Strategic Indonesia

The 3 divas keep the Indonesian economy on track

2007-11-10T14:26:00.000-08:00

By Sara Webb Reuters
Published: November 8, 2007

JAKARTA: They are called the three divas, but the three most powerful women in Indonesia are anything but prima donnas.

They are economists who together are setting the biggest economy in Southeast Asia on track for its fastest growth in 11 years.

Finance Minister Sri Mulyani Indrawati, Trade Minister Mari Pangestu, and the central bank's senior deputy governor, Miranda Goeltom, form an unusual clique in a country where the establishment is dominated by men.

"We know each other very well. The chemistry is always very good between the three of us," Indrawati, a former International Monetary Fund director, said in a recent interview.

While the three play golf and lunch together, Indrawati said she valued the fact that she can discuss economics with the other two, particularly given the isolated nature of her job.
"It's something we can enjoyably share," she said.

"Being a minister of finance, you feel really lonely and alone," she said. "If you are mingling too closely with the business community they will accuse you of being too close, and if you are mingling with the political parties they think you are busy politicking. I have to keep a distance."
Indonesia, the most populous Muslim country, has had relatively few high-profile women in its government.

Its first female president, Megawati Sukarnoputri, owed her position in part to her pedigree - her father, Sukarno, was the first leader after independence.

But while Sukarnoputri, a former housewife, kept a low profile, the three divas are familiar faces at the International Monetary Fund, the World Bank, and the international trade circuit - though some nationalists say they are too cozy with these institutions.

In contrast with many of her tight-lipped foreign counterparts, Goeltom, the central banker, is regularly quoted in the media, most recently on the economic impact of high oil prices.
She often speaks in public, and she is famously unpunctual - a trait that saved her life in 2003, when she was stuck in traffic and arrived late for lunch at the Marriott hotel in Jakarta, missing a bomb attack by minutes.

Now Goeltom and the central bank governor, Burhanuddin Abdullah, are in the spotlight again as economists await further credit easing.

The benchmark interest rate has fallen to 8.25 percent from a high of 12.75 percent in April 2006 after 13 rate cuts, as inflation has eased.

The cuts in rates have triggered domestic consumption, spurring economic growth that is set to hit 6.3 percent this year.

Exports are bouncing back, and foreign direct investment, which faltered on worries about corruption, bureaucracy and legal uncertainty, is close to its 2000 record of $9.8 billion.

One reason for the recovery, Indrawati says, is that reforms are starting to have an effect.
President Susilo Bambang Yudhoyono, a former general, was elected in 2004 on the back of promises to increase growth, create jobs and tackle graft in a country that year after year ranks among the most corrupt.

When Indrawati, 45, was appointed finance minister, she embarked on a cleanup of Indonesia's notoriously corrupt tax and customs departments in a bid to raise state revenues.

The former academic, whose dissertation was on how men and women respond to tax policies, has a tough job ahead of her, as only one Indonesian in 170 pays taxes.

For years, tax bills were often settled by greasing palms, but now it is getting harder for the well-heeled to keep the tax office at bay. Indrawati has replaced corrupt officials and raised salaries for officials in the ministry so they are not tempted to steal or solicit bribes.

Her officers are investigating companies that deliberately understate their profits in order to pay less tax, and they are tracking down wealthy lawyers, bankers, property owners - even platinum cardholders - many of whom get a nasty shock when officials phone or drop by to check on them.

Restoring public trust in government departments and institutions has become an obsession for Indrawati, who said she felt she had at least inspired "a positive and contagious disease, a reform fever" among many tax and customs bureaucrats.

While Indrawati tackles tax issues, Pangestu wants to raise the profile of Indonesian exports.
"Where would the world be without Indonesia?" the trade minister joked recently, pointing out that the country made a substantial portion of the world's zippers, Barbie dolls and false eyelashes.

Pangestu is a rare breed in the cabinet, not just because she is female, but because she is the only ethnic Chinese.

The minority Chinese account for a disproportionate share of the country's wealth, and their success is sometimes resented. An anti-communist coup in the 1960s led to their suppression, and their language, writings and customs were banned or discouraged until relatively recently.

Pangestu has lived in boomtown Shanghai, where many Indonesian Chinese, including some of the country's wealthiest tycoons, keep homes and run their businesses - valuable firsthand experience for an economist charged with turning Indonesia into a roaring Asia tiger once again.

Indonesia News

2007-11-10T14:01:00.000-08:00

Friday, 09/11/2007 17:29 WIB72th Uncontrolled Mudflow Occurs in PorongTEMPO Interactive, Sidoarjo: The uncontrolled emissions (spurt) of water mixed with flammable gas occurred again near the Lapindo mudflow in Porong, Sidoarjo, East Java. This time, the new discharge was beside the kampong road, RT 8/RW 1 area, Pejarakan Village, or around 1.5 kilometers South of the Lapindo mudflow center.

Friday, 09/11/2007 16:13 WIBPLN-TNB Malaysia Form a Holding CompanyTEMPO Interactive, Jakarta: The State Electricity Company (PLN) along with Tenaga Nasional Berhad (TNB) of Malaysia will form a holding company for an interconnection transmission network project between Sumatra and Malaysia.

Friday, 09/11/2007 15:22 WIBDoing Business in Indonesia Can be EasyTEMPO Interactive, Jakarta: The rank of ease in business in Indonesia has the chance to go up 41 places from the 123rd to 82nd in 2008. On the condition that the government repairs the mechanism for starting a business, ownership registration and obtaining credit.

Friday, 09/11/2007 14:17 WIBForeign Affair Department Cooperates to Remove Smuggled CarsTEMPO Interactive, Jakarta: The Finance Department is cooperating with the Foreign Affairs Department in eradicating smuggled cars that use a diplomatic facility.

Friday, 09/11/2007 13:07 WIBJakarta's Traffic JamsPrivate Cars to be RestrictedTEMPO Interactive, Jakarta: The government plans to restrict the use of private cars in Jakarta. Transportation Minister Jusman Syafi'i Djamal said the plan is a mid-to-long term effort to overcome the capital city's traffic overcrowding which is just becoming worse.

Friday, 09/11/2007 12:30 WIBAdelin's Acquittal: Kaban Bombarded by CriticismTEMPO Interactive, Jakarta: Chairman of the House of Representatives (DPR), Agung Laksono, asked President Susilo Bambang Yudhoyono to warn Forestry Minister M. S. Kaban, who is suspected of intervening in the judicial process of Adelin Lis, Finance Director of PT Keang Nam Development Indonesia, yesterday (8/11).

Thursday, 08/11/2007 17:34 WIBSoldiers Allowed to Join CampaignsTEMPO Interactive, Jakarta: Soldiers, civil servants and children are allowed to participate in campaigns.

Thursday, 08/11/2007 17:19 WIBWomen's Quota in Political Parties RaisedTEMPO Interactive, Jakarta: The Working Committee of the Draft Political Parties Bill has decided that the quota of women's representation in political parties be raised from 30 percent to 35 percent.

Thursday, 08/11/2007 16:54 WIBGovernment Prepares Budget ScenariosTEMPO Interactive, Jakarta: President Susilo Bambang Yudhoyono has said that the government is preparing action options to anticipate world oil price increases heading towards US$100 per barrel, especially as regards the impacts on the budget.

Thursday, 08/11/2007 14:08 WIBSoutheast Asia to Prevent Spread of Zoonotic DiseasesTEMPO Interactive, Jakarta: Southeast Asian countries are to make a regional strategic framework to prevent and control the spread of zoonotic diseases (diseases that originate from animals) to humans.

For up date and further information on Strategic Indonesia please click www.wiloto.com

2006-12-19T20:42:00.000-08:00

For up date and further information on Strategic Indonesia please click www.wiloto.com
For up date and further information on Strategic Indonesia please click www.wiloto.com

For up date and further information on Strategic Indonesia please click www.wiloto.com
For up date and further information on Strategic Indonesia please click www.wiloto.com

Thank you.

The Richest in Indonesia

2006-05-03T04:51:00.000-07:00

Bisnis Indonesia
By : Christovita Wiloto
CEO & Managing Partner
Wiloto Corp. Asia Pacific

Actually, nothing is unusual about the list of the richest people in the world in 2006 according to Forbes Magazine in its March edition. Indeed, the list now contains 10 newest rich persons from India, making the total richest people from that country into 23 names. While, Russia added seven new names, and pushed the total into 33 people.

But, the names occupying the top two are still the same, Microsoft boss Bill Gates, and veteran investor as well as the owner of Berkshire Hathaway, Warren Buffett. They are worth US$50 billion and US$42 billion respectively.

Underneath them, many popular names occupied the list, one of them is Lakshmi Mittal, the king of steel business from India, reputedly worth US$23,5 billion. What makes it interesting is that Mittal started his business 30 years ago in Surabaya!. Even he still owns PT PT Ispat Indo in Surabaya.

Another familiar names include the part owner of Microsoft, Paul Allen (US$22 billion), Prince Al-Waleed Bin Talal Al-Saud (Saudi Arabia, US$20 billion), the Mexico telecommunication tsar Carlos Slim Helu (US$30 billion), the retail king of IKEA, and Ingvar Kamprad (Sweden, US$28 billion).

What about Indonesia?
Now, was there any Indonesian that made it into the list of Forbes this time? It is easy to predict, the names are associated with the king of cigarettes company namely Rachman Halim, the owner of Gudang Garam, worth US$1,90 billion in the number 410 and Budi Hartono, the owner of Djarum, worth US$1,80 billion in number 428.

I don’t understand why Forbes did not include the name of Aburizal Bakrie and Putera Sampoerna in that March issue. The fact is currently Bakrie family is the richest in Indonesia with assets “reportedly” worth more than US$ 4 billion (around more than Rp 38.8 trillion) and Putera Sampoerna, who recently sold his shareholding in HM Sampoerna worth US$2 billion (around Rp18,4 trillion) to Philip Morris. Maybe, because this information has not reached the Forbes board of editors.

But, the most important thing is how this richest family of Indonesia can made it into the list of Forbes. The family of Rachman Halim a.k.a Tjoa To Hing, for instance, inherited the cigarette factory Gudang Garam, founded in June 1958, from its founder Surya Wonowidjojo.

Gudang Garam itself is the biggest cigarette producer in Indonesia, with the factory covering an area of 514 hectare in Kediri, East Java. This factory employs thousands of people from Kediri and its surrounding. It is no surprise that Gudang Garam becomes the driving force for the economic condition in that city. Without Gudang Garam, maybe Kediri – even though it has Sugar refinery of Ngadirejo – will still only be a small town among various towns and municipalities in East Java.

Halim family itself is no stranger to the label of the richest person. He has been in the Forbes list since few years ago. In Southeast Asia, he even managed to occupy the fourth rank. Likewise with Budi Hartono, also inherited the cigarette company Djarum from Oei Wie Gwan. Together with his brother, Michael Bambang Hartono, both the sons of this conglomerate from Kudus work hard to bring Djarum Group to its prominence even up to overseas.

The perseverance of the founder and manager of Gudang Garam and Djarum is what make them champion in their field. Totally, Gudang Garam and Djarum now has the market share of more than half of the domestic cigarette market. They each have their champion brands that almost become generic, such as Gudang Garam Filter, and Djarum Super. Popularity of these two brands only receives the threat from A Mild by Sampoerna, that is the market leader in the mild cigarette.

The interesting thing is that at the time when Halim family is consistently doing the cigarette business that has been at the core of their business for almost half of the century, Djarum Group decided to branching out into the property and banking business.

In the property, Djarum developed WTC Mangga Dua, Pulogadung Trade Centre and Grand Hotel Indonesia. While in the banking, Djarum owns Bank Haga and Hagakita, as well as 5% shares in BCA through Alaerka, which is a member of consortium Farindo Investment, that owns 51.19% shares of BCA.

The lesson that we can learn is how those Indonesian businessmen worked hard and persevere, able to grow their business and sitting alongside the other world class entrepreneur from all over the world.

Also, they give a major contribution to the people in the surrounding of their factories. They gave contribution also in giving prominence to the Indonesia in the sport arena. Badminton club Djarum Kudus, for instance, becomes the biggest contributor towards the national athletes that often won the international championship.

Meanwhile, we understand also that this kind of company is the biggest taxpayer in this country. Their contribution probably can only be matched by the big state-owned company such as Pertamina, or foreign company like Freeport.

Indonesia, I guess is tired with the black and dark businessmen with their dubious business reputation. Indonesia currently needs to have more businessmen with reputable integrity, respectable, honest, perseverance, hardworker and careful in doing their business, can be a good model for others, and able to sit alongside world-class businessmen.

If necessary, they can acquire also the world class companies in the world for the sake of bringing the glory for our beloved Indonesia.

Petrokimia

2006-02-26T18:52:00.000-08:00

Bisnis Indonesia
February 26, 2006

Christovita Wiloto
CEO
Wiloto Corp. Asia Pacific
powerpr@wiloto.com

Kita tidak bisa menutup mata bahwa perekonomian nasional kita mulai merangkak mencoba bangkit. Walau dampaknya terutama di kalangan bawah belum terasa. Walau harus diakui pemerintahan nampak cukup konsisten dengan upaya memberantas korupsi. Hal itu dibuktikan dengan banyaknya kasus korupsi yang secara perlahan namun pasti dibongkar habis.

Di luar itu, meskipun tanpa regulasi-regulasi baru, kehidupan industri, termasuk industri petrokimia baik hulu maupun hilir berjalan seperti adanya. Kenyataan ini membuktikan bahwa industri yang bergerak di sektor ini mampu menghidupi dirinya sendiri dan tetap eksis untuk menopang mitra bisnisnya yang lain.

Dalam beberapa tahun terakhir, industri petrokimia (baik hulu maupun hilir), praktis berjalan dan mampu melindungi dirinya tanpa harus minta proteksi pemerintah. Ini jelas berbeda dengan kebiasaan pemerintah kita tempo hari yang sebentar-sebentar mengeluarkan kebijakan yang setengah memaksa yang akhirnya malah menjadi bumerang buat industri ini.

Di tengah semakin terus melambungnya harga minyak dunia, kita tidak bisa pungkiri bahwa salah satu pilar kekuatan perekonomian Indonesia adalah hasil tambang, khususnya minyak dan gas. Selama ini, pengelolaan minyak dan gas bumi di Indonesia lebih difokuskan pada ekspor.

Karenanya kita sayangkan bila sumber daya alam migas Indonesia yang sangat besar ini tidak dikembangkan dalam satu industri yang terintegrasi dari hulu hingga ke hilir. Padahal industri hulu migas tidak kalah penting jika dibandingkan dengan industri hilirnya.
Idealnya pengembangan industri hulu migas inilah yang harus dimanfaatkan sebagai salah satu strategi dalam mengejar ketertinggalan ekonomi Indonesia dengan negara-negara Asia Tenggara lainnya. Misalnya Thailand dan Vietnam, yang telah jauh mengembangkan industri ini.

Potensi Strategis
Dalam soal pengembangan industri petrokimia hulu ini, sebenarnya kita sudah mempunyai potensi strategis. Industri ini memang sempat mengalami krisis keuangan. Tapi lambat laun, industri petrokimia hulu ini secara swadaya terus melakukan konsolidasi dan berbenah diri. Kita tidak bisa bayangkan bagaimana jika industri pretrokimia hulu yang sudah berdiri ini tidak beroperasi, padahal begitu banyak industri hilir yang mengandalkan perusahaan ini, terutama dalam pengadaan bahan baku.

Strategis karena jika industri petrokimia hulu ini tidak beroperasi, otomatis industri hilirnya seperti pabrik tekstil berskala besar maupun kecil akan menyusul mati. Belum lagi para distributor, pedagang tekstil, dan sebagainya. Jika ini terjadi, tidak bisa kita bayangkan betapa repotnya pemerintah, sebab jumlah pengangguran pasti bakal meningkat.

Sebagai gambaran, jumlah pengangguran di Indonesia hingga saat ini masih bertengger pada angka 40 juta orang. Berita-berita yang dilansir media massa, angka pengangguran itu tidak pernah turun. Akhir-akhir ini, media massa bahkan sering memberitakan ribuan orang berbondong-bondong memperebutkan formulir pendaftaran untuk menjadi pegawai negeri sipil (PNS).Bukan cuma itu, acara bursa-bursa kerja yang banyak digelar di sejumlah kota disesaki banyak calon pekerja.

Bahwa industri petrokimia -- baik hulu maupun hilir -- sudah terbukti sebagai industri yang penyebarannya hampir merata di Indonesia menyerap banyak tenaga kerja. Kita harus menggantungkan optimisme bahwa ke depan industri ini harus terus dikembangkan ke arah yang lebih baik.

Mengembangkan industri petrokimia jelas menguntungkan. Mengapa? Sebab produksi industri petrokimia seperti aromatic dan olefin sangat berperan dalam menunjang industri tekstil, plastik, karpet, benang untuk ban mobil, pestisida, dan obat-obatan.

Peranannya yang sangat strategis inilah yang juga telah berperan membuat harga produk petrokimia pernah berkisar US$400 sampai di atas US$1.200 per ton. Dari setiap tonnya, dapat menghasilkan keuntungan antara US$80-US$200 dari setiap 1 ton.

Prospek keuntungan inilah yang melatarbelakangi mengapa negara-negara Timur Tengah seperti Saudi Arabia, Iran, Qatar, dan Abu Dhabi termotivasi membangun industri petrokimia sampai tahun 2010 yang diperkirakan memproduksi olefin (ethylene) sebesar 15 juta ton per tahun.

Untuk keperluan itu, usaha patungan Saudi Arabia, Exxon Mobil, Shell, BP, dan Phillip akan menginvestasikan senilai US$10-15 miliar. Arab Saudi sendiri melalui Sabic memperoleh laba senilai US$1 miliar lebih dengan revenue US$ 7,6 miliar.

Demikian juga dengan Eropa Timur yang memprogramkan pembangunan industri petrokimia hulu dan turunannya sebesar 5 juta ton per tahun. China ternyata tidak mau ketinggalan, ikut mengembangkan industri petrokimia hulu ini. Informasi yang diperoleh, sampai tahun 2006, mereka merencanakan membangun industri petrokimia hulu berkapasitas 6,35 juta ton per tahun. Hal ini belum termasuk pembangunan industri petrokimia hulu hasil kerja sama antara Fujian Petrochemical, Exxon Mobil, dan Saudi Aramco berkapasitas 800.000 ton per tahun dengan nilai investasi sebesar US$ 3 miliar.

Indonesia yang sudah tertinggal dari negara-negara lain dalam hal pengembangan industri petrokimia hulu ini, sudah seharusnya mengejar ketertinggalannya. Salah satu upaya yang bisa dilakukan adalah memaksimalkan kapasitas aset yang telah dimiliki. Sekali lagi tanpa industri petrokimia hulu, kita bukanlah apa-apa

US-owned gold mine halts production in Indonesia

2006-02-23T10:20:00.000-08:00

THAI PRESS REPORTS

Section: Regional News - U.S. gold mining giant Freeport McMoRan suspended operations in Indonesia's easternmost province, Papua, after illegal miners blocked the road leading to the site.

Hundreds of illegal miners set up barricades of wood and stone blocking the road leading to the world's largest gold and copper mine in the remote province of Papua.

The blockade follows clashes Tuesday after police and Freeport security guards tried to force around 100 illegal miners out of the Grasberg copper and gold mine, which is run by a local unit of Freeport.

The illegal miners, who were armed with bows and arrows, shot and wounded several security guards. Several miners also received injuries in the clash, but no one was seriously injured.

Freeport spokesman Siddharta Moersjid claims the illegal miners attacked the authorities. "Police were accompanying our security guards who approached a group of illegal miners and asked them to leave the area," he said. "A number of illegal miners attacked the security personnel injuring three of our security guards and one member of the Indonesian police. The police restored order and during the process two of the illegal miners were injured, not seriously."

Illegal miners earn their living from retrieving bits of gold from the waste rock discarded by the mine. It is a common practice across the Indonesian archipelago, where many people live in poverty.

Freeport has a history of troubled relations with the local people, many who eke out a meager living by illegal mining. The mine spokesman did not say why the company wanted to prevent people from mining the waste rock.

Siddharta says the decision to suspend operations was taken as a precautionary measure. It is the first time Freeport has stopped production since a landslide killed several workers in 2003.

"Following the incident the group of illegal miners blocked the road leading to the mine and the mill. So the mining and the milling operations have to be temporarily suspended as a precautionary measure," he said.

Earlier this month Freeport security guards and police conducted several raids to remove illegal miners from the site. Freeport operations in Papua have come under heavy scrutiny following reports it paid millions of dollars to the Indonesian military and police to guard the mine.

Sources:
VOA
Thai Press Reports

Freeport Mine Shut For Second Day

2006-02-23T10:17:00.000-08:00

JAKARTA, Feb 23, 2006 (Dow Jones Commodities News via Comtex) --
TOP STORIES Jakarta Protesters Attack Freeport Office Building
Students angry at U.S. gold mining giant Freeport-McMoRan Copper & Gold Inc. (FCX) attacked the building housing its offices in Jakarta on Thursday, as the company's mine in Papua province remained shut for a second day due to protests. Freeport: Premature To Quantify Indonesia Output Losses

JAKARTA (Dow Jones)--The massive Papua mine of U.S. firm Freeport-McMoRan Copper & Gold Inc. (FCX) remained shut by angry protesters for a second day Thursday, with a company spokesman saying potential production losses are currently difficult to calculate.

Source:
Dow Jones

Oil price surge helps Santos double annual profit

2006-02-23T10:10:00.000-08:00

MELBOURNE, Feb 23 AAP - Santos Ltd has more than doubled its annual profit and the oil and gas producer says the outlook is good for another bumper year in 2006. The Adelaide-based company today posted a $762.1 million net profit for calendar 2005, an increase of 115 per cent.

Chief executive John Ellice-Flint said the massive jump in profit had been driven both by increased production and by rising oil and gas prices. "The profit is split about 50/50 due to volume and commodity price," he said.

Santos' average realised price for oil climbed 42 per cent to $73.83 ($US54.76) per barrel and gas rose 10 per cent to $3.62 per gigajoule, with Mr Ellice-Flint saying prices looked set to remain strong in 2006.

Production for the year rose 19 per cent to 56 million barrels of oil equivalent (mmboe) and Santos expects this to grow to between 60 and 61 mmboe in 2006 and between 62 and 63 mmboe in 2007.

The company has ramped up exploration and development activity in recent years and is no longer accused of relying too heavily on its mature assets in the Cooper basin in South Australia. Where eight years ago only 23 per cent of its production came from outside of the Cooper Basin, this figure has now risen to 60 per cent.

The exploration program will step up another notch in 2006 with 25 wildcat exploration wells to be drilled at a cost of about $225 million and 310 wells to be drilled in total. The work is paying off with Santos' reserves at the end of the year reaching 414 mmboe, up from 348 mmboe at the end of 2004.

The market has been anxious for more details on the Jeruk oil find in Indonesia and Mr Ellice-Flint said three to four appraisal wells would be drilled there this year. The company said additional information would be released in the middle of the year and its target was to start early production in 2007.

Mr Ellice-Flint also said the company was still in discussions about its potential involvement in the $4 billion Papua New Guinea gas pipeline project. Santos declared a final dividend of 20 cents per share, taking the full year dividend to 38 cents, up from 33 cents in 2004. Santos shares fell 30 cents to $11.80.

Source:
AAP

Iran, Indonesia review expansion of mutual relations

2006-02-23T10:05:00.000-08:00

BBC MONITORING INTERNATIONAL REPORTS

Text of report in English by Iranian news agency IRNA website

Kuala Lumpur, 23 February: Foreign Minister Manuchehr Mottaki conferred here Thursday [23 February] with his Indonesian counterpart, Hasan Wirayudha, on issues of mutual interests.

At the meeting, the two ministers discussed expansion of mutual cooperation, regional and international developments along with Iran's peaceful nuclear programmes.

The Iranian minister is scheduled to confer with Indonesian President Susilo Bambang Yudhoyono on expansion of mutual relations and international developments.

Sources:
IRNA website, Tehran, in English 1205 gmt 23 Feb 06
BBC Monitoring

RP, Indonesia extend fishing accord

2006-02-23T10:01:00.000-08:00

MANILA STANDARD
General Santos City--The country will continue to enjoy fishing privileges in Indonesian waters following the signing of a five-year extension of an agreement between the two countries yesterday.

The fishing agreement effectively extended the country's access to Indonesian fishing grounds until 2011.

Agriculture Secretary Domingo Panganiban and Indonesian Minister of Marine Affairs Freddy Numberi signed the new accord.

"The tuna industry means a lot to the Philippines and the document we signed means a lot to the Filipinos, from the fishing crew to the Philippine fishing operators, to the fish processors and traders and exporters," Panganiban said.
It took the Philippine negotiating team a year and two failed bilateral talks to extend the contract for another five years. The Philippines entered into a one-year interim contract with Indonesia prior to the signing of the new agreement .

The new contract replaced the one-year interim agreement set to expire on Nov. 11 this year.

The previous agreement signed in 2002 allowed Filipino fishing vessels to harvest tuna and tuna-like species within the Indonesian Exclusive Economic Zone (EEZ).

It gave licenses to 75 catcher vessels, 150 fish carriers, 20 long liners, 300 light boats and 10 single purse seiners, and allowed access to the Pacific and Indian Ocean areas of the Indonesian EEZ. It also provides offloading and resupply access to 10 Indonesian ports.

Marfenio Tan, president of the Socsargen Federation of Fishing and Allied Industries Inc., said additional provisions in the fishery pact will be discussed in 2007, which includes parameters for joint venture deals.

The new agreement covers new areas of cooperation in aquaculture; marine capture fisheries through joint venture; postharvest, fish processing development and marketing; coastal management and development; marine fisheries conservation; combating illegal, unreported and unregulated fishing practices; research activities; education and training and environmental protection.

Panganiban said the new fishing pact would help the local tuna industry compete against other tuna fishing fleets in the region.

"It will also help the industry comply with the emerging restrictive trade regulations that pose a threat to out tuna exports in major markets such as the European Union and the United States," Panganiban said.

Local fish processors export tuna to Europe, US, Japan and neighboring countries. Tuna accounts for about 12 percent of the country's total fish production, bringing $280 million in annual exports, mostly in the form of canned tuna, high-value sashimi tuna and tuna steaks.

Total annual tuna catch was estimated at 400,000 metric tons. The industry generates more than 100,000 jobs. The Philippines ranks second in tuna catches in the world, next to Taiwan and fifth in terms of canning with US in the lead, followed by Thailand, Spain and Italy.

Source:
Manila Standard

Indonesia leader, Vietnam premier vow to boost bilateral, regional ties

2006-02-23T09:51:00.000-08:00

BBC MONITORING INTERNATIONAL REPORTS--
Text of report in English by Vietnamese news agency VNA website

Jakarta, 22 February: Vietnamese Prime Minister Phan Van Khai arrived in Jakarta on 22 February, beginning an official visit to Indonesia at the invitation of Indonesian President Susilo Bambang Yudhoyono.

PM Khai was welcomed at the airport by Foreign Minister Hasan Wirayudha and Minister of Culture and Tourism Jero Wacik.

After an official welcoming ceremony held at the Presidential Office in the afternoon by President Susilo Bambang Yudhoyono, PM Khai and President Yudhoyono met and the two sides later held talks.

President Yudhoyono highlighted the significance of the visit in promoting Indonesia-Vietnam strategic comprehensive partnership, saying the visit not only marked a new step of development in the two countries' traditional friendship and multifaceted cooperation, but also the 50th anniversary of the establishment of diplomatic ties (30 December 1955).

PM Khai said he believed that his first visit to Indonesia in the capacity of Vietnamese prime minister would markedly contribute to further expanding the two countries' ties.

The two sides discussed specific measures to broaden and strengthen the traditional friendship and comprehensive cooperation and exchanged views on international and regional issues of mutual concern.

They expressed pleasure at the fine development of the Vietnam-Indonesia relationship over the past five decades and emphasized the need to further enhance multifaceted, long-term and stable cooperative ties between the two countries in the principle of respecting independence, sovereignty and territorial integrity of each other.

The two leaders agreed on assigning the Ministries of Foreign Affairs to quickly design the 2006-2010 plan of action to lay a firm foundation for the two countries to effectively implement their Joint Declaration.

They reached a consensus in creating a more attractive and favourable environment for cooperation in trade and investment cooperation as well as in agro-forestry and fisheries, oil and gas, energy, healthcare, culture, tourism, education-training, security and defence, environmental protection. Bilateral cooperation was also agreed in the fight against terrorism, trans-national crimes, epidemics and natural disasters.

PM Khai and Indonesian president were unanimous in holding the fourth session of the Joint Committee for Economic and Trade Cooperation in Hanoi. They also applauded the signing of an agreement on tourism cooperation between the Vietnam Administration of Tourism and the Indonesian Ministry of Culture and Tourism.

The leaders spoke highly of the coordination between the two countries at international and regional forums and reaffirmed their commitments to promote the close partnership between the two countries in boosting peace, stability and economic development in the region and the world.

They also reiterated their commitments to support the establishment of the ASEAN community, with security-political cooperation, economic cooperation and cultural-social cooperation being the three major factors for its development.

The Indonesian president said he believed that the 2006 APEC Summit in Vietnam will help boost cooperation among APEC member economies, making Asia-Pacific a dynamic community for prosperity and sustainable development.
The two leaders highlighted the close cooperation between the two countries through their support for Indonesia to become a non-permanent member of the United Nations Security Council in the 2007-2008 term and for Vietnam in the 2008-2009 term.

Sources:
VNA news agency website, Hanoi, in English 22 Feb 06
BBC Monitoring

Airbus has received orders this week for a total of 40 A320 aircraft from Indonesia's Adam Air and India's GoAir

2006-02-23T09:45:00.000-08:00

AIRLINE INDUSTRY INFORMATION--European aircraft manufacturer Airbus has outperformed US-based Boeing Co at the Asian Aerospace show in Singapore.

The manufacturer reportedly announced at the show orders for new passenger aircraft from Indonesia and India as well as industrial cooperation plans with South Korea.

According to The Associated Press, Airbus revealed on Thursday (23 February) that it has received orders this week for a total of 40 A320 aircraft from Indonesia's Adam Air and India's GoAir. The order is valued at approximately USD2.8bn (EUR2.4bn) based on list prices. GoAir also took an option for the purchase of 10 additional A320 aircraft.

The manufacturer also finalised extended cooperation agreements with state-run Korea Aerospace Industries Ltd worth over USD1bn (EUR840m). These cover development of the new A350 and manufacturing of components for A321 aircraft.

In addition Airbus also entered into a deal on Monday (20 February) to sell 43 A320 and A319 jets to the airline Indian for USD2.5bn (EUR2.08bn) and Boeing announced that Indian carrier Spicejet had ordered 10 737 aircraft and was taking an option to order another 10, The Associated Press reported.

Source:
Financial Times Information Limited.

Trade and Investment News

2006-02-23T04:18:00.000-08:00

Highlights
Politics
• The presidents of Indonesia and East Timor agreed to put the past behind them
• The foreign minister criticizes Denmark for withdrawing its diplomats, saying their safety was
not at risk
• Two Australians sentenced to death for their part in a heroin-smuggling conspiracy
Regions
• GOI and Newmont agrees to out-of-court settlement
• Parliament promises to deal quickly with Aceh governance bill
Economy
• Infrastructure Policy Package Launched
• New investment reform package to be released
• The economy grew at 5.6% last year, faster than analyst’s predictions

Business briefs
Macroeconomy
• Economic growth in 2005 ahead of previous year’s improvement
• Caution on economy to continue, says central bank governor
Investment
• January investment figures top $1 billion
• Singapore-based US businesses upbeat on Indonesia
State concerns
• EU to help check illegal logging
• Manufactured exports put on 12.7%
SOEs
• PPA to sell 800 properties
Private sector
• Car sales figures down, expecting second half boost
Banks
• Consumer spending keeps moving forward
• Former bank debtors to bring money back
• Bank stakes to be sold by government
Oil & gas
• Government sets deadline for Cepu deal
• Santos drills third well at Jeruk

Gusmao, Yudhoyono Look Forward
President Susilo Bambang Yudhoyono embraced his East Timorese counterpart on Friday (17/2/06), and said a report detailing atrocities committed by Indonesia during its occupation of the tiny nation would not affect ties.

East Timorese President Xanana Gusmao did not address the report, which was submitted to the United Nations last month, but said he was looking forward to "living in peace" with his neighbor.

Gusmao said both countries had "more to do" on reconciliation, but would satisfy the international community with a responsible and credible account of rights abuses. "We are committed to our principles ... as sovereign states," he added.

"Collective justice should prevail over individual justice,” East Timor's Prime Minister Mari Alkatiri said in an interview. “We can't now find among the people victim A, B or C," he said in the interview published in Portuguese newspaper Diario de Noticias."If the entire people suffered to gain independence, the compensation for this suffering was independence," he added.

Why Leave? Danes Asked
Denmark's decision to withdraw its diplomats and embassy staff from Jakarta after protests over Danish newspaper cartoons of the Prophet Mohammad was taken in haste, Indonesia's foreign minister said on February 12.

The Danish foreign ministry said diplomats and staff had been withdrawn because of security threats in the world's most populous Muslim nation. "We think this decision was quite hasty. We have given protection to the ambassador and his staffs. Moreover, the demonstrations in Indonesia have been relatively peaceful," said Foreign Minister Hassan Wirayuda.

"There is no good reason, but it is for them to decide," he told reporters on the sidelines of an Asian inter-religious forum. Wirayuda said Indonesia did not have any specific information about any threat. "(Denmark) said they received threats through the telephone but we have no way to confirm that. We have heard of such things before and usually they are only rhetoric," he said.

Denmark has been the target of protests in Islamic countries since cartoons of the Prophet, first published in the Danish newspaper Jyllands-Posten in September, were reprinted by other European newspapers in January. Indonesia has condemned the cartoons and called on the media to draw a lesson from the publications that have sparked Muslim protests worldwide, saying freedom of the press was not absolute.

On February 12, Vice President Jusuf Kalla said the cartoon furor was not a sign that there was a clash between Islam and the Western civilization or other religions. "This is press, media without tolerance versus (dignity of) the faith. This is because tolerance was not implemented," he told East Asian religious leaders from 10 faiths.

Two Australians Get Death Sentences
The Indonesian Government is likely to reject Australian pleas for leniency on behalf of two of the the nine heroin traffickers, with top officials calling for the death sentences to be carried out as soon as the appeals process finishes. A spokesman for Attorney General Abdul Rahman Saleh said on Friday (17/2/06) that prosecutors would continue to push for Andrew Chan, 22, and Myuran Sukumaran, 24, to go before the firing squad if their appeals fail.

Presidential pardons for the pair or to reduce the life sentences handed down to the rest of the nine were unlikely as none had ever been granted to drug offenders, Mashudi Ridwan said. The head of Indonesia's police force and its anti-drugs agency also supported the verdicts, calling for the executions to take place quickly to deter other traffickers, who were caught with the assistance of the Australian Federal Police. The remainder of the accused were sentenced to terms of life in prison.

REGIONS

GOI-Newmont Settle Community Development and Environment Agreement in Buyat Area
Newmont Mining Corp agreed to pay a foundation $30 million to fund community development and environmental monitoring programs around the gold mine in Buyat Area, North Sulawesi, as part of an agreement with the Government reached Thursday (16/2/06) to end a civil suit over pollution allegations. The deal was announced at a joint news conference.

“This is the best option for us to resolve the dispute for the welfare of the people there,'' Indonesia's Coordinating Minister for People's Welfare Aburizal Bakrie was quoted as saying by Bloomberg. Minister for Environment, North Sulawesi Governor and representatives of 3 districts surrounding the area were presence at the signing ceremony.

The Office of the State Minister for Environment filed the lawsuit last year and had been seeking $133.6 million in damages.Robert Gallagher, Newmont's vice president for Indonesian operations, said the deal "reaffirmed our long-term presence and investment in Indonesia and our commitment to the communities where we operate."

"This is a good sign to show that the government is moving in the right direction," said Standard Chartered economist Fauzi Ichsan.

Indonesia hopeful Aceh Law passed by deadline
The House of Representatives (DPR) is optimistic that legislation on governance for Aceh province will be passed before the March 31 date set out in the Helsinki peace accord, Deputy House Speaker Zaenal Maarif said Tuesday (14/2/06), the Associated Press reported.

The legislation would allow former rebels to form their own political party and give the province upto 70% of revenues from its natural resources, including gas and oil reserves, Maarif said. A parliamentary committee began debating the bill on Wednesday. "We all know that there is a deadline contained within the peace deal," said Maarif. He said members of a committee formed to deal with the bill understood the need for haste.The Free Aceh Movement (GAM) and the government have up to now fulfilled the terms of the deal, sealed last August. The agreement has stopped violence in the province, which lost more than 131,000 people to the December 26, 2004 earthquake and tsunami.

Infrastructure Project for Aceh
Indonesia and foreign donors announced plans Friday (17/2/06) to launch a $1 billion infrastructure project in the province. The project, to be jointly funded by the government and a multi-donor fund, will focus on road and bridge repair, prevention of future floods and the rehabilitation of ports in Aceh and Nias island.

Money also will be spent on a comprehensive land title program, waste management and other large-scale infrastructure needs, said Kuntoro Mangkusubroto, who heads the government's Aceh-Nias Reconstruction Agency (BRR).

The Multi-Donor Fund, set up to coordinate money that poured into the region after the December 26, 2004, tsunami and a subsequent earthquake in Nias, will contribute $340 million to the projects. The rest of the money will come from the government, Kuntoro said at a joint news conference in Jakarta.

Papua Shooting Probe Completed
Indonesian police have finished their investigation into eight suspects accused in the 2002 slayings of two American and one Indonesian teacher at the Freeport mine in Papua and handed over their charge sheets to prosecutors, a spokesman said Friday (17/2/06).

Prosecutors will now study the dossiers and decide whether they are strong enough to file to court, or need to be returned to police for more investigation, the Associated Press reported. The eight men were arrested last month over their alleged roles in the slayings close to the Freeport copper and gold mine.
One of the men, Anthonius Wamang, was indicted by a US grand jury over the attack. "We have finished the investigation," said spokesman Brig. Gen. Anton Bachrul Alam. "We have also questioned 22 witnesses, including some American citizens as well as getting information from the FBI."

He said Wamang was facing a charge of premeditated murder, which carries the death sentence. The other men were accused of lesser charges, he said.

Jambi Regent Guilty of Corruption
A court in Jambi on Tuesday (14/2/06) sentenced suspended Sarolangun regent Muhammad Madel to a year in prison for corruption. Prosecutors, who demanded a four-year sentence, claimed he had caused Rp2.8 billion
($300,000) in losses to the state.

Madel was also fined Rp100 million or an extra six months for his role in the construction of a pontoon dock in 2004. He was found to have endorsed changes to blueprints that led to the dock’s collapse six months after it was completed, The Jakarta Post reported.

ECONOMY
Infrastructure Policy Package Launched
Coordinating Minister for Economics Affairs Boediono and six other ministers launched a new infrastructure policy package on Friday. The policies mainly consist of improving related regulations, simplifying licensing procedures and providing several facilities to better implement infrastructure projects, as well as support their financing needs.

The policies will concern 10 main infrastructure sectors: roads, railways, power, oil and gas, telecommunications, housing, water and sanitation, air, water and land transportation, he said, according to The Jakarta Post.

Boediono also welcomed the final calculation of last year’s growth, which the Bureau of Statistics (BPS) put at 5.6%. It was a positive result considering the problems that beset the economy last year and was higher than growth in most of Indonesia’s neighboring economies, he said.

Growth in the fourth quarter had come in at only 4.9%, the slowest for six quarters, BPS said. The slowdown in annual growth was “milder than expected,” Morgan Stanley Economists said. Consumption weakness was still expected to slow the economy, but should be contained by funds for the poor.
Citigroup economist Anton Gunawan said the full-year figure suggested the impact of last year's double fuel price hikes was not as severe as many analysts feared.

The Fitch ratings agency downgraded Indonesia’s sovereign credit rating outlook to stable from positive, but analysts said the move appeared to be based on outdated data, and noted that it followed by a week a Standard & Poor’s outlook upgrade to positive.

A group of Singapore-based US business executives said they were confident about Indonesia’s outlook, citing continuing reform measures and the expanding market. "Indonesia is a very important country in the region, and it is an area with a lot of opportunities and interest for our members," said Amy M. Adams, chairman of the American Chamber of Commerce in Singapore.

Indonesia can achieve sustained economic recovery and faster growth with the completion of structural reforms, senior International Monetary Fund (IMF) official Daniel Citrin said on Thursday (17/2/06). The comment came as Indonesia prepares to launch a new set of reforms which aim to create a
better environment for investment.

"Indonesia has a pretty positive medium-term outlook with growth possibly accelerating to the 6- 7% range," said Citrin, deputy director of the IMF's Asia-Pacific department. "Continuing to preserve macroeconomic stability and pushing ahead much more forcefully with structural reforms will be the keys to producing growth and reducing unemployment," he told the US-Indonesia Society in Washington, according to Reuters. He named the tax system, labor regulations, the judicial system and governance in general as factors that still needed work.

BUSINESS BRIEFS
MACROECONOMY
Economy expanded 5.6% in 2005
Indonesia’s economy expanded 5.6% in 2005 from the previous year, outpacing growth of 5.4% in 2004. However, the economy contracted in the fourth quarter of 2005 from the previous three months, as high inflation and heavy interest rates took their toll.

The economy contracted 2.18% in the October to December period from the previous quarter, data from the Central Bureau of Statistics (BPS) showed on Wednesday (15/2/06). That compares with growth of 2.87% in the third quarter from the second quarter.

Year on year, the economy expanded 4.9%, decelerating from 5.63% in the July to September period due to a variety of internal and external factors, BPS chief Choiril Maksum said. The bureau said per capita income last year was $1,267, up from $1,120 in 2004.

Growth last year was partly driven by the transport and telecommunications sectors, which expanded on foreign investment, Reuters reported. The transport and communications sector grew 10.78% in the fourth quarter from a year earlier compared with 12.87% growth in the previous quarter.

Based on industrial sectors, manufacturing grew 2.91% in the fourth quarter from a year earlier versus 5.59% growth in the previous quarter. Private consumption grew 4.18% in the fourth quarter, slower than 4.43% in the third quarter. Citibank economist Anton Gunawan said that to some extent, relatively strong consumption growth in the fourth quarter may have been spurred by the distribution of cash compensation to help ease the burden of the fuel price hike on the poorest families. The government paid Rp300,000 to each of 15.648 million households registered as poor in the last quarter of 2005.
Private consumption was the economy's main driver, making up 65.41% of GDP in 2005 against 67.78% the year before. It expanded 3.95% for 2005, growing 4.18% year-on-year in the fourth quarter and rising 1.1% quarter-on-quarter.
Coordinating Minister for Economy Boediono meanwhile said that the overnment still aims to achieve economic growth of 6% to 7% in the medium term.

"Going forward, we will try to achieve higher growth by pushing up investment," he was quoted as saying by XFN-Asia. "I would say that compared to our neighbors, we did quite well given the difficulties we faced last year," he said, referring to the oil price spike and the severe impact brought about by the
December 2004 tsunami. He said that to create jobs and reduce poverty, the economy has to grow by at least 6% to 7% over the medium term. "We are striving towards that direction," he said.

BI to Keep Tight Monetary Policy
Bank Indonesia (BI) Governor Burhanuddin Abdullah said the central bank would not as yet relax its monetary policy to maintain monetary stability over the next several months. During that period, the benchmark interest rate will either stay at the present level of 12.75% or rise to 13%, Abdullah said on Wednesday (15/2/06), according to Antara.

There have been calls for a cut in the interest rate to boost the real sector as improvements have been shown in the macroeconomic condition marked with the rupiah's appreciation and an increase in the Jakarta composite index.
During Wednesday’s auction, the interest rate on the BI promissory note was 12.74% or one basis point below the benchmark interest rate set by the central bank.

BI absorbed Rp32.23 trillion ($3.5 billion) in public funds from the sale of the BI certificates in the auction. Abdullah has said the monetary policy will remain tight in the first quarter of the year and will begin to relax in the following quarter. He said the interest rate gap between the US dollar and the rupiah kept the inflow of funds steady. The decrease in oil imports, thanks to a rise in domestic oil prices, also helped stabilize the currency.

BI to Replace 3-Month SBIs
The central bank, Bank Indonesia (BI), is planning to replace its three-month BI Certificates (SBI) with treasury bonds to create a clear interest rate benchmark, BI director for public relations and strategic planning Budi Mulya said.
"Maybe in March or April, we will stop the auction of three-month SBIs. So there would only be the one-month SBI. This is to make the SBI rate better reflect the BI rate," he said, referring to the central bank's key policy rate.

"The reason we are doing this is to remove market confusion about which rate should be the reference of the BI rate. We have discussed the matter with the government," he was quoted as saying by XFN-Asia.

INVESTMENT
Govt. to Unveil Investment Package
The government is set to unveil this week a long-awaited policy package aimed at immediately boosting investment. Coordinating Minister for Economy Boediono is finalizing the policy measures, Trade Minister Mari Pangestu told Dow Jones Newswires on Thursday (16/2/06).

"(The package) will contain a lot of immediate short-term deregulation and streamlining (of investment stimulus) measures," Pangestu said. There will also be "clear indications of changes in the law and regulations which people are
hoping for in investment, tax, customs, labor and decentralization," she said.
Pangestu said the departments of trade and transportation have also drawn up a list of urgent, short-term measures to assist the export production sector.

Indonesia’s stimulus package reflects government efforts to lure back investor dollars. "We've got to see increased investment coming back in, including expansion of existing (production) capacity," Pangestu said. "For that to happen, a number of things have to begin to be felt this year with regard to improving the invest climate and infrastructure."

She projected that exports will rise at least 13% this year from last year. That would mark an easing from 19.5% year-on-year growth to $85.57 billion in 2005.

$1b in New Investment Approved
The prospect of a prolonged economic slowdown has not deterred nine local and overseas firms from proposing new investment plans worth more than $1 billion to the government, chairman of the Investment Coordinating Board (BKPM), Muhammad Lutfi, said on Tuesday (14/2/06).

"Between January and February alone, we approved several major investment projects worth hundreds of millions of dollars each. This shows that the business community still has confidence in us," he was quoted as saying by The Jakarta Post.

According to Global Insight Daily, foreign direct investment (FDI) in Indonesia reached $1.4 billion (Rp12.8 trillion) last month, while domestic investment totaled Rp2.6 trillion. Lutfi said the agency predicts investment -- both foreign and domestic – to grow by 21% this year to Rp139 trillion ($14.94 billion) from Rp115 trillion last year, creating 470,000 new jobs, compared to the 280,000 jobs created by investors last year.

The BKPM estimate excluded investments in the oil, gas and mining industries, banks and nonbank financial institutions, and the capital markets as these are regulated by other agencies. Realized FDI from January to December last year nearly doubled to $8.91 billion (909 projects) from $4.6 billion (544 projects) during the same period in 2004.

US Businesses Upbeat About Reforms
A group of Singapore-based US businessmen has expressed confidence about the future outlook for Indonesia's economy due to its expanding market and the government's continuing economic reform measures.

The businessmen, representing some 20 US companies based in Singapore, met with local counterparts and economics ministers in Indonesia during their visit to get firsthand information about business opportunities and the direction of economic reform in Indonesia, The Jakarta Post reported on Wednesday (15/2/06).

"Indonesia is a very important country in the region, and it is an area with a lot of opportunities and interest for our members," said Amy M Adams, chairman of the American Chamber of Commerce in Singapore. Such qualities, however, would not attract investment unless the government addresses various
concerns raised by business, especially those concerning taxation, labor and customs -- three problematic areas that have made investing in Indonesia less attractive.

Adams noted that the government leaders they met during their visit appeared to be serious about reforming the taxation, labor and customs sectors. On top of these reforms, the government also needs to take care of security issues, which often frighten off foreign businesses and tourists, she said.

STATE CONCERNS
EU Proposes Plywood Inspection
The European Union (EU) is proposing a collaborative scheme with the Indonesian government to allow its members to inspect wood-based imports from Indonesia, such as plywood and wood panels, as part of EU's efforts to help the country curb illegal logging. "We hope that we can arrive at an agreement on the matter with the Indonesian government by the end of this year or early next year," the EU's natural resources program manager for
Indonesia, Vernon Copeland, told The Jakarta Post on the sidelines of a workshop on illegal logging organized by the Forestry Department on Wednesday (15/2/06).

Forestry Minister MS Kaban, in a speech during the workshop, urged the EU to bar its members from importing illegally felled timber. "We're asking the European countries not to serve as markets for the illegal loggers," he said.
The scheme, Copeland said, is part of an EU action plan on forestry law enforcement and trade, designed to prevent the entry of panels or plywood sourced from illegal logging.

Under the scheme, Indonesia will be required to issue documents providing evidence of the legality of the exported panels. The customs and excise services of the individual EU members would then inspect the documents and confiscate panels found to be illegal. However, he said the scheme would be applied on a voluntary basis, and that no sanction would be imposed against member states that allow the entry of illegal logs.

The EU has been supporting the government's effort to eradicate illegal logging for the last three years. The European Commission has disbursed about 1 million euros in grant to fund the operation of the Illegal Logging Response Centers. Indonesia suffers annual losses of about Rp30 trillion due to illegal logging, while deforestation has affected some 2.8 million hectares.

Export of Manufactured Goods Up
Indonesia's export of manufactured goods rose 12.7% in the first 11 months of 2005 from $50 billion in the same period the year before. The highest increase of 28.5% was recorded in the export of steel and automotive products,
valued at $2.36 billion, up from $1.87 billion in the same period the previous year, Industry Minister Fahmi Idris was quoted as saying by Antara.
A 5.24% decline was recorded in the export of timber and wood products to $2.82 billion.

The largest contributors to the export value were electronic products, information technology and electric machines with exports valued at $11.08 billion, followed by textiles and garments valued at $7.66 billion.

SOEs
Qantas, Lufthansa Eye Garuda
Australia’s Qantas and Germany's Lufthansa are reportedly eyeing stakes in debt-laden Indonesian carrier, Garuda Indonesia. The Sydney Morning Herald reported on Wednesday (15/2/06) that Qantas is exploring a potential partnership with Garuda in an attempt to gain a toehold in one of Asia's fastest growing aviation markets.

Qantas chief executive Geoff Dixon and chief financial officer Peter Gregg held talks with stateowned Garuda earlier this month. Another attraction for Qantas in building its presence in Indonesia could be the country's potential as a low-cost maintenance base, the Herald said.

It could provide a maintenance hub for parts of the Qantas and Jetstar fleet of short-haul 737s and A320s. Meanwhile, State Minister for State Enterprises Sugiharto said Garuda officials have recently returned from Germany where they met with their counterparts from Lufthansa to explain the condition of the airline, Antara reported on Thursday (16/2/06).

Sugiharto described the talks as encouraging, but noted that Lufthansa is not the only investor eyeing Garuda, since investors from the Middle East are also interested in acquiring Garuda.

PPA to Sell Property Units
The Finance Department’s asset management company, PT PPA, plans to sell 800 properties this year after placing a value on the assets, The Jakarta Post reported on Monday (13/2/06).

PPA vice president Raden Pardede said recently that the evaluation process should be completed within the next one to two months so that the assets could be sold. Pardede said PPA spends about Rp150 billion ($16.22 million) each year for the maintenance of various fixed assets under its control.

PPA manages some 3,113 properties, mostly in the form of land assets. Other assets include shares in banks and companies. PPA received various forms of assets from the now defunct Indonesian Bank Restructuring Agency (IBRA), which took over assets of troubled banks and indebted bank owners in the wake of the late 1990s regional financial crisis. The PPA is tasked to sell them to raise cash to help finance the state budget deficit.

PRIVATE SECTOR
Auto Sales Drop, Hopes for Second Half
Indonesia's auto industry is undergoing a slow start to the year after sales slumped last month, with higher fuel costs seen triggering production cuts, and a drop in annual sales of up to 16%, Reuters reported on Wednesday (15/2/06).

Auto makers are trimming working hours and output following a slump in sales since the government more than doubled domestic fuel prices in October to ease pressure on the budget. Domestic vehicle sales were a record 533,910 units last year, as consumers snapped up cars, pick-ups and motorbikes with cheap loans. But sales have tapered off since the fuel price hike and slumped 41.5% in January from a year earlier, the sharpest fall in four years.

Industry experts say 2006 sales could drop to as low as 450,000 units as the fuel hike bites and interest rates have gone up. Chairman of Indonesia's Automotive Industry Association (Gaikindo), Bambang Trisulo, said he
does not believe trimming output would result in massive layoffs. Some executives expect sales to recover in the second half, when inflation is forecast to slow and interest rates ease.

BANKS
Consumer Borrowing Still Strong
High inflation and interest rates have failed to dampen consumer demand, with the latest central bank figures showing that consumer borrowing grew at an even faster pace last year than the year before, The Jakarta Post reported on Wednesday (15/2/06).

Consumer spending, which has been the backbone of the economy since the 1997 economic crisis, grew 36.7% in 2005, compared to 34.7% in 2004 when the country's macroeconomic picture was relatively more benign. According to Bank Indonesia (BI) figures, borrowing for investment and working capital purposes, mostly by large corporations, declined, contributing to lower overall lending growth of 24.6% last year compared to the growth of 26.4% booked in 2004. The figures showed that as of December 2005, the banking sector had extended loans amounting to Rp689.7 trillion (some $69.1 billion).

Debtors Expected to Come Home, Pay Up
Dozens of Bank Indonesia Liquidity Support (BLBI) program debtors who fled the country to avoid prosecution are ready to come home to return funds owed to the state, an official has said.

"In the near future, dozens more BLBI debtors will return home with this good intention," Cabinet Secretary Sudi Silalahi told the House of Representatives’ legal affairs commission during a meeting on Monday (13/2/06), The Jakarta Post reported.

The government has said it is considering reverting to its release and discharge policy, which allowed the dropping of charges against bad debtors who return their funds. Silalahi said the police had worked hard in cooperation with Interpol to trace the debtors, most of whom fled to countries with no extradition treaties with Indonesia.

Yudhoyono welcomed the debtors' willingness to return, but insisted the law must be upheld and that they should not be prey to unscrupulous officials.
About Rp144.5 trillion ($15.6 billion), which had been disbursed by the Suharto government to a number of private banks to keep them solvent during the 1997-1998 economic crisis, was embezzled by bankers.

Govt. to Sell Remaining Bank Shares
The government is planning to sell its remaining stakes in Bank Internasional Indonesia (BII) and Bank Permata, respectively the country's 6th and 7th largest lenders, this year if the market is good.

Vice president of state-owned asset management company PT PPA, Raden Pardede, said the asset sales are part of his company’s work plan this year, Antara reported on Monday (13/2/06). The government still has a 5.24% stake in BII and a 20.8% stake in Bank Permata, respectively controlled by a consortium of South Korea's Kookmin Bank and Singapore's Temasek Holding
Ltd and a consortium of Standard Chartered Bank and Astra International.

The stake in BII will likely be divested through market placement and the stake in Bank Permata through market placement or strategic sales, a PPA official has said.

OIL AND GAS
Exxon, Pertamina Told to Fix Cepu
ExxonMobil Corp and Indonesia's state oil company, PT Pertamina, will be summoned to explain their failure to file a development plan for the country's biggest untapped oil field as the government said it will push for a settlement within weeks, Bloomberg reported on Wednesday (15/2/06).

The Upstream Oil and Gas Regulatory Body (BP Migas) was slated to meet with Exxon and Pertamina late last week to seek the submission of a plan for the Cepu oil field, BP Migas chairman Kardaya Warnika said. The companies had failed to meet a December 31 deadline.

"If there's no working proposal, there will be no work done nor production on Cepu," Warnika said. "They have to start doing some work on the field this year. That's what we want." Meanwhile Vice President Jusuf Kalla said the government was appointing two ministers to oversee the talks.

State Enterprises Minister Sugiharto and Minister for Energy and Mineral Resources Purnomo Yusgiantoro will mediate the talks, Kalla said Saturday during a visit to the field in Central Java. The government wanted some resolution "in a few weeks time," he said. "Before I came here, the president instructed me that the project should be started next week, this month," Kalla said. "We don't want this to be prolonged. The sooner the issue is resolved, the
better for the interests of the country."

The dispute between Exxon and Pertamina over which company will operate the Cepu field has stalled its development for more than four years. Sugiharto said on Monday (13/2/06) the government is drafting a joint operator agreement between the two companies on the development of Cepu, but it could take time to formulate details, reported Reuters.

Meanwhile Maman Budiman, vice president of public affairs at ExxonMobil Oil Indonesia Inc, said ExxonMobil has submitted bids for two new offshore oil and gas blocks, among several blocks that the government had offered to investors in December.

“We have submitted a bid for two offshore blocks, Pasangkayu and Surumana, in Makassar Straits," he was quoted as saying by Reuters. "We believe there is still potential to find hydrocarbon in those areas.”

Santos Drills 3rd Oil Well at Jeruk
Australian oil and gas producer Santos Ltd is drilling a third oil well at the Jeruk field in East Java to determine oil reserves but any production will not come on stream this year, a company spokesman said on Tuesday (14/2/06), according to Reuters.

"We are drilling the third well at Jeruk 3 to determine oil reserves. Output from Jeruk is still a long way to go because there is much work to do," Santos spokesman Arie Nauvel said. "It is impossible Jeruk will come on stream this year," he said, without giving a target start date.

Jeruk, majority-owned by Santos, will have an estimated production rate of 50,000 barrels per day (bpd), although officials have said it could ultimately pump two or three times that much. Nauvel said Santos expects to produce between 10,000 and 20,000 bpd of oil from the nearby Oyong field at the end of March.

Source:
THE COORDINATING MINISTRY FOR ECONOMIC AFFAIRS
REPUBLIC OF INDONESIA

Garuda; Change or Die

2006-02-14T10:49:00.000-08:00

By Christovita Wiloto
CEO of Wiloto Corp. Asia Pacific
Bisnis Indonesia February 12, 2006

The changes in the "logic of business" that has been happening in the airlines industry turned out not only affected the small airlines. Big airline such as Garuda Indonesia is burdened by the load of debts in the tune of hundreds millions of Dollars. It has taken a lot of efforts and time to restructure the debts, but to no avail so far.

From the total debt of Garuda of 800 million dollar AS, 510 million of it is a debt to the European Credit Agency (ECA), 130 million dollar in the form of promissory note, and the rest of 160 million dollar to Bank Mandiri and PT Angkasa Pura I dan II. Garuda was also in default for payment of 55 million dollar to the holder of promissory note that fell due at the end of December 2005.

Apart from being burdened by the load of debt, the unfinished negotiation with the creditors was also contributed with how to find the best way to settle these debts. Generally, the creditors requested the management of Garuds to update the business plan. The business plan must contain the effect of the Bali Bombing relative to the performance of the company. They also seek guarantee from the Government of Indonesia towards the payment of the debts, injection of fresh fund and guarantee towards the Garuda business continuation.

The government has assisted Garuda by giving bridging fund totaling 56 million dollar, which will be used for working capital.

Meanwhile, in its guidance, the State Ministry of State Enterprise determines that Garuda must seek strategic alliance with other global airlines. This must be done in line with the transformation of its business to anticipate the growing competition in the airlines business.

The point is, whatever restructuring plan submitted to the creditors, the strategic alliance option is the option that must be dealt with by Garuda. Not surprisingly, if currently Garuda is actively courting some of the foreign airlines, especially from European countries.

But, the idea of forging strategic alliance with foreign airlines created controversy in the public, not only among the member of the parliament but also among the practitioners in the airlines industry. Even Vice President Jusuf Kalla added his surprising comment.

End of last year, the Vice President commented that the government no longer viewed Garuda as the flag carrier. His reasoning, is that current situation is different from the past, therefore it is possible that Garuda be sold of to the investors – both domestic or foreign.

''At present, there is almost no countries in the world that have flag carrier,'' said Vice President, after performing the Friday pray in his office. He added, that there has been growing trend for the sale of airlines, such as Qantas, KLM, atau Malaysia Airlines System (MAS).

Strategic Value of Garuda

The controversy should have been ended here. I think, all of us the fellow Indonesian citizen hope that Garuda can still spread its wings and fly away. Not only becoming the “bridges” from Indonesia to the rest of the world (and vice versa), but also becoming the ambassador for Indonesia in the international stage.

We must appreciate that our country has posted one ambassador for every country in this world. But, with their busy schedule in the diplomatic and elite circles, I am pretty sure that they will not have much time to socialize with the local people.

Service companies like Garuda can play greater role in entering the public domain. With its role as the bridges for people who are traveling to and from Indonesia, the existence of Garuda I think is more “eye catching” and familiar. People from some European countries, for instance, maybe are more familiar with the address of Garuda offices than the address and name of the Indonesian ambassador currently posted there.

In this situation, and with all due respect to what have been done by the Cultural Attaches in the respective embassies, in my opinion Garuda can play more effective and efficient role in promoting the tourism in Indonesia and even the country itself.

Now just imagine if Garuda no longer services the big cities in the world. What will happen is, maybe, the popularity of our country is decreasing. Meaning, whatever it takes, Garuda must still flying and represent the glory of Indonesia to the eyes of international world.

In order to achieve that, Garuda must totally change it business paradigm, from “only” the state owned company to become world-class company. This must be done to enable it to “compete” with other world-class airlines such as Singapore Airlines, Qantas, MAS or Thai Airways. Not only competing with the growing domestic airlines such as Lion Air, Adam Air, Awair and so forth.

The problem is, changing its total paradigm is not an easy job to do. It needs “Passion” and “Iron fists” to do it. It is possible that this will hurt some people along the way. Both internal and affiliated party of Garuda may be affected. I am sure that Garuda will face a lot of resistances, especially from the internal party.

The management and crews of Garuda can no longer instill the old paradigm that they are the “golden boy” and somewhat “different” from the others. The old paradigm must be replaced with the new one that enforces the competition, to serve more, to satisfy more. Garuda must understand that in order to compete in the new "logic of business" in the airlines industry, they have to change. In order also to become the “healthy” Garuda, nimble and can fly anywhere as well as ready to compete with other airlines in the world.

Therefore, Garuda has only two choices. Change totally its paradigm or die away.

Source:
Bisnis Indonesia
February 12, 2006

Indonesian analysts discuss issues facing new commander-in-chief

2006-02-14T09:56:00.000-08:00

BBC MONITORING INTERNATIONAL REPORTS

Excerpt from report by Radio Australia on 14 February

[Presenter Linda LoPresti] Indonesia's new military commander has begun his first week in the job with a warning from the president to keep the armed forces out of politics and a brief to push ahead with an agenda of modernization and internal reform. Tom Fayle reports on the task ahead for the former graduate of the Joint Services Staff College in Canberra.

[Correspondent] Air Marshal Djoko Suyanto is in his mid-fifties, hails from East Java, has some training in both Australia and the United States and is, by all accounts, an avid music lover. He is also the first air force chief to be elevated to the post of overall commander of the Indonesian military in many years and is a military academy classmate of now President Susilo Bambang Yudhoyono, graduating in the same year.

Agus Widjojo knows the world of the Indonesian military and politics well. He is both a retired lieutenant-general and a former deputy speaker of People's Consultative Assembly. He argues that while Air Marshal Djoko's appointment is symbolic of the president's commitment to military reform, it's also a question of rotating the post through the three services and giving the junior service a chance to show its mettle.

[Agus Widjojo] It is to be seen as strengthening the joint doctrine within the TNI, which stipulates that any military operations would be carried out jointly amongst the three services, and also positioning that the three services [are] at equal level, and to transform the definition of national defence from the traditional way of the past where we focused or oriented the defence inwardly because we believed that any threats to the republic would come from within. Now it is to be transferred into the traditional definition of national defence and which is to be directed and focused outwardly, meaning external defence. Which means also distancing the role of the military from social politics or anything to do with the internal or domestic condition of the country.

[Correspondent] Despite this, there is speculation among military analysts that Air Marshal Djoko is really something of a seat warmer for another friend and classmate of the president, but this time an army man - Gen Djoko Santoso. Jakarta-based military analyst Sukardi Rinakit dismisses this, but says the air marshal can expect a rough ride from the army as the services continue to jostle for influence and resources. [passage omitted]

Dr Sukardi Rinakit says the key challenge for Air Marshal Djoko will be balancing the military budget.

[Sukardi] The first challenge of the new commander-in-chief, first it's relating to how the military can finance and can fulfil its operation costs. Because the military doesn't have enough money for operation costs [there is] no choice, the new commander-in-chief must maintain its military business [as heard] as far as possible.

[Correspondent] He also argues that among the many human rights issues facing the new military commander, there is at least one area where improvement can be expected - Papua [Irian Jaya].

[Sukardi] I think the air force will little bit control the army activities there. [passage omitted]

[Correspondent] Some have also argued that given his links with the United States and Australia, Air Marshal Djoko Suyanto will also be a more acceptable face internationally at a time when the TNI is rebuilding its post-East Timor links with the military of both those countries. But that's not a view shared by Lt-Gen Agus Widjojo.

[Agus Widjojo] I think there are too many speculations being thrown on the air which is irrelevant to the appointment of Air Marshal Djoko as commanding general of the TNI. I think it's as simple as that now is the chance to proceed with the military reform and give an opportunity to the air force to be represented by their best officer to be assigned as commanding general of the TNI.

[Correspondent] So you won't be surprised if he serves out his full term at the top?

[Agus Widjojo] No, I will not be surprised.

Source:
Radio Australia, Melbourne, in English 1005 gmt 14 Feb 06
BBC Monitoring

Indonesia, Japan starts "substantial" FTA negotiations

2006-02-14T09:49:00.000-08:00

BBC MONITORING INTERNATIONAL REPORTS

Text of report in English by Japanese news agency Kyodo

Jakarta, 14 February: Indonesia and Japan have entered substantial negotiations on a bilateral free trade agreement in their latest round of talks in Jakarta, raising hopes that a basic agreement can be reached later this year, Indonesian and Japanese government officials said Tuesday [14 February].

"Now, we have a common understanding that both sides will do their best to reach a basic agreement in the summer, (and) the summer means, to my understanding, June or July," a Japanese official said at the end of the five-day Japan-Indonesia Economic Partnership Agreement talks.

Indonesian Ambassador to the United States Soemadi Brotodiningrat, who led the Indonesian delegation in the third round of negotiations, told Kyodo News that Japan and Indonesia exchanged lists of requests and tariff reduction offers for various items.

"We made major progress here, and as in any other negotiations, the more we step forward, the more we can see the problems we are facing," Brotodiningrat, a former Indonesian ambassador to Japan, said without elaborating.

Japanese officials said Indonesia sought improved access for its labour force to Japan, particularly helpers for elderly people, seamen, and factory workers.

The Japanese delegation, headed by Deputy Japanese Foreign Minister Mitoji Yabunaka, also reiterated its request that Jakarta improve its investment climate to lure more Japanese businesses.

Negotiators agreed to hold the next round of negotiations in the third week of April, according the Indonesian and Japanese officials.

"The meeting will be very important...If we won't see major progress then, it will be difficult to reach a basic agreement in the summer," the Japanese official said.

The two countries, which launched the EPA talks in July, had agreed to hold such talks every two months. Both Japanese and Indonesian officials have indicated their goal of completing the EPA negotiations in less than two years.

Sources:
Kyodo News Service, Tokyo, in English 1145 gmt 14 Feb 06
BBC Monitoring

Indonesia: Broadcasting conflict leaves investors in limbo

2006-02-14T09:44:00.000-08:00

BBC MONITORING INTERNATIONAL REPORTS

Text of report in English by Indonesian newspaper The Jakarta Post website on 14 February

An ongoing dispute between the Information and Communications Ministry and the Indonesian Broadcasting Commission (KPI) about which institution has the right to issue broadcasting licences has left the industry in limbo.

The conflict began during President Megawati Soekarnoputri's regime when the 2003 Broadcasting Law was passed, establishing the KPI and giving it the right to issue television and radio licences.

President Susilo Bambang Yudhoyono's government later issued four regulations that gave the ministry the right to issue broadcasting licences. The KPI, with support from some industry players, is still contesting the regulations, which did not come into force until 5 February this year.

North Sumatra commission official Arya said the dispute meant his office was unable to process a backlog of applications for broadcasting licences and set new frequencies.

"It is us who live in the regions who are suffering the most from the new laws," he said. Four government regulations transfer the power to allocate electronic media frequencies and issue broadcasting licences from the KPI to the ministry.

The commission says it will continue issuing broadcasting permits, as mandated by the law establishing it.

"The KPI will continue to hear complaints about broadcasting content and proceed with issuing broadcasting permits," deputy chairman Sinansari Ecip said Monday [13 February]. The decision was made in a meeting of commission executives on Sunday, he said.

Sinansari said the KPI would request the Supreme Court review the four regulations.

Information and Communications Minister Sofyan Djalil said the KPI was welcome to file a judicial review, however, he stressed the government would continue enforcing the regulations.

"Let the Supreme Court decide," he said. The regulations provided legal certainty in the broadcasting sector, Sofyan said.

The commission and broadcasters have raised concerns the regulations would threaten the media's freedom of expression because they granted excessive powers to the Information and Communications Ministry.

Commission member and University of Indonesia communications lecturer Sasa Djuarsa Sendjaja criticized the ministry's response, saying the legislation was deliberately designed with big media bosses in mind.

"What do they mean by legal certainty - is this certainty for the capital owners? What about legal certainty for the public interest?" Sasa said.

Sofyan countered by saying it would be impossible for the broadcasting industry to run without capital.

In an earlier ruling on the matter, the Constitutional Court said the 2003 Broadcasting Law was not against the Constitution.

It said the powers to issue technical regulations on broadcasting should be granted to the KPI.

Sources:
The Jakarta Post website, Jakarta, in English 14 Feb 06
BBC Monitoring

Inco reports results for fourth quarter and full year 2005

2006-02-14T09:39:00.000-08:00

Canada Newswire English

TORONTO, Feb. 14 /CNW/ - Inco Limited today reported adjusted net earnings(1) of $169 million, or 89 cents per share ($0.76 per share on a diluted basis(2)), for the fourth quarter of 2005, compared with adjusted net earnings(1) of $253 million, or $1.35 per share ($1.21 per share on a diluted basis(2)), for the fourth quarter of 2004. The principal adjustments made in arriving at adjusted net earnings(1) for the fourth quarter of 2005 were (1) the exclusion of a gain of $88 million on the sale of a non-core investment; (2) the exclusion of estimated remediation costs of $13 million involving a property we retained from a disposed business unrelated to our current operations and (3) the exclusion of unfavourable non-cash currency translation adjustments totalling $11 million. All of the adjustments made in arriving at adjusted net earnings(1) for the fourth quarters and full years of 2005 and 2004 are set forth in the table under "Reconciliation Between Adjusted Net Earnings and Net Earnings in Accordance with Canadian GAAP" below.

Our net earnings for the fourth quarter of 2005 in accordance with Canadian generally accepted accounting principles ("Canadian GAAP") were $235 million, or $1.23 per share ($1.06 per share on a diluted basis(2)), compared with net earnings of $226 million, or $1.20 per share ($1.08 per share on a diluted basis(2)), for the fourth quarter of 2004.

Our adjusted net earnings(1) for the full year 2005 were $811 million, or $4.29 per share ($3.64 per share on a diluted basis(2)), compared with $855 million, or $4.56 per share ($4.08 per share on a diluted basis(2)), for the full year of 2004.

Our net earnings for the full year 2005 in accordance with Canadian GAAP were $836 million, or $4.41 per share ($3.75 per share on a diluted basis(2)), compared with net earnings of $619 million, or $3.30 per share ($2.95 per share on a diluted basis(2)), for the full year of 2004.

Our adjusted net earnings(1) for the fourth quarter of 2005, as reflected in the table under "Reconciliation Between Adjusted Net Earnings and Net Earnings in Accordance with Canadian GAAP" below, were lower than adjusted net earnings(1) for the corresponding period of 2004 due to a lower realized selling price for nickel, lower Inco-source nickel deliveries and higher production costs partially offset by higher realized selling prices for copper and certain platinum-group metals ("PGMs") and higher deliveries of PGMs.

Our adjusted net earnings(1) for the full year 2005, as reflected in the table under "Reconciliation Between Adjusted Net Earnings and Net Earnings in Accordance with Canadian GAAP" below, were lower than adjusted net earnings for the corresponding period of 2004 due primarily to lower deliveries of Inco-source nickel, copper and PGMs as well as increased production costs partially offset by higher realized prices for nickel, copper and certain PGMs. Net earnings in accordance with Canadian GAAP for the full year 2005, as reflected in the table referred to above, were higher than for the full year 2004 due primarily to a gain on the sale of a non-core investment referred to above and the previously reported Goro non-cash asset impairment charge recorded in 2004 as well as higher realized selling prices for nickel, copper and certain PGMs, partially offset by nickel unit cash cost of sales before by-product credits and lower deliveries of Inco-source nickel, copper and PGMs.

All of the adjustments made in arriving at adjusted net earnings for the fourth quarters and full years of 2005 and 2004 are set forth under "Reconciliation Between Adjusted Net Earnings and Net Earnings in Accordance with Canadian GAAP" below. Our net earnings for the fourth quarter and full year of 2005 in accordance with Canadian GAAP also reflect the inclusion of the adjustments referred to in the table under "Reconciliation Between Adjusted Net Earnings and Net Earnings in Accordance with Canadian GAAP" below.

------------------------------
(1) The adjusted net earnings reported in this release have not been
calculated in accordance with Canadian GAAP, the accounting
principles under which our consolidated financial statements are
prepared, and there is no standard definition in such principles for
such adjusted net earnings or loss. Accordingly, it is unlikely that
comparisons can be made among different companies in terms of such
adjusted results reported by them. A reconciliation of adjusted net
earnings to net earnings in accordance with Canadian GAAP appears
below as well as an explanation of why we believe adjusted net
earnings is useful information.

(2) The calculation of adjusted net earnings per share and net earnings
per share in accordance with Canadian GAAP on a diluted basis takes
into account the dilutive effect of our outstanding warrants, share
options and convertible debentures. The amount of dilution per share
due to these items is dependent on our level of earnings and the
price of our common shares. For the fourth quarter and full year
2005, the number of diluted shares used in this calculation was
approximately 223 million shares, compared with 210 million for the
corresponding periods of 2004.

Chief Executive Officer's Message

The year 2005 was a very exciting one for Inco and our shareholders.We established new all-time records for total annual revenue, Canadian GAAP net earnings, and our average annual realized price for nickel in 2005. We finished the year with about $1 billion in the bank as we continued to advance the biggest growth program in our history. At Voisey's Bay, we produced our first concentrates well ahead of our original schedule and we began shipping the nickel concentrates to our operations in Ontario and Manitoba. The nickel concentrates are now being processed into finished nickel products at our Ontario and Manitoba operations. In New Caledonia, we successfully returned to the field and began ramping up construction on our Goro project.

Without doubt the most exciting development in 2005 was the announcement of our friendly offer to acquire Falconbridge Limited. When completed, the combined company would be the world's largest nickel company and a great copper company. We continue to move forward to complete the pending acquisition. This message, however, looks at Inco's historical and projected performance without the very significant benefits expected to be realized from the pending combination.

With the nickel market expected to remain strong and our nickel production expected to reach a new record high in 2006, we believe that 2006 will be another very good year for earnings and cash flow. With our strong financial position and our continued positive outlook for the nickel market, we have increased our quarterly cash dividend, as announced on February 7, 2006, by 25 per cent to an annualized rate of $0.50 per share.

Nickel Market Developments and Outlook

The stainless steel inventory adjustments that affected the global nickel market beginning in the second half of 2005 continued into the fourth quarter of 2005. However, we have seen a number of positive signs that these inventory adjustments are now behind us. Nickel demand in non-stainless applications like aerospace and hybrid vehicles remained very strong in the fourth quarter of 2005. On the supply side, we saw production disruptions at several nickel producers in the fourth quarter of 2005, tightening nickel supplies.

As we entered 2006, the nickel market has begun to gain momentum, as reflected in the benchmark LME cash nickel price which has averaged $14,711 per tonne ($6.67 per pound) over the January 3-February 13, 2006 period compared with an average LME cash nickel price of $12,628 per tonne ($5.73 per pound) in the fourth quarter of 2005. We expect that stainless steel production will rebound in 2006, led by large production increases in China as new capacity there comes on stream. Industrial production and capital investment are expected to be strong in the U.S. and to improve in Europe and Japan. We are continuing to see good demand from the U.S. and European high nickel alloys market, fueled by the aerospace and power generation end-use markets for these alloys.

In short, with strong growth in nickel demand forecast for 2006, and with limited new nickel projects or expansions currently expected to come on stream before at least 2008, we believe that nickel demand should continue to outpace supply in 2006, which will continue to put upward pressure on prices.

Operations Review

In 2005 we met or exceeded our previous October 2005 guidance on production, nickel price premiums and nickel unit cash costs at our operations, achieving consistent production and productivity improvements across the company.

During the fourth quarter of 2005, we produced 142 million pounds of nickel. Our nickel production for the full year was 487 million pounds, in line with our previous October 2005 guidance of 485 to 490 million pounds for 2005. PT Inco produced 168 million pounds of nickel in matte in 2005, the highest production in its history.

We produced 92 million pounds of refined copper and related products in the fourth quarter of 2005 and 277 million pounds of refined copper and related products for the full year, slightly above our previous October 2005 guidance. In addition, we produced 10 million pounds of copper in concentrate at Voisey's Bay in the fourth quarter of 2005. Platinum-group metals (PGMs) production was 115,000 ounces for the fourth quarter of 2005, and for the full year was 419,000 ounces, above our previous October 2005 guidance of 380,000 to 390,000 ounces.

In 2006, we expect to see a substantial increase in our nickel production. With the addition of Voisey's Bay output for a full year, we plan to raise nickel production from Inco's operations to about 535 million pounds. We have also entered into contracts with two leading smelting and refining companies to have them toll smelt and refine nickel concentrates which we have agreed to purchase from Australian sources. These arrangements are expected to provide Inco with an additional 30 million pounds of nickel for sale, giving us about 565 million pounds of nickel for sale in 2006.

We expect to increase copper production by 20 per cent in 2006, producing 340 million pounds of copper, including 65 million pounds in Voisey's Bay copper concentrates to be sold to third parties. Our 2006 PGMs production is expected to be in the range of 400,000 ounces.

In 2005, Inco's nickel unit cash cost of sales, net of by-product credits, was $2.65 per pound, better than our previous October 2005 guidance for the year of $2.85 to $2.95 per pound, but an increase in this cash measure when compared with 2004. In 2006, we expect that our nickel unit cash costs of sales net of by-product credits will be $2.35 to $2.40 per pound, taking into account the recently announced changes in industrial electricity rates in Ontario. This cost measure includes the feeds we purchase from third parties at LME or other benchmark prices and then process at our Canadian operations. Our costs will be negatively affected by the same factors affecting at least some of the other producers, notably a stronger Canadian dollar and higher energy costs, particularly the cost of high sulphur fuel oil and diesel fuel at PT Inco.

Substituting Voisey's Bay feed for external purchased feeds at our Canadian operations will help to lower our costs. However, the impact of Voisey's Bay in 2006 will not be fully realized until we have a steady flow of Voisey's Bay concentrates to our Ontario and Manitoba operations in the second half of 2006. Once we reach this goal in the second half of 2006, we expect that our nickel unit cash cost of sales will be at least $0.15 per pound lower in the last six months of 2006 than projected for the full year 2006.

In the face of ongoing cost pressures, we continue to work hard to reduce costs and improve productivity wherever we can. All of our key operating units achieved productivity increases in 2005 and we are strongly focussed on getting further improvements in 2006 and they are all delivering more consistent and reliable production.

Growth Projects

We marked a number of significant milestones at our Voisey's Bay project in 2005 - the production of first concentrate, the opening of our demonstration plant in Argentia, Newfoundland to test hydrometallurgical technologies for processing Voisey's Bay nickel concentrates, the first concentrate shipments to our operations in Ontario and Manitoba, and the first production of finished nickel from Voisey's Bay concentrate at our Sudbury operations in early January 2006.

The ramp-up at Voisey's Bay is going very well. As a result, we have raised our 2006 production estimate from this operation to about 120 million pounds of nickel in concentrate.

We continue to make good progress at our Goro project in New Caledonia. Engineering is about 70 per cent complete. Approximately 900 construction personnel are currently on site and earthworks have started for the process plant and our residue storage facility and on road realignment. We are building some 400 modules for the process plant in the Philippines and delivery of these at the Goro site is expected to begin in April.

Our capital cost estimate for the Goro mine, process plant and infrastructure of $1.878 billion is expected to be at the upper end of the plus 15 per cent confidence level. We expect to have a definitive cost estimate in the second quarter 2006, when engineering will be at least 75 per cent complete and all major contracts will have been awarded. The expected initial start-up of the project remains in late 2007.

Building on a Strong Financial Foundation

In the fourth quarter of 2005, we generated $204 million of cash flow from operations, before changes in working capital and capital expenditures. Our cash flow for the full year 2005 was $1.2 billion before changes in working capital and capital expenditures.

Our balance sheet remains strong, with a cash position of $958 million as of year-end 2005. Our debt-to-capitalization ratio was 28 per cent as of year-end 2005.

Update on our Friendly Acquisition of Falconbridge

On October 11, 2005, we announced Inco's friendly take-over offer for Falconbridge, and the two companies entered into a definitive support agreement covering this transaction.

Our offer was subject to a number of customary conditions, including receipt of all necessary regulatory clearances and acceptance of the offer by Falconbridge shareholders owning not less than 66 2/3 per cent of all outstanding Falconbridge common shares.

We have continued to move forward in our efforts to obtain the remaining required clearances from antitrust/competition authorities in the U.S. and Europe. In late January 2006, we received clearance from the Canadian Competition Bureau. Over the next two weeks or so, we currently expect to hear from the U.S. Department of Justice and the European Commission on what, if any, remedy would be required to resolve any competitive concerns that these authorities might see in the context of the pending acquisition. We remain optimistic in terms of the outcome of these processes. Assuming that the outcome of the regulatory clearance processes is positive, we would then be able to proceed with our offer and be in a position to take-up and pay for Falconbridge common shares.

The new Inco to be created by the combination of two great companies represents an exciting and unique opportunity for Inco and Falconbridge shareholders. This transaction promises to create the world's largest nickel company and a leading copper company, with outstanding growth prospects in both metals, given the combined company's strong operations and unique project portfolio. We will generate outstanding cash flow and have the ability to pursue our combined growth strategy on a scale that neither company could have contemplated individually. It will be a geographically diverse company, having a major presence in North and South America, Asia, the South Pacific and Europe. Combining the two companies' operations is also expected to create significant operating and other synergies that are uniquely available to the two of us given the proximity of our operations in Ontario and elsewhere.

While 2005 was a very good year indeed for the Company and our shareholders, with the promise and potential of the new Inco we are convinced that even more exciting times lie ahead.

I look forward to reporting on the completion of the pending acquisition of Falconbridge and our performance for the first quarter of 2006.

(signed)

Scott M. Hand
Chairman and Chief Executive Officer

Reconciliation between Adjusted Net Earnings and Net Earnings in
Accordance with Canadian GAAP
We define adjusted net earnings and adjusted net earnings per share as a calculation of net earnings that excludes items that, because of the nature, timing or extent of such items, we believe do not reflect or relate to our ongoing operating performance. Accordingly, the items that are excluded from this calculation would include certain gains or losses on the sale of non-core investments, asset impairment charges and write-downs in the value of assets, non-cash currency translation adjustments relating principally to liabilities that are not expected to be discharged or settled for a number of years, reclamation or remediation costs unrelated to our current operations, income or other tax benefits or charges relating to the impact of currency translation adjustments, certain tax losses where the related benefits are not normally taken, adjustments for tax rulings and other decisions, interpretations and determinations covering, or based upon, transactions which occurred or related to prior periods and for revaluation of recorded future tax liabilities due to changes in laws or regulations affecting future tax rates, interest income associated with tax refunds, project suspension and similar costs, including related project currency hedging gains and losses, adjustments to minority interests reflecting changes thereto due to subsequent events, losses or gains on debt retirements or redemptions, strike expenses, and other gains and losses that, in each case, do not reflect on our ongoing operating performance. The determination of which items to exclude when calculating adjusted net earnings involves the application of judgment by us.

The following table provides, for the periods indicated, a reconciliation between our adjusted net earnings and net earnings as reported in accordance with Canadian GAAP:

<<
(in millions except per
share amounts) Net Earnings
-------------------------------------------------------------------------
Fourth Quarter Year
-------------------------------------------------------------------------
2004 2004
2005 (Restated)(1) 2005 (Restated)(1)
-------------------------------------------------------------------------
Adjusted net earnings $ 169 $ 253 $ 811 $ 855
Currency translation
adjustments (11) (56) (59) (85)
Gain on the sale of non-core
investment 88 - 88 -
Net income tax benefits(2) 3 22 16 23
Gain on disposal of assets - 6 - 6
Asset impairment charge and
write-downs in value
of assets(4) - - (23) (191)
Estimated remediation costs(5) (13) - (13) -
Partial redemption of
convertible debt (1) - (9) -
Gain on forward currency
contracts - 2 - 10
Favourable adjustment relating
to Goro Nickel S.A.S.
minority interest - - 25 -
Goro project suspension costs
and related currency hedging
gains (losses), net - (1) - 1
-------------------------------------------------------------------------
Canadian GAAP net earnings,
as reported $ 235 $ 226 $ 836 $ 619
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(in millions except per
share amounts) Basic Net Earnings Per Share(3)
-------------------------------------------------------------------------
Fourth Quarter Year
-------------------------------------------------------------------------
2004 2004
2005 (Restated)(1) 2005 (Restated)(1)
-------------------------------------------------------------------------
Adjusted net earnings $ 0.89 $ 1.35 $ 4.29 $ 4.56
Currency translation
adjustments (0.06) (0.30) (0.31) (0.45)
Gain on the sale of non-core
investment 0.46 - 0.46 -
Net income tax benefits(2) 0.02 0.12 0.08 0.12
Gain on disposal of assets - 0.03 - 0.03
Asset impairment charge and
write-downs in value
of assets(4) - - (0.12) (1.02)
Estimated remediation costs(5) (0.07) - (0.07) -
Partial redemption of
convertible debt (0.01) - (0.05) -
Gain on forward currency
contracts - 0.01 - 0.05
Favourable adjustment relating
to Goro Nickel S.A.S.
minority interest - - 0.13 -
Goro project suspension costs
and related currency hedging
gains (losses), net - (0.01) - 0.01
-------------------------------------------------------------------------
Canadian GAAP net earnings,
as reported $ 1.23 $ 1.20 $ 4.41 $ 3.30
-------------------------------------------------------------------------
-------------------------------------------------------------------------

------------------------------
(1) The 2004 results have been restated due to the retroactive
application of a change in accounting policy for convertible debt and
a restatement of our minority interest balances.
(2) The net income tax benefits recorded in the fourth quarter and full
year 2005 relate primarily to adjustments for prior period tax
rulings, decisions, interpretations or determinations and the tax
impact related to currency translation adjustments on our long-term
debt.
(3) These amounts are based upon currently issued and outstanding shares
and not diluted shares.
(4) Represents, in 2005, the write-down in value of our copper refinery
at our Ontario operations and certain assets of PT Inco.
(5) These estimated costs are unrelated to our current businesses and
operations.

We believe that the reporting of adjusted net earnings, a calculation that, as noted above, excludes certain gains or losses on the sale of non-core investments, asset impairment charges, non-cash currency translation adjustments and other items that, given their nature, timing or extent, may obscure trends in the performance of our operations or otherwise not be representative of our ongoing operations, provides our shareholders and other investors with a potentially useful picture that eliminates the volatility of such items, whether they are favourable or unfavourable, and may assist them in assessing our operating performance. In addition, management uses such information internally for operating, budgeting, financial planning and incentive compensation purposes.

Outlook

The following section is limited to the outlook for Inco without taking into account the completion of the pending acquisition of Falconbridge Limited. Accordingly, the estimates and projections set forth below would change significantly upon the expected combination of Inco and Falconbridge.

Our current estimates for production for the first quarter and full year of 2006 for nickel, copper and platinum-group metals ("PGMs"), including PGMs produced from purchased material, are as follows:

First Quarter Full Year
2006 2006(1)
------------- -------------

Nickel - tonnes (thousands) 59 - 61 256
- pounds (millions) 130 - 135 565

Copper - tonnes (thousands) 33 154
- pounds (millions) 75 340

PGMs - troy ounces (thousands) 80 400

------------------------------
(1) Includes 30 million pounds of nickel returned for sale from third
party toll smelting and refining arrangements, with five million
pounds of toll finished nickel production in the first quarter of
2006.

We currently project that our nickel unit cash cost of sales after by-product credits for the full year 2006 will be in the range of $2.35 to $2.40 per pound ($5,182 to $5,292 per tonne). This estimate excludes the costs of certain purchased intermediates and related treatment and refining charges of third parties. A reconciliation between our nickel unit cash costs of sales both before and after by-product credits as indicated and cost of sales in accordance with Canadian GAAP for the fourth quarter and full year 2005 and 2004 is set forth in the table entitled "Reconciliation of Nickel Unit Cash Cost of Sales to Canadian GAAP Cost of Sales" below. The premium on our nickel products for 2006 we currently expect to realize over the London Metal Exchange ("LME") cash nickel prices is approximately $0.05 to $0.10 per pound ($110 to $220 per tonne). Our premiums are affected by fluctuations in the LME cash nickel price and the effect this has on the price we receive for the nickel in matte product produced by PT International Nickel Indonesia Tbk ("PT Inco"), the lag effect that changes in the LME benchmark price have on the pricing of certain of our nickel products, and how certain of our specialty nickel products are priced. As reflected in the chart above, we have historically experienced, and expect to continue to experience, some quarter-to-quarter variability in production levels of our primary metals products due to planned maintenance shutdowns of operations and other normal planned actions.

The current First Call consensus mean estimate for our adjusted net earnings per share for 2006 is $3.50 on a diluted basis. Based upon the current First Call mean forecast for the average LME cash nickel price for 2006, which we understand to be $6.45 per pound, and our understanding of the latest mean forecasts by First Call and London Bullion Market Association (LBMA) for the prices for our other metal products for 2006, and taking into account our production, premium and nickel unit cash cost of sales after by-product credits estimates indicated above, we are comfortable with the current First Call consensus estimate for 2006 for our adjusted net earnings per share of $3.50, on a diluted basis. We are not endorsing how First Call arrives at its consensus mean estimate for our 2006 adjusted net earnings per share on a diluted basis or First Call's forecasts for the LME cash nickel price, or the other benchmark metal prices published by First Call and LBMA, for 2006. Our policy continues to be that we do not publicly forecast where nickel and other metal prices will be in the future given the historic volatility of these prices and the level of economic uncertainty that currently exists in at least some of our key geographic markets. The LME cash nickel price averaged $6.67 per pound ($14,711 per tonne) for the January 3-February 13, 2006 period. The LME cash nickel price on February 13, 2006 was $6.77 per pound ($14,935 per tonne).

The earnings per share consensus estimate above refers to an estimate for adjusted net earnings and excludes certain adjustments that would be made in the calculation of net earnings in accordance with Canadian GAAP. Since such adjustments would include assumptions or forecasts relating to changes in the Canadian-U.S. dollar exchange rate and other currency exchange rate changes and other external factors that we do not believe we are in a position to predict with any degree of certainty, we do not provide a reconciliation between any adjusted net earnings estimate and a corresponding net earnings estimate in accordance with Canadian GAAP.

In terms of the current estimated sensitivity of our earnings per share, both for basic and diluted purposes, to changes in nickel prices, for every change of 10 cents, up or down, per pound in our realized nickel price over a full year, our Canadian GAAP basic and diluted net earnings per share (EPS) over a full year would change, up or down, by about 14 cents and 12 cents, respectively. As reflected in the table below, while our financial results are most sensitive to changes in (1) nickel prices, our results are also sensitive to changes in copper and other prices as well as, on the cost side, changes in oil and natural gas prices and (2) the Canadian-U.S. dollar exchange rate given that a substantial portion of our expenses are incurred in Canadian dollars:

ESTIMATES OF CURRENT 2006 SENSITIVITY OF BASIC
AND DILUTED EPS TO CERTAIN
METALS PRICES AND OTHER CHANGES
OVER ONE YEAR (IN U.S.$)(1)

Amount of Change Basic EPS Diluted EPS
(up or down) Effect Effect(2)
----------------- ----------- ------------
Realized nickel price $ 0.10/lb. $ 0.14 $ 0.12
Realized copper price(3) 0.10/lb. 0.08 0.07
Realized palladium price 50.00/troy oz 0.03 0.03
Realized platinum price(3) 50.00/troy oz 0.03 0.02
Realized cobalt price 1.00/lb. 0.01 0.01
Cdn.-U.S. exchange rate(4)(5) 0.01 0.06 0.05
Fuel oil price (West Texas
Intermediate)(3)(5) 1.00/bbl 0.007 0.006
Natural gas price(5) 0.10/MM BTU 0.002 0.002

------------------------------
(1) Canadian GAAP basic (Basic EPS Effect) and diluted (Diluted EPS
Effect) net earnings per share. Each sensitivity assumes other
factors are held constant.
(2) Based on 223 million diluted shares.
(3) Includes the impact of hedging activities as of December 31, 2005.
(4) Represents the impact on Canadian dollar-denominated operating costs
and excludes the translation effect relating to Canadian
dollar-denominated liabilities and to accrued taxes for Canadian
dollar currency translation effects associated with U.S.
dollar-denominated liabilities.
(5) Increases in these costs and exchange rate have a negative effect on
EPS.

Our capital expenditures for our existing operations and growth projects are also sensitive to changes in exchange rates depending upon the currency in which such expenditures are incurred. It is currently projected that our consolidated total capital expenditures for 2006 will be approximately $1.82 billion. Taking into account capital contributions expected to be made in 2006 by other shareholders in our Goro project, certain previously announced government assistance relating to our growth projects and other financing arrangements that are already in place for these projects, we currently project that of this $1.82 billion total estimate, we will have funded or be required to fund about $1.34 billion.

Commentary on Results for the Fourth Quarter and Full Year 2005

Results of Operations
The following table summarizes our results in accordance with Canadian GAAP for the periods indicated:

Three Months Ended Year Ended
(in millions of U.S. dollars December 31, December 31,
except per share amounts) 2005 2004 2005 2004
-------------------------------------------------------------------------
(Restated) (Restated)

Net sales $ 1,121 $ 1,161 $ 4,518 $ 4,278
Net earnings 235 226 836 619
Net earnings per common share
- basic 1.23 1.20 4.41 3.30
- diluted 1.06 1.08 3.75 2.95
Cash provided by operating
activities 39 294 739 1,393
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The increase in net earnings for the fourth quarter of 2005 compared with the fourth quarter of 2004 was primarily the result of a gain on sale of a non-core investment, lower currency translation adjustments, higher realized selling prices for copper and certain PGMs and higher deliveries of PGMs and copper partially offset by lower realized prices for nickel, lower Inco-source nickel deliveries and higher nickel unit cash cost of sales before by-product credits. The increase in net earnings for full year 2005 compared with 2004 was primarily the result of the previously reported non-cash Goro project asset impairment charge of $191 million, after-taxes, recorded in 2004, higher realized selling prices for nickel, copper and certain PGMs and higher other income, partially offset by higher nickel unit cash cost of sales before by-product credits and lower deliveries of Inco-source nickel, copper and PGMs.

The effect of certain of these items on our results of operations is set forth under "Reconciliation between Adjusted Net Earnings and Net Earnings in Accordance with Canadian GAAP" above.

Net sales

Net sales decreased in the fourth quarter of 2005 by three per cent due to an eight per cent decline in nickel deliveries as well as a 10 per cent decrease in the average realized selling price for nickel. This was partially offset by a 17 per cent increase in copper deliveries, a 38 per cent increase in the average realized selling price for copper, a 46 per cent increase in PGMs deliveries and higher realized prices for certain PGMs. Net sales increased for the year 2005 by six per cent due to higher selling prices for nickel, copper and certain PGMs partially offset by lower deliveries of nickel, copper and PGMs.

Cost of sales and other expenses

The following table summarizes our nickel unit cash cost of sales before and after by-product credits for the periods indicated:

Three months ended Year ended
December 31, December 31,
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
Nickel unit cash cost of sales
before by-product credits
per pound $ 2.91 $ 2.77 $ 3.04 $ 2.60
Nickel unit cash cost of sales
after by-product credits
per pound $ 2.24 $ 2.56 $ 2.65 $ 2.32
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the fourth quarter and full year 2005 compared with the corresponding periods of 2004, the increase in nickel unit cash cost of sales before by-product credits was principally due to (1) higher costs for high sulphur fuel oil and diesel fuel at PT Inco, (2) higher electricity and natural gas prices at our Ontario operations, (3) the negative impact on unit cost of lower nickel production, (4) a higher average Canadian-U.S. dollar exchange rate that adversely affected our costs and (5) higher spending on supplies and services due, in part, to our efforts to expand production. These adverse effects on unit costs were partially offset by (1) the net cost reductions and related savings and (2) lower costs for purchased nickel intermediates primarily as a result of lower volumes of purchased intermediates processed at our Ontario and Manitoba operations in 2005. For the fourth quarter of 2005 compared with the fourth quarter of 2004, the decrease in nickel unit cash cost of sales after by-product credits was due to (1) higher by-product credits resulting from higher deliveries of PGMs and (2) higher realized prices for copper and certain PGMs. This was partially offset by higher unit cash cost of sales before by-product credits. For the full year 2005 compared with the full year 2004, the increase in nickel unit cash cost of sales after by-product credits was primarily due to higher unit cash cost of sales before by-product credits partially offset by higher by-product credits. The increase in by-product credits was primarily due to higher realized prices for copper and certain PGMs partially offset by lower deliveries of copper and certain PGMs.

We have continued to use purchased nickel intermediates to increase processing capacity utilization at our Ontario and Manitoba operations. While the cost of purchased nickel intermediates is higher than that for processing our own mine production and such cost increases as the prevailing prices, LME cash nickel or other benchmark prices, on which this material is purchased by us increases, the price realizations are also higher, resulting in margins on these purchases remaining relatively unchanged.

A reconciliation of our nickel unit cash cost of sales before and after by-product credits to cost of sales under Canadian GAAP for the periods indicated is shown in the table entitled "Reconciliation of Nickel Unit Cash Cost of Sales to Canadian GAAP Cost of Sales" below.

In the fourth quarter and full year 2005, we realized net cost reductions and related savings of $16 million and $40 million, respectively, below our full year 2005 target of $60 million for these savings.

Nickel production decreased to 64,359 tonnes (142 million pounds) in the fourth quarter of 2005 compared with 66,195 tonnes (146 million pounds) in the fourth quarter of 2004. Nickel production decreased to 220,727 tonnes (487 million pounds) for the full year 2005 compared with 236,817 tonnes (522 million pounds) for the full year 2004. The decrease in nickel production in the fourth quarter compared with the same period of 2004 was primarily due to the need to rebuild the required inventories for our Clydach, Wales refinery after the previously announced planned shutdown and the related slower than planned ramp-up after that shutdown experienced at our Ontario operations in the third quarter of 2005. The decrease in nickel production for 2005 compared with 2004 was largely due to the same reasons affecting fourth quarter 2005 production, a longer than planned shutdown at our Ontario operations and a slower ramp-up after that shutdown and a longer than usual maintenance shutdown during the third quarter at our Manitoba operations, a shutdown which was necessary to prepare these operations for the arrival of the Voisey's Bay concentrates in the fourth quarter of 2005. PT Inco produced a record 168 million pounds of nickel in matte in 2005.

Other income

In the fourth quarter of 2005, other income increased by $76 million compared with the corresponding period in 2004 due principally to a gain from the sale of a non-core investment in a junior mining company in the amount of $88 million. For the year 2005, the increase in other income relates to this gain partially offset by a charge resulting from the conversions and settlement of such conversions in cash of a portion of our LYON Notes originally issued in March 2001.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased by $9 million in the fourth quarter of 2005 due to lower consulting fees. Selling, general and administrative expenses increased by $15 million for the year 2005 primarily due to higher capital taxes and higher expenses associated with share options that had been granted in prior years with share appreciation rights based upon the price of our common shares.

Income and mining taxes

Our effective tax rate for the fourth quarter of 2005 of approximately 21 per cent was lower than the combined statutory income and mining tax rate in Canada of about 39 per cent due principally to the non-taxable gain of $88 million on the sale of a non-core investment referred to above and a decrease in estimated net mining taxes. Our effective tax rate for the year 2005 of 31 per cent was lower than the combined statutory income and mining tax rate in Canada of about 39 per cent due principally to the benefit of profits earned in jurisdictions having lower tax rates and the non-taxable gain noted above.

Minority Interest

For the full year 2005, minority interest included a previously recorded favourable adjustment of $25 million, reflecting the recovery of losses previously taken by Inco due to insufficient minority interest balances existing in 2004 to absorb the share by the minority interest of the impairment charge associated with the Goro project recorded in the second quarter of 2004.

Cash Flows and Financial Condition

Net cash provided by operating activities in the fourth quarter of 2005 was $39 million, compared with $294 million in the fourth quarter of 2004. The decrease in net cash provided by operating activities was primarily due to higher working capital requirements in the fourth quarter of 2005 due, in part, to the required working capital ramp-up for Voisey's Bay as it commenced commercial production as of December 1, 2005. Net cash provided by operating activities in the year 2005 was $739 million, compared with $1,393 million in 2004. The decrease in net cash provided by operating activities in 2005 was primarily due to an increase in working capital at the end of 2005 compared with 2004. The increased working capital requirements were primarily related to reduced income and mining tax payable balances in view of the significant tax payments of $245 million made during the first quarter of 2005 in respect of the 2004 taxation year and higher tax instalments paid in 2005. In addition, inventory increased primarily as a result of increased production costs, increased finished copper inventory as a result of the previously indicated closure of the copper refinery in Ontario in the month of December 2005 and higher in-process inventories of Voisey's Bay concentrates as well as the establishment of supplies inventories at Voisey's Bay.

Net cash used for investing activities was $216 million in the fourth quarter of 2005 compared with $325 million in the fourth quarter of 2004. Investing activities in the fourth quarter of 2005 included $103 million of proceeds from the sale of an investment referred to above. Net cash used for investing activities for the year 2005 of $892 million increased slightly from the year 2004 level of $881 million primarily due to (1) higher capital spending, mainly in respect of our Goro project and (2) higher sustaining capital expenditures at our Canadian operations and PT Inco, partially offset by (x) lower capital spending for our Voisey's Bay project and the proceeds from the sale of an interest in the Goro project, (y) subsequent contributions from our partner in the Goro project and (z) the proceeds from the sale of an investment referred to above.

Net cash provided by financing activities for the year 2005 was $35 million. In December 2005, we received $49 million in respect of the French government-sponsored financing for Goro. During the fourth quarter of 2005, we also received $200 million from the drawdown of the balance of our $400 million term loan facility that matures in December 2011. In addition to certain debt repayments, cash used for financing activities in 2005 included $76 million in respect of the tender for conversion and settlement in cash at our election of a portion of our LYON Notes. During 2005, LYON Notes representing approximately $163 million aggregate principal amount were tendered for conversion. At our option, we elected to settle a portion of the conversions tendered in accordance with the terms of the LYON Notes for cash in lieu of shares in the amount of $76 million. The difference between the cash settlement price of $76 million and the book value of the LYON Notes tendered and settled in cash in the total amount of $41 million represents a charge of $35 million. For accounting purposes, the LYON Notes are bifurcated between debt and equity, the equity portion representing the value of the holders' conversion options. Consequently, the charge of $35 million has been bifurcated between a charge to earnings of $9 million and a charge to retained earnings of $26 million. The remainder of the LYON Notes tendered for conversion were, at our option, settled in shares with no impact on net earnings.

At December 31, 2005, cash and cash equivalents were $958 million, down from $1,076 million at December 31, 2004, primarily reflecting cash outflows for capital expenditures for our growth projects and sustaining capital expenditures at our operations. Total debt was $1,974 million at December 31, 2005, compared with $1,868 million at December 31, 2004. Total debt as a percentage of total debt plus shareholders' equity was 28 per cent at December 31, 2005, compared with 30 per cent at December 31, 2004.

As previously announced, on February 7, 2006 Inco's Board of Directors declared an increased quarterly dividend on our Common Shares of $0.125 per share, payable March 1, 2006 to shareholders of record as of February 17, 2006.

Changes in Accounting Policies and Restatements

Effective January 1, 2005, on a retroactive basis, we adopted revisions to Canadian Institute of Chartered Accountants (CICA) Section 3860, Financial Instruments - Disclosure and Presentation. The revisions relate to the accounting for instruments for which the issuer has the right to settle in cash or its own shares. Such an instrument is bifurcated between debt and equity in accordance with this revised standard. This change impacted the accounting treatment for our LYON Notes, Convertible Debentures due 2023 and 3 1/2% Subordinated Convertible Debentures due 2052 which were previously treated as equity in accordance with EIC No. 71, Financial Instruments that may be Settled at the Issuer's Option in Cash or its own Equity Instruments. In the fourth quarter 2005, we restated our prior year and current year quarterly minority interest and deferred income taxes to correct an error in the allocation of net earnings to minority interests, and also restated prior year and current year quarterly diluted earnings per share to correct an error in applying the "if converted" method with respect to our convertible debt. The aggregate impact of these restatements on diluted earnings per share was as follows: first quarter 2005 - nil; second quarter 2005 - an increase of $0.01 per share; and third quarter 2005 - a decrease of $0.01 per share. The impact on 2004 diluted earnings per share was an increase of $0.02 per share.

Access to Webcast of February 14, 2006 Presentation to the Investment

Community on Fourth Quarter 2005 Results and Related Matters

As previously announced, interested investors can listen to our presentation to the investment community, expected to include an analysis of Inco's 2005 financial and operating results as well as a review of (1) key operational, marketing and other current drivers of Inco's business, (2) the "new" Inco to be created by the pending acquisition of Falconbridge Limited, (3) Inco's Voisey's Bay and Goro projects and key current strategic objectives and (4) our current outlook for 2006 and beyond.

This presentation is scheduled for February 14, 2006, beginning at 3:00 p.m. (Toronto time), and can be accessed by visiting the website of a third-party webcasting service we will be using, CNW Group Ltd., at www.newswire.ca/webcast, at least five minutes before the start of the presentation. Copies of any slides or other statistical information to be used for the conference call can be accessed and will be available for online viewing by persons with a computer system and Internet connection meeting certain minimum requirements through www.newswire.ca/webcast or through Inco's website, www.inco.com, by clicking on the "Latest Quarterly Webcasts" link on the homepage.

The archival webcast of the presentation can be accessed via the Internet through www.newswire.ca/webcast. A recording of the presentation can be listened to until 11:59 p.m. (Toronto time) on February 28, 2006 by dialling 1-800-558-5253 in North America and by entering the reservation number 21280521. This recording is also available outside North America by dialling 416-626-4100 and by entering the same reservation number.

Cautionary Statement Regarding Forward-Looking Statements

This news release contains forward-looking statements regarding the Company's offer to purchase all of the common shares of Falconbridge Limited, including statements regarding the timing thereof and the anticipated timing of achievement of milestones in the regulatory clearance process, anticipated financial or operating performance of the combined company, expected synergies and cost savings from the proposed combination of Inco and Falconbridge, and strategies, objectives, goals and targets of the combined company, and forward-looking statements regarding the Company alone, including anticipated financial or operating performance, the Company's costs on a stand-alone basis, its position as a low-cost producer of nickel, production levels for nickel, copper and platinum-group metals for its first quarter and full year 2006 for the Company as a whole and at its Indonesian, Voisey's Bay and other Canadian operations, nickel market conditions and nickel demand and supply both globally and for certain markets and uses, premiums realized on its metals prices, nickel unit cash cost of sales after by-product credits, third party toll smelting and refining arrangements, production costs on its own mine production, nickel inventories, its financial results, including adjusted net earnings per share on a diluted basis, cash flow from operations, cash generation, the effect on and sensitivity of financial results to changes in nickel and other metal prices, exchange rates, energy and other costs and its common share price, cost reduction and related savings objectives, construction, commissioning, initial start-up, and other schedules, capital costs and other aspects of its Goro project, arrangements covering copper production and sales, capital expenditures at the Company's growth projects, overall capital expenditures, contributions from shareholders and government programs and other external sources of funds, and governmental clearances or approvals required, for its growth projects, tax payments, planned maintenance and other shutdowns and subsequent start-ups at certain operations, new collective labour agreements, including the risk of a disruption or work stoppage, and other issues and aspects relating to its business and operations. Inherent in those statements are known and unknown risks, uncertainties, assumptions and other factors well beyond the Company's ability to control or predict. Actual results and developments may differ materially from those contemplated by these statements depending on, among others, such key factors as, in the case of the planned acquisition of Falconbridge, the risks that we will not be able to obtain the required approvals or clearances from regulatory and other agencies and bodies on a timely basis, or divestitures or other remedies required by regulatory agencies may not be acceptable or may not be completed in a timely manner, we may not meet the other remaining conditions of our offer, we may not realize the anticipated annualized benefits and operational and other synergies and cost savings from the acquisition or related divestitures, restructurings, integration and other initiatives associated with the planned combination of Inco and Falconbridge and we may realize unanticipated costs and/or delays or difficulties relating to such integration, and such other factors relating to Inco itself as business and economic conditions in the principal markets for the Company's products, the supply, demand and prices for metals to be produced, purchased nickel intermediates and nickel-containing stainless steel scrap and other substitutes and competing products for the primary metals and other products the Company produces, developments concerning labour relations, the Company's deliveries, production levels, production and other anticipated and unanticipated costs and expenses, metals prices, premiums realized over LME cash and other benchmark prices, tax benefits and charges, changes in tax legislation, hedging activities, the Canadian-U.S. dollar and other exchange rates, changes in the Company's common share price, the capital costs, scope, schedule, required permitting and other key aspects of the Goro project, the timing of receipt of all necessary permits and governmental, regulatory and other clearances or approvals, and engineering and construction timetables, for the Goro project, the necessary shareholder and government program sources of financing for the Goro and other projects, political unrest or instability in countries or territories such as Indonesia and New Caledonia, risks involved in mining, processing and exploration activities, research and development activities, the accuracy of our estimated mineral/ore reserves, resolution of environmental and other proceedings and the impact of various environmental regulations and initiatives, market competition, the ability to continue to pay quarterly cash dividends in such amounts as Inco's Board of Directors may determine in light of other uses for such funds and other factors, and other risk factors listed from time to time in the Company's reports filed with the U.S. Securities and Exchange Commission. The forward-looking statements included in this release represent the Company's views as of the date of this release. While the Company anticipates that subsequent events and developments may cause the Company's views to change, the Company specifically disclaims any obligation to update these forward-looking statements. These forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to the date of this release. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on any forward-looking statements.

Material Assumptions

A number of assumptions were made by Inco in preparing its guidance for 2006 and making certain other forward-looking statements for 2006 and beyond and in connection with our pending acquisition of Falconbridge Limited. Such assumptions include, but are not limited to, those set forth under the "Outlook" section of this press release and the slides and other material covering the presentations being made as of this date which are available on our website and on the SEDAR system in Canada. These assumptions include estimates on the U.S. dollar-Canadian dollar exchange rate for 2006, global industrial production and in key geographic markets, interest rates, global nickel and other metals demand and supply and in key geographical markets, and growth in the key end-use markets for the metals produced by the Company, that we would not have any labour, equipment or other disruptions at any of our operations of any significance in 2006 other than any planned maintenance or similar shutdowns and that any third parties which we are relying on to supply purchased intermediates or provide toll smelting or other processing do not experience any unplanned disruptions. Some of the material assumptions made by us involve confidential or particularly sensitive information and, accordingly, we do not believe it is appropriate to disclose such assumptions for competitive or other business reasons. Forward-looking statements for time periods subsequent to 2006 involve longer term assumptions and estimates than forward-looking statements for 2006 and are consequently subject to greater uncertainty. Therefore, the reader is especially cautioned not to place undue reliance on such long-term forward-looking statements.

Important Legal Information

This communication may be deemed to be solicitation material in respect of Inco's proposed combination with Falconbridge. Inco filed with the SEC, on October 24, 2005, a registration statement on Form F-8 (containing an offer to purchase and a share exchange take-over bid circular) and on each of December 15, 2005 and January 20, 2006, an amendment to such form F-8, in connection with the proposed combination. Inco has also filed, and will file (if required), other documents with the SEC in connection with the proposed combination. Falconbridge has filed a Schedule 14D-9F in connection with Inco's offer and has filed, and will file (if required), other documents regarding the proposed combination, in each case with the SEC.

INVESTORS AND SECURITYHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders may obtain copies of the registration statement and Inco's and Falconbridge's SEC filings free of charge at the SEC's website (www.sec.gov). In addition, documents filed with the SEC by Inco may be obtained free of charge by contacting Inco's media or investor relations departments.

February 14, 2006

Inco Limited

Key Financial and Operating Statistics

For the three months For the year
ended December 31, ended December 31,
2005 2004 2005 2004
-------------------------------------------------------------------------
Average Realized Prices
Nickel(1) - per tonne $ 12,780 $ 14,138 $ 14,842 $ 13,906
- per pound 5.80 6.41 6.73 6.31
Copper - per tonne 4,528 3,283 3,839 2,916
- per pound 2.05 1.49 1.74 1.32
(1) Including intermediates

LME Average Cash Prices
Nickel - per tonne 12,628 14,080 14,733 13,852
- per pound 5.73 6.39 6.68 6.28
Copper - per tonne 4,297 3,094 3,684 2,868
- per pound 1.95 1.40 1.67 1.30

Deliveries
Nickel in all forms (tonnes)
- Inco-source 58,843 67,271 223,811 235,185
- Purchased finished 6,607 3,693 22,471 16,697
-------------------------------------------------------------------------
65,450 70,964 246,282 251,882
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Copper (tonnes) 34,814 29,694 120,543 124,884
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cobalt (tonnes) 417 514 1,694 1,542
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Platinum-group metals (in
thousands of troy ounces) 118 81 415 420
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Net Sales to Customers by
Product (in millions)
Primary nickel $ 837 $ 1,004 $ 3,655 $ 3,503
Copper 158 97 463 364
Precious metals 81 51 267 246
Other 45 9 133 165
-------------------------------------------------------------------------
$ 1,121 $ 1,161 $ 4,518 $ 4,278
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Nickel Production in all
Forms (tonnes) 64,359 66,195 220,727 236,817
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Finished Nickel Inventories
at end of Period (tonnes) 23,444 27,334 23,444 27,334
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Inco Limited

Reconciliation of Nickel Unit Cash Cost of Sales to Canadian GAAP
Cost of Sales

For the three months For the year
(in millions of U.S. dollars ended December 31, ended December 31,
except where noted) 2005 2004 2005 2004
-------------------------------------------------------------------------

Cost of sales and other
expenses, excluding
depreciation and depletion $ 726 $ 643 $ 2,633 $ 2,348
By-product costs (174) (147) (635) (572)
Purchased finished nickel (87) (52) (331) (234)
Delivery expense (8) (8) (35) (33)
Other businesses cost of sales (10) (9) (39) (38)
Non-cash items(1) (11) (3) (32) (28)
Remediation, demolition and
other related expenses (33) (12) (57) (30)
Adjustments associated with
affiliate transactions (17) 10 34 (54)
Asset write offs and related
charges(2) - - (32) -
Other (10) (12) (9) (11)
-------------------------------------------------------------------------
Nickel cash cost of sales
before by-product credits(3) 376 410 1,497 1,348
By-product net sales (261) (178) (825) (719)
By-product costs 174 147 635 572
-------------------------------------------------------------------------
Nickel cash cost of sales
after by-product credits(3) $ 289 $ 379 $ 1,307 $ 1,201
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Inco-source nickel deliveries
(millions of pounds) 129 148 493 518
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nickel unit cash cost of sales
before by-product credits
per pound $ 2.91 $ 2.77 $ 3.04 $ 2.60
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nickel unit cash cost of sales
before by-product credits
per tonne $ 6,415 $ 6,107 $ 6,702 $ 5,732
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nickel unit cash cost of sales
after by-product credits
per pound $ 2.24 $ 2.56 $ 2.65 $ 2.32
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nickel unit cash cost of sales
after by-product credits
per tonne $ 4,938 $ 5,644 $ 5,842 $ 5,115
-------------------------------------------------------------------------
-------------------------------------------------------------------------

------------------------------
(1) Post-retirement benefits other than pensions.
(2) Relates to certain assets at PT Inco that had no future value to PT
Inco's operations and the write-off of the book values of certain
equipment assessed to be beyond economic repair and to PT Inco's
change in accounting for asset sales and other dispositions.
(3) Nickel cash cost of sales before and after by-product credits
includes costs for both Inco-source and purchased nickel
intermediates.

Inco Limited

Consolidated Statement of Earnings

(unaudited)
For the three months For the year
(in millions of U.S. dollars ended December 31, ended December 31,
except per share amounts) 2005 2004 2005 2004
-------------------------------------------------------------------------
(Restated) (Restated)

Net sales $ 1,121 $ 1,161 $ 4,518 $ 4,278
-------------------------------------------------------------------------

Costs and expenses
Cost of sales and other
expenses, excluding
depreciation and depletion 726 643 2,633 2,348
Depreciation and depletion 69 70 256 248
Selling, general and
administrative 51 60 207 192
Research and development 12 7 35 29
Exploration 13 13 43 32
Currency translation
adjustments 11 56 59 85
Interest expense 10 7 26 36
Asset impairment charge - - 25 201
-------------------------------------------------------------------------
-------------------------------------------------------------------------
892 856 3,284 3,171
-------------------------------------------------------------------------
Other income, net 91 15 83 49
-------------------------------------------------------------------------
Earnings before income and
mining taxes and minority
interest 320 320 1,317 1,156
Income and mining taxes 66 63 408 432
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings before minority
interest 254 257 909 724
Minority interest 19 31 73 105
-------------------------------------------------------------------------
Net earnings $ 235 $ 226 $ 836 $ 619
-------------------------------------------------------------------------
Net earnings per common share
Basic $ 1.23 $ 1.20 $ 4.41 $ 3.30
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted $ 1.06 $ 1.08 $ 3.75 $ 2.95
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average common shares
outstanding, in thousands
Basic 191,023 187,909 189,425 187,550
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted 222,519 210,205 222,706 210,156
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Inco Limited

Consolidated Balance Sheet

December 31, December 31,
(in millions of U.S. dollars) 2005 2004
-------------------------------------------------------------------------
(Restated)
ASSETS
Current assets
Cash and cash equivalents $ 958 $ 1,076
Accounts receivable 673 601
Inventories 996 834
Other 68 42
-------------------------------------------------------------------------
Total current assets 2,695 2,553
Property, plant and equipment 8,459 7,587
Accrued pension benefits asset 611 422
Deferred charges and other assets 245 154
-------------------------------------------------------------------------
Total assets $ 12,010 $ 10,716
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Long-term debt due within one year $ 122 $ 107
Accounts payable 253 331
Accrued payrolls and benefits 221 208
Other accrued liabilities 533 399
Income and mining taxes payable 36 279
-------------------------------------------------------------------------
Total current liabilities 1,165 1,324
Deferred credits and other liabilities
Long-term debt 1,852 1,761
Deferred income and mining taxes 2,018 1,891
Accrued post-retirement benefits liability 732 671
Asset retirement obligation 168 171
Deferred credits and other liabilities 131 58
-------------------------------------------------------------------------
Total liabilities 6,066 5,876
-------------------------------------------------------------------------
Minority interest 761 470
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Shareholders' equity
Convertible debt 362 418
-------------------------------------------------------------------------
Common shareholders' equity
Common shares issued and outstanding
192,237,394 (2004 - 188,133,439 shares) 3,000 2,891
Warrants 62 62
Contributed surplus 578 571
Retained earnings 1,181 428
-------------------------------------------------------------------------
4,821 3,952
-------------------------------------------------------------------------
Total shareholders' equity 5,183 4,370
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 12,010 $ 10,716
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Inco Limited

Consolidated Statement of Cash Flows

(unaudited)
For the three months For the year
ended December 31, ended December 31,
(in millions of U.S. dollars) 2005 2004 2005 2004
-------------------------------------------------------------------------
(Restated) (Restated)

Operating activities
Earnings before minority
interest $ 254 $ 257 $ 909 $ 724
Items not affecting cash
Depreciation and depletion 69 70 256 248
Deferred income and mining
taxes 46 20 77 63
Asset impairment charge - - 25 201
Other (60) 44 57 114
Contributions greater than
post-retirement benefits
expense (105) (116) (137) (140)
Decrease (increase) in non-cash
working capital related to
operations
Accounts receivable (93) (51) (72) (166)
Inventories (114) (22) (149) (88)
Accounts payable and accrued
liabilities 72 79 34 126
Income and mining taxes
payable (52) (64) (235) 249
Other 22 77 (26) 62
-------------------------------------------------------------------------
Net cash provided by
operating activities 39 294 739 1,393
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Investing activities
Capital expenditures (348) (339) (1,168) (876)
Partial sale of interest in
Goro Nickel S.A.S. - - 150 -
Proceeds from the sale of
an investment 103 - 103 -
Other 29 14 23 (5)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net cash used for investing
activities (216) (325) (892) (881)
-------------------------------------------------------------------------
Financing activities
Repayments of long-term debt (3) (2) (105) (100)
Long-term borrowings 211 203 214 205
French government-sponsored
Girardin Act financing 49 41 49 41
Cash settlement of LYON
Notes converted (11) - (76) -
Common shares issued 6 12 40 30
Common dividends paid (19) - (57) -
Dividends paid to minority
interest (10) (5) (49) (20)
Other (4) (11) 19 (10)
-------------------------------------------------------------------------
Net cash provided by financing
activities 219 238 35 146
-------------------------------------------------------------------------
Net increase (decrease) in
cash and cash equivalents 42 207 (118) 658
Cash and cash equivalents at
beginning of period 916 869 1,076 418
-------------------------------------------------------------------------
Cash and cash equivalents at
end of period $ 958 $ 1,076 $ 958 $ 1,076
-------------------------------------------------------------------------
-------------------------------------------------------------------------

>>
%SEDAR: 00001084EF

Source:
Canada Newswire Ltd.
INCO Press Release

Inco reports results for fourth quarter and full year 2005

2006-02-14T09:34:00.000-08:00

Indonesian police nab Bali bombing suspect

2006-02-14T09:27:00.000-08:00

PeopleDaily China-- A man suspected of linking to last year's suicide bombings in Bali has been arrested recently, bringing the number of suspects in custody to 11, the Indonesian police headquarters said Tuesday.

"We have seven days to question the person before we decided whether to name him suspect or release him," police spokesman Brig. Gen. Anton Bachrul Alam told reporters here.

The suspect was identified as Sahal Al Amri alias Sunarto, 31. He was arrested last Thursday at his residence in the Central Sulawesi town of Poso by the police anti-terror squad.

The suspect has links with Subur, another suspect who police believed had recruited suicide bombers, Anton said without elaborating.

The attacks on three restaurants on Bali island left 23 people dead including the bombers. Police have identified the suicide bombers who videotaped farewell messages before carrying out the attacks.

The video also showed a balaclava-clad man threatening attacks on western targets. The man is believed to be Noordin Moh Top, a Malaysian national being sought here for masterminding a series of deadly bombings, including in Bali.

Sources:
Xinhua,
PeopleDaily

OPEC Output Down 120,000 Barrels Per Day in January, According to Platts

2006-02-14T08:42:00.000-08:00

LONDON, Feb. 14 /PRNewswire-FirstCall/ -- Overall crude production by oil cartel OPEC fell again in January, dropping by 120,000 barrels per day to 29.68 million barrels per day (mil b/d) from December's 29.8-mil b/d, a Platts survey of OPEC and oil industry officials showed February 13.

That figure includes Iraqi production at 1.53-mil b/d. Excluding Iraq, which does not participate in OPEC output accords, the ten members with crude production quotas pumped an average 28.15-mil b/d in January, 100,000 b/d down from December's 28.25-mil b/d and just 150,000 b/d above their 28-mil b/d ceiling.

The latest estimates show OPEC volumes at their lowest level in almost a year and mark the second consecutive month that OPEC production has been below 30-mil b/d. Platts estimates last year showed volumes averaging 29.58-mil b/d in February, 29.83-mil b/d in March and 29.96-mil b/d in April, before rising to 30.02-mil b/d in May. Overall production held above 30-mil b/d until December 2005.

There were no increases to offset the production losses seen in six countries.
"Despite marginal falls in individual production levels, OPEC is still pumping nearly flat out in the face of high prices," said John Kingston.

Iraq, whose oil industry continues to be beset by infrastructural problems and sabotage-not to mention the occasional weather-related disruptions to exports-saw volumes fall by 20,000 b/d to 1.53-mil b/d.

Nigeria's output fell further after a series of militant attacks on oil installations in the Niger Delta, although the drop was partly offset by rising deepwater offshore production from Shell's Bonga field.

UAE production edged down as a result of Murban field maintenance. Saudi volumes also dropped slightly, to 9.48-mil b/d from 9.5-mil b/d in December, while Iran's production slipped by 30,000 b/d to 3.9-mil b/d.

Indonesian production declined further in January to average 920,000 b/d over the month.

High oil prices dissuaded the group from giving any serious consideration to a cut in crude output at the recent January 31 meeting in Vienna, despite previous concerns about the projected fall in demand in the second quarter.

Indeed, Saudi oil minister Ali Naimi said on the sidelines of the talks that he did not think there would be a need to cut output at all this year. OPEC is next scheduled to meet March 8 in Vienna.

Sources:
PR Newswire,
Platts-The McGraw-Hill Companies

Corruption probe 'deters' investment at SOEs

2006-02-14T08:28:00.000-08:00

The ongoing investigations into a number of top executives at state-owned enterprises (SOEs) for their alleged roles in corruption cases have affected the performance of the SOEs, as other officials are now afraid to make corporate decisions for fear of being charged with corruption in the future, a minister claims.

Executives from telecommunications firm PT Telkom, Bank Mandiri, and power utility PT PLN have put investment plans on hold as a result of the graft probes, State Minister for State Enterprises Sugiharto said Monday.

"Previously, SOE officials would go all out for projects. But now, none of them are willing to handle projects as they are afraid of being investigated by the authorities in the future," said Sugiharto at the presidential palace.

He explained that there were a huge number of planned capital expenditure projects that were unlikely to be acted upon during the first quarter of this year, thus slowing down the expansion of the SOEs.

The National Police recently questioned PLN president Eddie Widiono and finance director Parno Isworo (for now, in their capacities as witnesses) in connection with a Rp 122 billion (US$13.1 million) corruption scandal at the company. The police have thus far detained the company's director for power and primary energy, Ali Herman Ibrahim, and his deputy, Agus Darmadi, over the case.

The case began when the Supreme Audit Agency found irregularities in the purchase of two generators installed at the Borang gas-fired power plant to provide additional power for the 16th National Games in Palembang, South Sumatra.

Meanwhile, the West Java Police have detained Telkom's human resources and internal affairs director, John Welly, for alleged corruption involving the provision of Voice over Internet Protocol facilities.

Sugiharto said his office would send representatives out to visit the companies and explain to the executives that as long as they complied with the law and principles of good corporate governance, they would have nothing to fear.

"If they do no wrong and comply with the regulations, there should be no reason for slowing down their companies' investment plans. That would only reduce the earnings of the companies," he said.

Source:
Rendi Akhmad Witular,
The Jakarta Post, Jakarta

Interview with President Of Ben Gurion University

2006-02-14T08:24:00.000-08:00

Federal News Service (Middle East)
(Note - The following was translated from Hebrew)

INTERVIEW WITH PROF. AVISHAI BRAVERMAN, PRESIDENT OF BEN GURION UNIVERSITY IN THE NEGEV AND ISRAELI LABOR PARTY CANDIDATE FOR FINANCE MINISTER, DISCUSSING THE LABOR PARTY'S ECONOMIC AGENDA (ISRAEL 103FM RADIO, 08:20 (GMT+2) FEBRUARY 13, 2006)

ANCHOR: Good morning to the man who was the Head of the University of the Negev, Professor Avishai Braverman.

AVISHAI BRAVERMAN: Good morning Nissim.

ANCHOR: You're already running to work. I just told you good morning.

AVISHAI BRAVERMAN: Yes.

ANCHOR: Why? Are you already stressed because of the time?

AVISHAI BRAVERMAN: I work from four in the morning until two at night. We still have to gain a lot of mandates before we can form a government.

ANCHOR: Tell me my good friend Avishai Braverman, I want to ask you a question before we talk about party matters.

So how do you like being in politics?

AVISHAI BRAVERMAN: Look, in politics there are two sides. On the one hand, I really enjoyed the primaries, you know beyond all those headlines, when you meet people from the north, from the south, from all over the country. Wonderful people. And you also witness their struggles, and they are telling me that they want a change.

It's not acceptable to them that the country has become so poor, so corrupt, so violent, and this warms the heart. They received me very well.

Today, when I look around, I can see things in politics that are not very nice, as you well know. But my hope is that and people will look at what's important for the party and for the country, and less at their personal desires.

ANCHOR: In short, you're having a good time.

AVISHAI BRAVERMAN: Look, there are some things that I enjoy, and some things that I don't enjoy.

I'm here to accomplish a mission and a goal, and if you take the sweet you have to also take the bitter.

ANCHOR: I understand. Now I'd like to talk with you about what happened yesterday at your press conference, when you presented your economic agenda.

And today you know every party presented its economic agenda, and the average voter who is not an economist, when he opens the newspaper today, this is what he is seeing; Kadima is promising to invest over seven years, 14 billion shekels to reduce poverty.

Bibi (Netanyahu) from the Likud is promising to eliminate the problem of poverty within three years, and you in the Labor Party with Amir Peretz, promise to create within four years, another 400,000 jobs, and the innocent voter is saying, 'Stop trying to fool us.'

What is this, all of a sudden with some kind of magic, you're going to eliminate poverty? All of a sudden the State of Israel is going to be prosperous?

AVISHAI BRAVERMAN: This is an excellent question. First of all it is true that the average voter is confused, making what's being said of little importance. (inaudible) I'm saying it clearly. In Israel today we have the struggle of two world views.

The view of Olmert and Netanyahu, which their government has been presenting in recent years, is a view that says: 'Let's make the rich richer, and the rich will carry the middle class, and the middle class the poorer classes, and a redeemer will come to Zion.'

But this has never happened anywhere in the world. This view has not taken hold in Israel.

The view that we present is a clear view that says the State of Israel will not be like the Republican administration of Bush, where over there things are not working so well, but will adapt the policies of Clinton, of Blair, Sweden and Norway.

What is the central point of the social-democratic view? On the one hand, there will be competition, we will have no inheritance tax or any additional taxes. We will reduce the bureaucracy and our first priority will be the employment of the young and those older people who, to my regret, have not progressed rapidly enough.

ANCHOR: Yes Professor Braverman. I must stop you here.

While I have been talking to you, I received something in writing from Nehemiah Strassler and he says that you are simply presenting a fairytale world. This large sum of 68 billion shekels of government expenses, will be on the account of the Baron (Rothschild) and you are promising an annul growth rate of 5 percent.

AVISHAI BRAVERMAN: But I must tell you, with all due respect for Nehemiah Strassler, with all due respect again, I have explained all this to him and I regret to say that he does not understand. He has his own point of view and he doesn't listen.

Around me I have four of the best economists in Israel; Professor Amir Barnea, Professor Ephriam Tzadkah, David Brodett and Yarom Gabai.

The plan that I am presenting, that we presented yesterday along with Amir Peretz, is a straightforward plan explaining how we will achieve the sum of 68 billion shekels, because each year we will increase the budget by 2 percent in accordance with the population growth, just as they do in Europe. The population growth in Israel is 2 percent. This gives us 50 billion shekels of growth over four years.

In addition we will make drastic cut backs in Judea and Samaria, like Yitzhak Rabin did in his time, and small cutbacks that will not be detrimental over a long period, within the defense industry and the military.

This will give us 68 billion shekels. We will allocate this budget differently, not only to the rich, but to the elderly we will guarantee a retirement benefit. We will increase the minimum wage. We will increase the prescription drugs allotment. We will do all this with wisdom, because we have reached the situation of having become a third world country. Every third child lives in poverty. Every fourth citizen lives in poverty. We are now seeing cab drivers of eighty years old, who are still driving cabs because they have no pension.

The State of Israel has been reduced to a third world country. Look at our Labor Party team. Amir Peretz and myself, we mean what we say and we are reliable people.

ANCHOR: I'm sure you mean what you say. The question is, can this be implemented and can it be done at all?

AVISHAI BRAVERMAN: Look, we are certainly able to achieve a growth rate of 5 percent--

(Cross talk)

I know only one thing in my life, and I was in Brazil, Argentina, Indonesia, Senegal, Kenya, and we were tested by what we saw. If you cut back the bureaucracy and invest in research and development, which the previous government of Olmert and Netanyahu damaged most severely, they damaged the universities and education.

We are not only going to add to education, we are going to bring good news to the Israeli students, to every student, just like Professor Yuli Tamir suggested, that they will not pay tuition. They will receive loans and after four years, when they become an engineer or work in high tech, or become a doctor and make than the average salary, they will pay it back.

And if God forbid they are unemployed, they won't have to. This is how we will maintain the university budgets and improve them.

I'm asking Nehemiah Strassler, where does growth come from? Growth comes from education. It comes from investing in the foundations. If you damage the middle classes and don't invest in education and in health, this will hurt future growth. And all of the economists around me agree that we need to strengthen and invest in the middle and lower classes, and this will give us the chance to grow in time.

ANCHOR: Thank you very much Professor Avishai Braverman.

AVISHAI BRAVERMAN: Thank you.

Source:
Federal News Service (Middle East)
02/14/2006 10:07:14 AM EST

New measures planned to help corporate sector

2006-02-14T08:09:00.000-08:00

President Susilo Bambang Yudhoyono is set to unveil a new economic policy aimed at helping revive the country's corporate sector, which was hard hit by the fuel price hikes and ensuing economic slowdown last year.

Coordinating Minister for the Economy Boediono said a presidential instruction setting out concrete programs to help resolve problems in the "real sector" was expected to galvanize activity and confidence in the business community.

"With this instruction, all the economic ministries will be given particular responsibilities and time-bound targets for the implementation of the program," said Boediono on the sidelines of a ceremony at the presidential palace Monday.

Boediono, a former finance minister under the previous administration of Megawati Soekarnoputri, refused to provide details of the planned economic policy other than saying it would include the streamlining of customs procedures.

Analysts are forecasting that the country's consumption-driven economic growth this year will be lower than the government's initial forecast of 6.2 percent amid high oil prices, a weak investment climate and possible electricity hikes.

The World Bank's country director for Indonesia, Andrew Steer, has said that gross domestic product in Southeast Asia's largest economy might only grow between 5 and 5.5 percent.

Meanwhile, visiting executives of the European Business Chamber of Commerce (Eurocham) said the government should accelerate the construction of infrastructure projects, and the completion of new investment and tax laws to help encourage foreign investment.

"The government needs to make progress with new investment and taxation laws, as well as accelerate the construction of infrastructure to help drive the economy," said visiting Eurocham executive Lord Charles Powell of Bayswater.
Powell made the remark after meeting Vice President Jusuf Kalla to highlight the problems confronting the overseas business community in Indonesia.

"It will take time to get the economy on the right track and get foreign investment coming back into this country on a bigger scale. I am just encouraging the Vice President to go ahead with these steps," he said.
Powell is a former private secretary, and foreign affairs and defense adviser to former British prime ministers Margaret Thatcher and John Major, respectively.

Powell is currently a board member of and advisor to several major international companies, including Louis-Vuitton Moet Hennessy, Mandarin Oriental Hotel Group, Rolls-Royce, Hicks, Muse, Tate & Furst and Barrick Gold.

Source:
Rendi Akhmad Witular,
The Jakarta Post, Jakarta

Early IMF debt repayment 'good for Indonesia'

2006-02-14T08:00:00.000-08:00

The government will go ahead with its plans to repay Indonesia's debts to the International Monetary Fund (IMF) ahead of schedule, the finance minister said, citing a preliminary study from the central bank that showed the country was financially capable of doing so and the benefits that would result.

"Bank Indonesia (BI) has concluded that from the administrative point of view -- comparing our obligations to pay the loan interest and provide enough funds to repay the loans while maintaining the security of our foreign exchange reserves -- early repayment would be more beneficial to us," Finance Minister Sri Mulyani Indrawati said during a hearing Monday with the House of Representatives' finance commission.

Indonesia's outstanding debts to the IMF currently amount to $7.8 billion. The debts, which are managed by BI, take the form of standby loans to support Indonesia's forex reserves.

Between 1997 and 2003, the IMF provided some $25 billion in loans to Indonesia to help rescue ailing banks and restructure the country's debts in exchange for the implementation of a number of tough economic reform programs, including the privatization of state firms and the cutting of government subsidy spending on fuels and other commodities.

Public criticism was harsh, however, with many commentators questioning the benefits of the reforms, while the standby nature of the outstanding debts was slammed for placing unnecessary pressure on the budget.

Mulyani, a former IMF director, said that the government's main reason for wanting to speed up the repayments was rising borrowing costs.

"The interest rate has risen to 4.58 percent from 4.31 percent since last year's third quarter in line with the recent hike in U.S. Treasury bill yields. This is also plus a margin of 1.08 percent," she said.

Mulyani also said that Brazil and Argentina had recently repaid in full their debts to the IMF, raising concerns that Indonesia, which after Turkey was now the Fund's second largest debtor, and virtually its largest income contributor, which could be considered unfair given Indonesia's status as a developing country.

Mulyani further said that the government was confident about its financial capacity to fulfill the plan, saying that foreign direct investment was expected to rise in the coming years, adding increased revenues to the state coffers.
She declined, however, to elaborate on the repayment details or time frame pending further consultation with BI.

Source:
The Jakarta Post, Jakarta

Indonesian President pledges to modernise military arms

2006-02-14T07:57:00.000-08:00

THAI PRESS REPORTS--Section: Regional News - Indonesian President Susilo Bambang Yudhoyono has pledged to modernise the military's weaponry system.
He made the remark on Feb. 13 after inducting Air Marshall Djoko Suyanto as the new Indonesian Military Commander, replacing Gen. Endriartono Sutarto.
"It is now time for Indonesia to modernise its equipment and armament system as part of the military`s professional improvement," he was quoted by Antara news agency as saying.

Susilo said that the procurement of military armaments must be conducted in accordance with the government's budget and the significance of the usage. Therefore, the procurement must be implemented transparently and priority should be given to home made products.

Source:
Thai Press Reports

IAEA supports nuclear power plant construction in Indonesia

2006-02-14T07:52:00.000-08:00

THAI PRESS REPORTS--Section: Regional News - The International Atomic Energy Agency (IAEA) wholly supports Indonesia to build nuclear-power plants, State Minister for Research and Technology Kusmayanto Kadiman told media last week.

IAEA Director Mohammed El-Baradei expressed his support on the sidelines of a recent IAEA meeting in Vienna, Austria. Besides, the agency proposed providing Indonesia with technical expertise and assistance in the selection of suitable locations for nuclear power plants, said Kusmayanto.

Indonesia is cooperating in studies on nuclear reactors with the Australian Nuclear Science and Technology Organisation and mulling construction of plants in the Muria peninsula in central Java, Madura, Bali and other locations.

The country is expected to build four nuclear power plants with a capacity of 1,000 mW per one at a cost of 1.5 billion USD each, by 2016 at the latest.

Nuclear electricity will be an important alternative energy in Java, Madura and Bali because the regions account for 60 percent of the country's electricity consumption, according to Kusmayanto.

Source:
THAI PRESS REPORTS

Bakrie to provide '3G services' using CDMA technology

2006-02-14T07:39:00.000-08:00

Failing to win a government license for third generation (3G) mobile services last week has not undermined PT Bakrie Telecom's determination to enter the high-speed data transmission market.

Bakrie Finance's president, Anindya N. Bakrie, said in Jakarta on Monday the company planned this year to adopt the CDMA-based Evolution Data Optimized (EVDO) system, the latest version of CDMA 2000-1X, which would allow it to provide high-speed data transmission services as good as those offered by 3G technology.

"With the launch of EVDO, we will show that Bakrie Telecom remains committed to providing high-speed data transmission services," he said.
Bakrie Telecom and PT Telkom were both outbid in the 3G auction held by the government last week by three other operators, PT Telkomsel, Indosat and Excelcomindo, which each took one of the three frequencies blocks being auctioned.

"We can still use our current frequency (800 MHz) and our transceivers. We only need to add some equipment, such as EV-DO carriers to our transceivers, in order to provide high-speed data transmission services," Anindya said, adding that using WCDMA technology -- the GSM-based 3G mobile telecommunications technology -- in providing high-speed data transmission services would be far more costly for the company as it did not possess a GSM base.

If Bakrie Telecom had won a 3G license last week, the company would have also had to invest a lot of money to pay the frequency license fee and construct the GSM infrastructure, he said.

Source:
The Jakarta Post

Fitch downgrades ratings outlook for Indonesia

2006-02-14T07:30:00.000-08:00

The government's plans to offer its second batch of local bonds of the year Tuesday, and some global bonds next month, received a bit of a knock Monday with global credit rating agency Fitch Ratings downgrading its rating outlook for Indonesia.

Albeit disappointed, the government downplayed the decision as a mere glitch after Standard and Poor's recently upgraded its rating outlook, with Moody's Investment Services also expected to upgrade its outlook sometime soon.

Fitch revised downwards its outlook on Indonesia's foreign-currency and local-currency credit ratings, both of which are currently at "BB-" -- three notches below investment grade -- to "stable" from "positive".

S&P currently rates Indonesia at "B+", and Moody's at "B2", both with a positive outlook. Higher credit ratings and outlooks mean lower risk premiums on an issuer's debts, thus helping to lower borrowing costs.

"The revision reflects concerns over risks to the external balance sheet that need to be addressed with greater urgency and importance," associate director of Fitch's sovereign ratings team, Ai Ling Ngiam, said in a release.

"The reversal towards a weakening in the current account balance position coincides with a period of heavy public sector amortization payments."
Indonesia recorded a current account deficit of US$2 million during last year's second and third quarters, compared to $2.24 billion and $2.77 billion, respectively, in 2004, the latest figures from the central bank show.

Bank Indonesia, however, has estimated that in line with its preliminary calculations, the balance would likely rise to $1.97 billion by the fourth quarter.
Indonesia's foreign exchange reserves as of Jan. 30 rose to $35.07 billion, from $34.72 billion a month earlier. The government plans to pay Rp 63.5 trillion (some 6.9 billion) in foreign debt installments this year.

The agency also downgraded its ratings outlook on nine local lenders, citing more challenging operating conditions in the near term, particularly higher interest rates, which would likely have an impact on the asset quality and profitability of the banks.

Government officials took Fitch's latest review in their stride.
Minister of Finance Sri Mulyani Indrawati questioned why the agencies still gave Indonesia lower ratings than certain other countries when its macroeconomic indicators were better.

"This has made us avoid higher-cost bond issuance as a source of financing, and forced us to focus on bilateral foreign loans, even though these are sometimes politically sensitive," she said during a hearing with the House of Representative.

Bank Indonesia Governor Burhanuddin Abdullah also questioned why Fitch was worried about Indonesia's external balance sheet.

"I think our current account is going to be in surplus for 2006, but a very small surplus, because the importation of oil is falling, he said in an interview with Dow Jones, adding that foreign exchange reserves had also risen and "the trend is still increasing."

Local markets also took little notice of Fitch's revision, with the Jakarta Stock Exchange Composite Index closing slightly down by 0.06 percent at 1,252.40 and the rupiah ending the day flat at Rp 9,230 against the U.S. dollar.

Source:
Urip Hudiono,
The Jakarta Post, Jakarta

RI sends team to check waste disposal at Freeport's mine

2006-02-14T07:07:00.000-08:00

JAKARTA (Bloomberg): Environment Ministry has sent a 15-member team to check if Freeport-McMoran Copper & Gold Inc. improperly disposed waste from its mining operations in Papua province, Environment Minister Rachmat Witoelar said.

"There's a problem with its tailings. They were not properly processed," Rachmat said in a phone interview yesterday.

Preliminary data showed that Freeport may have exceeded the minimum residue limit in the Grasberg mine, the world's biggest gold mine in Papua province, he said.

An environment ministry report to parliament dated Jan. 30 showed total suspended solid in Aghawagon river stood at 451.7 milligrams per liter, more than the government-set limit of 50 milligrams per liter. The team was sent on Feb. 10.

"We have sent a full team, but I will need further findings to say what's the next step," Rachmat said.

Freeport's spokesman Siddharta Moersjid said the company would cooperate with the Environment Ministry to address any concerns they may have.
"We do not use cyanide or mercury in our process," Moersjid said in an e-mail response. "Our mine tailings are simply finely ground natural rock and are non-toxic."

The tests are expected to be completed in about three weeks, Rasio Ridho Sani, assistant deputy minister for management of hazardous material for mining, energy oil and gas, said in an interview.

Freeport runs the Grasberg mine, which is also the world's second-biggest copper mine, under a 30-year contract with the Indonesian government. The agreement, which started in 1992, can be extended for up to another 20 years.

The environment ministry has charged Newmont Mining Corp., the world's biggest gold miner, of polluting a bay near the company'smine in North Sulawesi province. The head of Newmont's local business, Richard Ness, 56, faces as many as 10 years in prison if convicted. The company and Ness deny the allegations, saying waste disposal from the mine was within legal limits.

Indonesia also filed a US$117 million civil suit against the Denver-based Newmont, claiming waste from the miner polluted the sea. In November, an Indonesian court dismissed the suit, saying it doesn't have the jurisdiction to decide on the case.

Source:
Bloomberg

Yudhoyono to visit N. Korea: spokesman

2006-02-14T07:04:00.000-08:00

JAKARTA (AFP): President Susilo Bambang Yudhoyono is planning to visit Pyongyang to hold bilateral talks with North Korean leader Kim Jong-Il, his spokesman said Tuesday.

No date had been fixed but it was hoped the trip would take place within the next few months, Dino Patti Djalal said.

He said it was not known if the trip would take place before Kim takes up an invitation, accepted in principle, to visit Indonesia.

Indonesia has long-standing ties with North Korea dating from the era of Indonesia's first president Sukarno. Kim visited Jakarta in 1965 when he accompanied his father Kim Il-Sung on astate trip.

Indonesia's special envoy Nana Sutresna visited Pyongyang last week as part of a mission to broker a meeting between the defense chiefs of North Korea and South Korea, which have technically been at war since their 1950-53 conflict, as part of efforts to reduce tensions on the divided peninsula.

Seoul, through its defence minister, last month asked Jakarta to host the talks and both Koreas last week agreed to resume military talks at general level no later than early March.

North Korea has been boycotting six-way talks aimed at dismantling its nuclear weapons program since negotiations ended in a stalemate in November over US financial sanctions on the Stalinist state.

Indonesia's auto sales slump 41%, biggest in 7 Years

2006-02-14T07:00:00.000-08:00

JAKARTA (Bloomberg): Automobile sales in Indonesia dropped 41 percent in January, the biggest fall in almost seven years, as rising interest rates deterred car purchases.

Domestic car sales fell to 26,612 units in January, compared with 45,480 units a year earlier, PT Astra International said, citing figures from the Association of Indonesian Automotive Industries.

Astra, Indonesia's biggest auto distributor, posted a 20 percent drop in domestic sales to 17,341 units last month from 21,657 units a year earlier, the association said.

Car sales are slowing in Indonesia as rising rates force prospective buyers to defer purchase plans. Indonesia's central bank raised its key interest rate to 12.75 percent in December, from July's 8.5 percent, to stem a decline in the nation's currency. January's decline is the biggest since February 1999.

Indonesian carmakers exported 2,092 vehicles last month, Astra said in the statement.

Source:
Bloomberg

Indonesia, Russia to cooperate on rocket-launching station

2006-02-14T06:56:00.000-08:00

JAKARTA (AP): Indonesia and Russia plan to build a satellite launching pad on a remote island in Indonesia's easternmost province, a spokesman of the Ministry of Foreign Affairs Yuri Thamrin said on Tuesday.

Senior officials from the two countries signed an initial agreement last week to build the launch pad on Biak Island in Papua province, said Yuri Thamrin.

The island was chosen because it is close to the equator, where rockets can take advantage of the Earth's greater rotational speed to save on fuel.

He gave no more details on the project.

Biak is off the northern coast of Papua, 3,200 kilometers northeast of Jakarta.
The province, formerly known as Irian Jaya, occupies the western half of New Guinea island.

Source:
Associate Press

Howard says Bali death sentences a warning to Australians

2006-02-14T06:52:00.000-08:00

SYDNEY, Australia (AFP): Prime Minister John Howard Tuesday described the actions of two Australians sentenced to death for heroin trafficking in Bali as "stupid" and said their punishment was a warning to others.

Howard said it was "predictable" that the ringleaders of the so-called "Bali Nine" group, Andrew Chan, 22, and Myuran Sukumaran, 24, would be given the death sentences that were handed down Tuesday, given the evidence against them.

The Australian leader said his government would appeal to the Indonesian government for clemency for the pair but warned that Canberra had no power to overturn the laws of countries with harsh drug laws.

"I just say to every young Australian, please take notice of this," he told reporters.

"I even beg them not to take the terrible risk that these young people have done ... the warnings have been there for decades, how on earth any young Australian can be so stupid as to take the risk is completely beyond me."

Howard said he hoped "every young Australian, who might in their wildest imagination think they can get away with this, will take a lesson from this".

He said Indonesia had made it clear it hated drugs and had harsh penalties for drug traffickers.

"They are the penalties prescribed by the laws of Indonesia and I don't think anybody is suggesting that the law wasn't carried out," he said.

Howard also defended Australian police, who have faced criticism here for tipping off Indonesian police about the activities of the Bali Nine, all of whom are Australian.

"I think that's very unfair, the police are there to protect us from the ravages of drugs," he said.

The Bali Nine gang of eight men and one woman were arrested in April last year as they tried to smuggle 8.5 kilograms of heroin to Australia via Bali.

In the first verdicts for the group Monday, Renae Lawrence and Scott Rush were each given life sentences. Another pair, Michael Czugaj, 20, and Martin Eric Stephens, 28, were also handed lifesentences Tuesday.

The fate of three other defendants will be announced Wednesday.

Source:
AFP, Australia

Indonesia expects to start new petrochemical plant in Feb

2006-02-12T16:12:00.000-08:00

JAKARTA, (Reuters) - Indonesia is expected to start up a new petrochemical plant, Trans Pacific Petrochemical Indotama (TPPI), this month, starting at 60 percent-capacity to produce aromatic and oil products, an official at state oil firm Pertamina said on Friday.

TPPI, located in Tuban city in East Java province, has a capacity of 100,000 barrels per day (bpd) of condensate to feed its splitter.

"We expect Tuban Petrochemical (TPPI) to start up this month because everything is almost ready," Pertamina's processing director Suroso Atmomartoyo told Reuters, referring to the plant's alternative name.
"The plant (initially) will run at 60 percent capacity and will gradually increase after that. However, that will also depend on how much feedstock we have," he said.

Atmomartoyo said the plant would find some condensate from domestic sources and some from abroad.

"We know that there is not much domestic condensate. We will take some from Senipah," he said. Indonesia produces around 125,000 bpd of condensates, some of which are exported. The 125,000-bpd volume includes 25,000 bpd from Senipah.

Atmomartoyo said the petrochemical output would include 1.1 million tonnes of kerosene, 189,000 tonnes of diesel oil, 500,000 tonnes of paraxylene, 120,000 tonnes of orthoxylene, and 100,000 tonnes of toluene.

"If the feedstock is 100,000 bpd, then that is the level of production. If the feedstock is less, then the output will also become less than that," Atmomartoyo said.

He said most of the petrochemical products would be absorbed by the domestic market, while Pertamina would take all of its oil products.

Another Pertamina official who declined to be named said Pertamina owns 15 percent of TPPI and local company TubanPetro has 59.5 percent. Siam Cement of Thailand and Japanese firms Sojitz Corp. as well as Itochu Corp. have the remaining stakes.

Soruce:
Reuters

Indonesia is considering selling an army-owned airline

2006-02-12T16:09:00.000-08:00

JAKARTA, (Reuters) - Indonesia is considering selling an army-owned airline, PT Mandala Airlines, as part of efforts to reform the armed forces, military chief Endriartono Sutarto said on Friday.

The Indonesian parliament approved a law in 2004 restricting the armed forces, known as Tentara Nasional Indonesia (TNI), from doing business. The armed forces have widely diversified businesses, mostly run through foundations, in sectors such as forestry and finance.

"TNI is no longer allowed to do business," Sutarto told reporters. "On Mandala ... the decision is to sell it."

Indonesia's airlines have been hit by soaring fuel prices. The Indonesian government has said it may sell up to 49 percent of flag carrier Garuda Indonesia to strategic investors. Garuda defaulted on a $55 million debt repayment at the end of 2005.

The government has vowed to help Garuda cope with its financial problems, which Garuda president director Emirsyah Satar has blamed on a weakening rupiah, higher oil prices and competition in the industry.

Source:
Reuters

Indonesia VP Wants Revision Of Freeport Profit Sharing Deal

2006-02-12T15:58:00.000-08:00

JAKARTA -(Dow Jones)- Soaring mineral prices on the global market justify a revision of the government's profit-sharing agreement with U.S. mining giant Freeport-McMoRan Copper & Gold Inc., Indonesia's Vice President Jusuf Kalla said Friday.

"Prices of gold and nickel are currently high, (and) based on this, profit sharing should be increased by two-to-three times from the previous figures," Kalla told reporters, without elaborating on the terms of the government's current profit sharing deal.

Kalla said his desire to gain a bigger slice of the profits from Freeport- McMoRan's massive Grasberg mine in remote Papua province was motivated by concern for Papuan residents rather a bid to boost desperately-needed government revenues.

"This is for the sake of Papuan people, because 70% of profit sharing (from Freeport-McMoRan's operations) will be given to the Papuan people," he said, without elaborating. A Freeport-McMoRan spokesperson could not immediately be reached for comment.

Kalla said the government would seek to review the contracts of large foreign investment projects, including Freeport-McMoRan's Grasberg, every five years, without elaborating.

Copper and gold prices on the world market hit record highs earlier this month as fund managers entered the market en masse as a result of strong demand expectations from the Asian economic powerhouses of China and India.

Copper reached an all-time intraday high of $5,110 per metric on Feb. 7 while gold reached an 18-year high of $575 an ounce on Feb. 2. on the London Metals Exchange.

Freeport-McMoRan funneled $260 million into government coffers in the form of taxes, royalties, dividends and fees in 2004, data from the firm's annual report for that year indicates. The report says the firm's total economic benefit to Indonesia totaled $3 billion in the same period.

The Grasberg mine has produced 16.1 billion pounds of copper and 23.3 million ounces of gold net since its discovery in 1988. The mine's estimated reserves of more than 40 billion pounds of copper and 46 million ounces of gold give it " decades" of future production, the Freeport-McMoRan 2004 annual report said.

Kalla's comments are likely to reinforce foreign investors' worst fears about contract sanctity and the predictability of Indonesia's legal and regulatory environment.

Indonesia recorded a 20.6% on-year rise in approved foreign direct investment to $11.69 billion in the first eleven months of 2005, but analysts say concern over the country's judicial unpredictability remains a major deterrent to new investment inflows.

Foreign investors are already aghast at a wrangle between Indonesia's state- owned Petroleum firm Pertamina (PTM.YY) and U.S. oil giant Exxon Mobil Mobil Corp. (XOM) that's preventing the signing of a joint-operations contract for the massive Cepu oil block in East Java province.

The two companies are deadlocked over Pertamina's demand that it be Cepu's sole operator for the first five years of the block's 30-year contract. Exxon Mobil says the demand violates a memorandum of understanding the two companies signed in June 2005.

Kalla's comments coincide with heightening official scrutiny of alleged illegal payments by Freeport-McMoRan to military officers on Papua. Freeport-McMoRan said late Wednesday that it will fully cooperate with government investigations into its Grasberg operations in Papua province.

Indonesia's Minister of Energy and Mineral Resources, Purnomo Yusgiantoro, said Wednesday that the government will "very soon" form a special interdepartmental investigative team to probe complaints about Freeport- McMoRan's Papua operations.

That probe is part of the widening fallout from a December New York Times report that Freeport-McMoRan allegedly made payments of nearly $20 million to military and police officials posted around Grasberg from 1998 to 2004.
Similar allegations were also made by London-based environmental watchdog Global Witness' "Paying for Protection" report in July 2005.

The allegations prompted Indonesia's defense minister last month to call for a probe of Freeport-McMoRan's military payments and for the issuance of specific guidelines for private firms that need the Indonesian military to provide security in remote areas.

In January, the allegations prompted the comptroller of New York City, representing shareholders of city pension funds, to ask both the U.S. Justice Department and the Securities and Exchange Commission to probe the legality of Freeport's financial support for security forces in Papua.

Freeport-McMoRan has said it gave "financial support" to Indonesian security officials in Papua for items including infrastructure and logistics, according to a letter signed by the company's Chief Executive Richard Adkerson, posted on the company Web site on Jan. ll.

The company's vice president of communications, William L. Collier III, last week declined a Dow Jones Newswires request for clarification on the payments, saying he wouldn't comment beyond the company's public disclosure.

Source:
Jakarta Bureau; Dow Jones Newswire

Indonesia Police Arrest Suspected Militant

2006-02-12T15:07:00.000-08:00

JAKARTA, Indonesia — An Islamic teacher suspected of involvement in a Southeast Asian terrorist network has been detained in central Indonesia, police said Saturday.

Brig. Gen. Bambang Suwedi said the suspect, identified only as Sahal, was arrested Thursday morning in the town of Poso in Central Sulawesi province.
Suwedi said police had acted on reports the teacher had ties to Malaysian fugitive Noordin Top, an operative with the al-Qaida-linked Jemaah Islamiah group.

"He (Sahal) was questioned by the anti-terror unit in Jakarta," Suwedi said, adding that police could hold Sahal for a week before formally declaring him a suspect.

Jemaah Islamiah has been blamed for a string of bombings since 2000 that have left over 245 dead, many of them foreigners. The group wants to establish an Islamic state spanning Indonesia, Malaysia, Singapore and the southern Philippines.

Ninety percent of Indonesia's 210 million people are Muslim, and most people practice a moderate form of the faith. But attacks against Christians have increased in recent years amid a global rise in Islamic radicalism.

Almost half of Sulawesi's population is Christian. The province was the scene of fierce battles between Muslims and Christians in 2001 and 2002 that killed about 1,000 people, and despite a peace deal, violence against Christians has continued.

Source:
The Associated Press

Ministry of Finance Ready to Accommodate Return of BLBI Funds

2006-02-12T14:54:00.000-08:00

Jakarta (ANTARA News) - Minister of Finance Sri Mulyani Indrawati has said that her office is ready to accommodate the return of Bank Indonesia Liquidity Support (BLBI) funds, but the office is now still arranging a mechanism of this purpose."Later at the ministry of finance," she told reporters when asked whether a special bank account will be provided for payment of the debts.

Coordinating Minister of Economy Affairs Boediono, National Police chief Gen Sutanto and Attorney General Abdurrahman Saleh also attended the meeting.On Monday, three debtors James Januar, Ulung Bursa and Omar Putirai came to the presidential office to express readiness to return the BLBI funds amounting to Rp170 billion.

According to National Police chief, Gen. Sutanto, they came to the state palace to follow the steps of Bank Bira`s commissioner Atang Latief who has earlier expressed readiness to return the BLBI funds to the government.

The government provided BLBI funds totaling Rp144.5 trillion from August 1998 to early 1999 to assist 48 ailing private banks. However, in May 1999, a Supreme Audit Agency report revealed that 95 percent of the troubled banks had misappropriated the funds.

The debtors who have surrendered themselves may not have to undergo a legal process, because according to law enforcers there is no indication they have violated the law although they have yet to secure a document stating they had paid their debts (SKL). Based on reports, the Police Chief said, the debtors actually wanted to return their debts through the Indonesian Bank Restructuring Agency (IBRA) which was already liquidated.

Source:
LKBN ANTARA

Washington. The issue of lobbying

2006-02-12T14:43:00.000-08:00

VOICE OF AMERICA NEWS-- Washington. The issue of lobbying, which is the process of trying to influence policy-makers in favor of a specific cause, has been under intense scrutiny in the United States because of a recent corruption scandal that is expected to involve lawmakers on Capitol Hill. One aspect of lobbying that has so far escaped close attention, however, is the efforts of foreign entities to affect U.S. policy.

There is bipartisan unanimity in Washington on at least one issue. According to both Republican House Majority leader Dennis Hastert and Democratic Senator Joseph Lieberman, lobbying abuse is a problem.

HASTERT: "I have been deeply disturbed by those who have broken the rules of the House and in some instances have pleaded guilty to breaking the law."
LIEBERMAN: "Now is our opportunity and really our responsibility to restore the trust of the American people in their elected government and, to the best of our ability, scrub clean the point where money, politics and government meet in America."

So far, though, most of the media attention has focused on the corrupt lobbying activities of domestic interests. But, the Center for Public Integrity, a nonprofit organization that investigates public policy issues, says lobbying by foreign entities is also a problem.

"It's a very big issue," said Alex Knott, the Center's political editor. "We've found that nearly 100 countries have spent money lobbying our federal government. And, since 1998, they've spent $624 million. That's a very large amount."

Knott says the bulk of the money from foreign companies that lobby the U.S. government comes from other developed countries.

"Your top five countries are the United Kingdom, Switzerland, Germany, Japan and France," he said. "And together, they've spent $423 million lobbying the federal government since 1998."

Knott says the remaining lobby money comes from many other countries - some expected, some not.

"Well, there's definitely some countries that people often bat their eyes at [raise questions] when they see it," explained Alex Knott. "Saudi Arabia lobbies our federal government. South Africa lobbied our federal government. Countries like Vietnam lobbies our federal government. Kenya, Sri Lanka, Haiti, Pakistan."

One country that has come under scrutiny is Israel, which the Center for Public Integrity says spent more than $3.6 million to lobby the U.S. government, from 1998 to 2004. At the same time, though, there is controversy surrounding the well-known group AIPAC, the American Israel Public Affairs Committee, which is an American organization, but spends millions of dollars to lobby exclusively on behalf of Israel.

For American citizens, the Constitution guarantees the right to lobby."It's in the First Amendment. There's a right to petition to redress grievances, and that's where lobbying comes from," said University at Buffalo finance professor Michael Rozeff.

He says he believes it is natural for foreign companies and governments to also want to lobby Washington, to promote their country's commercial interests or to try to affect U.S. policy.

One way they do this is by hiring prominent former U.S. politicians to act on their behalf. In 2004, Bob Dole, former senator and presidential candidate, lobbied on behalf of Indonesia.

"You cannot condemn that," he said. "It makes sense. If the United States has gotten involved with Taiwan, then it's natural for Mainland China to want to influence the outcome. Or if the United States has jawboned [criticized] about the value of the [Chinese currency, the] yuan - it has done more than jawboned, it has made threats about what might happen if China didn't revalue the yuan, then it's natural for them [the Chinese] to lobby. You can't stop that."

Experts are mixed as to how successful lobbyists are. Rozeff adds, though, that as the United States has become a dominant world power, foreigners have taken greater interest in trying to influence U.S. decisions on a whole range of topics, from trade to arms sales to taxation.

"The amount or extent of lobbying depends on the favors and the subsidies and the taxes and the regulations that the U.S. government can pass," said Rozeff. "And the bigger the government has got and the more activities it's gotten engaged in, the more the lobbying has done."

Rozeff says he is skeptical that any lobbying reforms ultimately passed by Congress will greatly affect foreign lobbying activities. He says the new regulations largely deal with issues like making all lobbying activities more transparent. This will make it harder to lobby, but, he adds, it won't stop people, whether Americans or foreigners, from doing it.

Source:
VOICE OF AMERICA NEWS
February 12, 2006

Fed: South Korean man to appear in court over Bali Nine links

2006-02-12T14:33:00.000-08:00

Australian Associated Press--BRISBANE, Feb 13 AAP - A South Korean national will appear in a Brisbane court today over alleged links to the Bali Nine drug syndicate.

"In relation to the Bali Nine, he's alleged to be an organiser," an Australian Federal Police (AFP) spokesman said last night.

The 25-year-old man, who previously lived in Brisbane, was arrested at Brisbane International Airport early yesterday after arriving on a flight from South Korea.

He was charged with conspiracy to import a trafficable quantity of narcotics into Australia between August 2004 and April 2005.

The man was remanded in custody to appear in Brisbane Magistrate's Court today, the AFP said.

He is the sixth person arrested in Australia with suspected links to the nine Australians facing jail terms or possible execution in Indonesia for allegedly trafficking heroin through Bali.

The five others charged in Australia in connection with the Bali Nine investigation are expected to next appear in Brisbane Magistrate's Court on April 3.

Source:
Australian Associated Press
February 13, 2006

PPA Hopes Govt to Set Monetary Value of 800 Properties

2006-02-12T14:25:00.000-08:00

Bandung, W. Java (ANTARA News) - A senior Asset Management Company or PT PPA executive here Saturday called on the finance minister as the keeper of some 800 properties to officially set their monetary value within the next one or two months, so that they can be sold within the shortest possible time.

"The properties market value as determined by an independent appraiser has already been submitted to the finance minister and now we hope the minister can issue a decree on their value within the next one or two months,` Raden Pardede, PPA vice president director, said at a seminar.

As long as the minister had yet to issue a decree on the properties monetary value, PPA would not be able to meet the target of its contribution to the state budget, he said.In 2006, PPA was expected to contribute no less than Rp2.35 trillion to the state budget.

Pardede said PPA was hoping to be able to sell the 800 properties as soon as possible because the operational cost of the properties had surpassed the operational cost of other assets under the PPA management.As the settlement team of the Indonesian Bank Restructuring Agency (IBRA) had completed its task, there would be additional 3,100 assets handed over to PPA.

Pardede said, PPA had to spend Rp150 billion on operational cost of which more than 50 percent had been used to operate the assets while the properties could contribute only 20 percent of PPA`s total target contribution to the state budget.

"The rest, we obtain from shares and credit assets," Pardede said.The Director of Credit and Property assets of PPA, Rahmat Saptaman meanwhile said it would be very difficult to increase the assets value.

Source:
LKBN ANTARA
Feb 11 20:14

Bojonegara Can Be Developed as Int'l Port

2006-02-12T14:20:00.000-08:00

Bojonegara, Banten (ANTARA News) - Vice President Jusuf Kalla expressed optimism that Bojonegara Port in Banten can one day be developed to become an international port as long as it has adequate area and supported by the presence of industrial estates.

"In the future, we are optimistic that Bojonegara can be developed on condition that it has adequate area with industrial estates," Kalla said after visiting Bojonegara and Cigading ports in Banten Saturday.

Kalla was accompanied by Coordinating Minister for Economic Affairs Boediono, Industry Minister Fahmi Idris, Trade Minister Marie Pangestu, State Minister for State Enterprises Sugiharto, Head of the National Development Planning (Bappenas) Paskah Suzetta, head of the Coordinative Board on Investment (BKPM), M Lutfie, and acting Banten Governor Ratu Atut Choisiyah.

Kalla said, development of Bojonegara Port should be conducted integrally. "We consider the future development and observe (ports) in other countries.

Development of this port must be conducted integrally."Bojonegara Port construction is aimed to anticipate development in the next two years, at the time when Tanjung Priok Port in Jakarta is predicted to become too crowded to accomodate economic activities.

"Industrial development has moved to west and Tanjung Priok is already crowded. If we did not build new (port) in the next two years there will be stagnation (in Tanjung Priok)," Kalla added.Previously, the Jakarta administration has planned to expand Tanjung Priok Port and change it into Jakarta New Port.Kalla said, the expansion plan of Tanjung Priok Port would go on but it would face the problem of limited area.

While Bojonegara Port is planned to be supported by development of industrial estate as well as other supporting facilities."The point is that we need new infrastructure outside Jakarta. Now we have Tanjung Priok and Cigading Ports, thus we need to build a new one," the Vice President added.A project officer of Pelindo II, Sri Rahardja said, development of Bojonegara Port is scheduled to have three phases, where for the first phase alone, it would need Rp170 billion of investment.

Meanwhile, in his visit to Cigading Port which belongs to Krakatau Steel, Kalla obtained information that Cigading is a specific port for bulk, not for containers."Because it is quite wavy here, the port is not suitable for container but only for bulk loanding and unloading," an administrator of the port, Faswar Budjang said.During 2005, Cigading Port has handled load and unload services for seven million tons of bulk goods, of which 3.6 million tons are PT Krakatau Steel`s goods and 3.4 million tons are other private companies` goods."Private companies` goods here are corn, cement, and soybean," Faswar said.

Source:
LKBN ANTARA
Feb 11 20:17

Govt to Transer Rp60 Trillion from BI to National Banks

2006-02-12T14:14:00.000-08:00

Jakarta (ANTARA News) - The government will in several stages deposit some Rp60 trillion of its monetary assets currently kept in a Bank Indonesia or central bank account with private or state-owned banks, a senior Finance Ministry official said here Saturday.

In the first stage at least Rp10 trillion will be transferred to national banks, Director General for Treasury Affairs at the Finance Ministry Mulia Nasution said.

Mulia said at present the government had Rp80 trillion in monetary assets. Of the amount, Rp60 trillion was deposited with Bank Indonesia in a state of iddle accout."The meaning of `iddle` account was that the BI never provids any interest to the government`s deposit in that central bank," he said.

According to him, by depositing the government`s fund amounting to Rp10 trillion in national banks, the government will be able to get an interest of about Rp1 trillion (on the basis of prevailing interest level offered by the banks).

After being deducted with various banking services, the government will receive at least additional interest of about Rp600 billion which will pose a non tax income to the state.

By depositing government`s fund in national banks, he added, it will, however, benefit the government in addition to help the banks receiving the fund in increasing the channel of credits to the community.

Asked when a Rp10 trillion fund will be tranferred to national banks, Mulia said at present his side is still waiting for the completion of government`s regulation on the management of the fund.

"We hope that it will be immediately issued, as anything relating to its regulation is already available," he said.

Touching on the criteria of national banks which will be appointed by the government, Mulia revealed that the government will have to take into account the bank`s infrastructure, services, speed and benefits the bank can provide to the state.

"Certainly the banks concerned should provide such a proposal to the government and then through a socalled beauty contest, the government will be able to appoint one or two banks," he added.

Source:
LKBN ANTARA
Feb 11 20:22

Johor to Explore Investment Prospects in Aceh

2006-02-12T14:10:00.000-08:00

Banda Aceh (ANTARA News) - The Malaysian state Of Johor will explore investment prospects in Nanggroe Aceh Darussalam province after the Indonesian government and the Free Aceh Movement reached a peace deal in the province, a Malaysian official said."We are happy Aceh is now peaceful. We will explore investment prospects here because Aceh has many potentials," Dato H Abdul Ghani Othman, chief minister of Johor, said in Aceh Besar on Sunday.

Othman and his entourage, accompanied by acting governor of NAD Mustafa Abubakar were in the province to inaugurate an orphanage dormitory for tsunami survivors in Ajuen Jeumput village, Aceh Besar district.Oil palm plantation and fishery sectors can attract investors from Johor, he added."These sectors have good prospects in the future to build Aceh in the aftermath of the tsunami. Moreover, its security situation is now conducive," the chief minister said.

Source:
LKBN ANTARA
Feb 12 22:55

Huawei Wins WCDMA Order in Indonesia

2006-02-12T14:02:00.000-08:00

SHENZHEN, February 13, SinoCast -- Shenzhen-headed Huawei Technologies, a leading telecom equipment vendor in the world, announces it wins a WCDMA order from Natrindo Telepon Selular (NTS), a mobile telecom carrier in Indonesia, to be the main contractor of the latter's 2G and 3G network.

According to their contract, Huawei will exclusively be in charge of construction of the soft switch core network, smart service platform, and IP backbone network of a nationwide telecom network that combines 2G and 3G equipment and technologies. The 2G and 3G base station system supplied by Huawei will continuously cover all lands of Indonesia except Jakarta, the country's capital.

NTS is a 51:49 joint venture established by Malaysian Maxis Communications and Indonesian Lippo Group. The company is an emerging telecom carrier holding GSM1800 and WCDMA licenses.

Source:
SINOCAST CHINA BUSINESS DAILY NEWS
February 13, 2006

Research Brief: Indonesia Politics, Good or Bad News?

2006-02-09T20:09:00.000-08:00

Have you heard anything good lately? Recently, most of the news has been
bad, so bad that readers somewhat tend to ignore the good news. Firstly, let
us see what the bad news actually is.

Last week, government officials in East Java prohibited fishermen to sail as violent weather will cause high tides and heavy rains until the end of February. In the eastern part of the archipelago, villagers in Irian Jaya went to higher ground as seawater engulfed their homes, afraid that a tsunami would follow.

In Jakarta, Telkom’s governing board sent a letter to the government asking permission to increase rates, while according to the media; PLN, state-owned power company is also reported to request for a similar hike in electricity tariffs.

On the economic front, January inflation was ahead of expectation, with the higher price of rice said to be the cause. For the public, more cash is needed not only to buy rice, but also to purchase sugar.

So what is the good news? The Rupiah strengthens against the US dollar, as
foreign portfolios rush into the Indonesian capital market. SBY’s nomination
for the Noble prize (for peace) can also be considered as good news.

On the other hand, some news is quite difficult to comprehend, blurring the
line between good and bad news. Syafruddin Temenggung, former Chairman
of the Indonesian Bank Restructuring Agency (IBRA), was recently named a
corruption suspect by the Jakarta High Court, accused of selling IBRA assets
well below book value, inflicting billions of Rupiah in damages towards
government funds.

Pontjo Sutowo, son of late Ibnu Sutowo (long-time President Director of state-owned oil company, Pertamina, during the early Suharto era), together with Ali Mazi (Governor of South East Sulawesi), were also named suspects by the Attorney General Office in the case of irregular land use permits regarding the Hilton Hotel.

It was also heard that the Finance Director of PLN, Parno Isworo, is under police investigation as a witness in the South Sumatra Borang price markup case. Abdul Latief, a prominent businessman, is also a suspect, in relation to the non-performing loan (from Bank Mandiri) extended to one of his companies, Lativi ,a television broadcaster.

For several years, government after government voiced their efforts to go after
corrupters, yet throughout the years, the results are seldom heard. To be fair,
the current government managed to successfully bring a few people to jail,
in the case of Bank BNI L/C irregularities for example, nonetheless, the success
rate remains low.

The case of several police officers owning bank accounts worth billions of Rupiah, as reported by the media, is still somewhat fresh in our minds. In the end, only one or two officers, with relatively low ranks, were named as suspects in possession of illegal funds amounting to several hundred million rupiah.

The low success rate may be the result of several reasons. The lowest on the list is due to “collusion” between the suspects, police officials, the attorney general and the court office. However, with the existence of the Corruption investigation Agencies (KPK and Tipikor), these officials become
more reluctant to collude, afraid of being caught, unless the payoff is high.

Therefore, we expect this kind of collusion may only occur in cases that involve
large amounts of money.

On the other hand, the office of the attorney general may lack the necessary
skills to handle cases that are rather “technical”, either financially or
transaction wise. For example, the sale of PT Rajawali III, state-owned sugar
manufacturer, that involved Syafruddin Temenggung, may be hard to prove
because as Chairman of IBRA, he has the right to sell any assets below book value as long as the procedures for selling them (transparency, bidding process, etc) are met.

Without the technical know how, it will be hard for the attorney general office
to improve the success rate, especially on cases like Rajawali III, Hotel Hilton
and others. We believe there are shortcuts to increase the success rate. First,
the office can recruit corporate lawyers in its team.

Although sounding like a “brilliant” idea, few problems remain regarding such approach, which is: who will bear their cost? Secondly, the office must be more aggressive to push the law on “whistle blower” or “witness protection” program.

With such law, a whistle blower could reveal all technical aspects regarding the suspect’s wrong doings as well as provide significant evidence. However, the problem (again) rests on the ability of the attorney general’s office to finance such a program, paying the bills and all living costs of the whistle blower.

The government must quickly find solutions to finance these shortcuts if it
expects to improve the success rate. If not dealt with soon, the public will grow
increasingly skeptical. After all, we already have too many bad news, now is the
time to hear more good news.

Source:
NC Securities
08 February 2006

Heavy Mittal The richest man Americans have never heard of

2006-02-09T09:20:00.000-08:00

The Wall Street Journal Europe.
PARIS--Lakshmi Mittal built up the world's biggest steel company--and the third-largest personal fortune of any man--by acquiring mills in the dodgiest of places. He honed his deal-making skills on the frontiers of capitalism: in Indonesia, Kazakhstan, Algeria, the Balkans, often in countries one might need to look up in the very latest atlas. In the past week, however, the 55-year-old Indian mogul has found himself in arguably the most difficult business environment of all--Western Europe.

In terms of political resonance as much as sheer size, Mittal Steel's hostile $24 billion bid for the world's second-largest steelmaker, Luxembourg-based Arcelor, is without precedent in Europe. The prime ministers of France and Luxembourg, jointly and repeatedly--along with politicians across the board--condemned the Indian's gumption and vowed to stop him. Worse were the threats from the unions and Arcelor's chief executive, Frenchman Guy Dollé.
A takeover of Arcelor would take Mr. Mittal a long way toward realizing his vision of a dominant global steelmaker in an industry for decades characterized, and brought low, by fragmentation. To pull it off, Mr. Mittal needs to break an Old World taboo against takeovers, hostile or otherwise, involving a company dear to Continental protectionists' heart. That this task falls to a man born in Rajasthan, and raised in Calcutta, is one of the more delicious gifts of globalization.

Before Arcelor's shareholders get their say on his offer, Mr. Mittal is trying to smooth the way with irate politicians. He spent this week shuttling around European capitals talking up the deal. If it's Tuesday, this must be Luxembourg in the morning and Paris in the afternoon, where I catch him, before a late-evening trip back home to London. "I've been all over, all over, all over, from one meeting to another meeting," he says.

In person, Mr. Mittal hardly looks the brash and aggressive "raider with foreign values" portrayed in Arcelor spin. He says he's relieved to be away from the army of cameramen who've dogged him around Paris the past two days. (The merger has stayed front-page news the whole week in France, home to 30,000 Arcelor workers.) "It has been blown way out of proportion," Mr. Mittal says, slouching in his seat, with more than a hint of an Indian accent. "It should have been a very positive atmosphere. That steel companies are merging should be great news." Is he serious? He claims to be. "We're waiting for Arcelor to begin friendly talks," he says. "We really do not want to work in a confrontational environment." He uses the word "friendly" repeatedly.

Mr. Mittal is disarmingly agreeable, an impression that his staff insists is the real deal. He takes steel seriously and seems to keep his thoughts to himself. The modesty can strike a bit of a false note, if only because anyone who got around corrupt governments to build a metals empire can't lack a thick skin and, shall we say, some flair. When I suggest the nice tycoon image might be the "Indian way," he scoffs, saying, "There is nothing Indian here, there is nothing European here, you have to run a multinational company in a proper fashion with top professionals."

The attacks on him have been vicious. Valery Giscard d'Estaing, the former French president, warned against giving into economic "laws of the jungle." A former French finance minister referred to Mr. Mittal as "an Indian predator," although his company is traded and based in Europe and he hasn't lived in India for 30 years. Mr. Dollé, the Arcelor boss, said Rotterdam-based Mittal Steel is a "company full of Indians" that wants to buy his with "monnaie de singe." The expression means "monopoly money"--Mittal's offer is mostly shares--but the literal translation is "monkey money." That double-entendre wasn't lost on people.

This barbarian at the gate fights back with flattery. "They're all emotional comments . . . absurd and frivolous," says Mr. Mittal. "I know Guy Dollé and he's a very nice gentleman. I respect him and I admire him." He says he hasn't seen the race card played against him for a long time. "In the late '80s, when I bought the first company in Trinidad, I remember the headline was 'An Unknown Indian Takes Over Caribbean IISCOT.' But people started knowing me and today they don't ask who is Lakshmi Mittal. [Nationality] is not an issue globally. I don't think the world is moving in that direction."

Trinidad was the start of an acquisitions spree that catapulted Mr. Mittal into elite business ranks almost overnight. He says it took longer than people imagine. Mr. Mittal was born in a small village in the Indian desert state of Rajasthan, which he suggests may explain his dry character: "My roots are there." His father moved the family to Calcutta, ran a mining concern, and took him on at 16. "He has been my mentor in India and encouraged me to go outside," Mr. Mittal says. In 1976, while in Indonesia to finalize a land sale for the family firm, he convinced his father to help him start a new steel business there. But only in Trinidad, the maiden foray outside of Indonesia, did "I realize that we can turn around these kinds of companies and create value for us."

Not long after came a $2 billion purchase in Mexico, against his father's advice, and an audacious move into Kazakhstan in 1995, when no major steelmaker could stomach the risk or the climate. The Kazakh plant, which employs 50,000, supplies China. At the time of its purchase, Mr. Mittal was the world's 32nd-largest steelmaker. But he has made a simple gamble that low-cost producers can thrive, once made efficient, by selling to growing developing economies that are hungry for steel. Against the grain, Mr. Mittal held that an industry plagued by overcapacity and low prices had hidden value. As other steelmakers were busy retrenching, Mr. Mittal picked up plants in 14 countries, mostly in emerging markets.

"I wouldn't say they're dodgy but they're places that others would not think to go," he concedes. So why did he? "I believed in my people--I believed in our ability to run those operations." Continued family control lets Mr. Mittal, who owns 88% of his firm, take chances that companies with diverse shareholders would never dream of. His only daughter, Vanisha, sits on the board, and his 29-year-old son, Aditya, is the chief financial officer. The ownership structure raises questions about transparency and corporate governance that Mr. Mittal dismisses. He says Mittal shares, if anything, are "always undervalued." If Mittal Steel gets Arcelor, he'll keep 50.1%, and insists on no less.

For years, Mr. Mittal has said that only two or three big players will dominate his industry in the future. He wants to do what Henry Ford did for cars: make Mittal synonymous with steel. "If you look at our customers, they are consolidating," he says. "There are three or five major car companies in the world. If you look at our iron suppliers, there are only three iron suppliers. It is a very natural process. It is more so in the steel industry, which has been very fragmented." Even together, Arcelor-Mittal would still only account for 10% of world steel production. "It's longer to go for us," he says.

The American steel industry was broken up not only along national but state lines. "I gave a speech in '97 in Pittsburgh where I spoke about consolidation and globalization," he says. "It was difficult for my audience to accept it. But three years down the road there were 27 bankruptcies in the United States." In 2004, Mr. Mittal made his breakthrough deal, buying Ohio-based International Steel Group, a hodgepodge of once-proud names like Bethlehem, Weirton and LTV that investor Wilbur Ross put together. Historic highs in steel prices have made Mr. Mittal's strategy look brilliant. The company earned $4.7 billion on $22.2 billion in sales in 2004, the last year for which results are available.

The U.S. purchase turned him into the new Carnegie, the biggest steel producer in the U.S. That year, Mr. Mittal added nearly $19 billion to his net worth. He's doubtless the richest man most Americans have never heard of. Unlike an Ellison or a Trump, Mr. Mittal doesn't court or invite publicity. When I mention in passing his No. 3 spot on the Forbes list (net worth: $25 billion), he smiles sheepishly: "Am I?"

But in Europe, the overtly modest man's lavish tastes garner notice. He owns the world's most expensive private home, a $127 million mansion in London. Nearly two years ago, the British tabloids had great fun with the $60 million wedding thrown for his daughter and a thousand close friends over five days in France. Kylie Minogue and Bollywood stars entertained at the 17th-century Chateau Vaux le Vicomte and other venues. Plenty of moneyed people like to spend it; there's a whiff of condescension in the faux-outrage about this rich Indian's tastes, no? He refuses to talk about it. "We want to keep private everything," he says.

London, a cosmopolitan city as never before, is an ideal base for this poster-magnate of globalization. He says it's well-placed for a geographically diverse operation. But the future, for him, is in the East. He recently started his first business in India. China "is in the same place Japan was in the 1970s," where steel consumption outstrips economic growth as the country builds up infrastructure. Mittal was the first company to take a major stake in a Chinese steel mill, but he suggests further investment can only come once Beijing agrees to open the sector and let marginal producers fail. Of the two Asian powers, only India is politically open. "I don't think democracy has anything to do with business." Is freedom or stability more important? "Most important is growth," he says.

In selling the Arcelor takeover, Mr. Mittal plays to his European audience by stressing the competitive threat from Asia. "If we do not have a strong European base with a global enterprise, we could have an issue from a country like China, and our jobs could be in danger," he says. Together, Mittal-Arcelor would employ 340,000 people and produce 100 million tons of steel, more then the next four companies combined.

The bid did win him some influential friends in France. Jean Arthuis, a former finance minister and senator, met the Indian and liked him. "France has to acknowledge the reality of globalization," he said in widely reported comments. Seeing that Paris lacks the weapons to stop him--the French state no longer owns a stake in Arcelor and leading politicians as well as Mr. Dollé backtracked a bit from their tough talk by yesterday--the markets hope that Mr. Mittal will succeed in slaying the dragon of "economic patriotism" that's spooked away other foreign companies looking for acquisitions. Last year Pepsi backed off from Danone once the French government declared the yogurt-maker a "strategic" national asset.

One rumor sees Wal-Mart buying France's Carrefour. Mr. Mittal is skeptical. "This is a Luxembourg company merging with a Dutch-listed company," he says, referring to his own intra-European, on paper at least, takeover bid. "A Wal-Mart case would be different." In other words, the Yanks are still more despised than any Indian. The knee-jerk hostility to hostile takeovers--in effect, to capitalism itself--seems a Continental trait. "Could be," says Mr. Mittal, only "Arcelor is involved in a hostile takeover in Canada." He laughs, for Mr. Dollé is certainly no innocent: Arcelor last month won a heated battle against a German rival for a $5 billion Canadian steel producer.

Mr. Mittal's own nationality is an elusive target for adversaries. His very business makes a mockery of the old nation-state model. He is nowhere and everywhere. As a sop to the old European way of thinking, Mr. Mittal offered to keep the future headquarters of a combined Mittal-Arcelor back in Luxembourg. "It doesn't matter to me," he says. For in his sort of world, it really doesn't matter.

Source:
MATTHEW KAMINSKI
Editorial page editor
The Wall Street Journal Europe.

Playboy sparks Indonesia porn row

2006-02-09T08:41:00.000-08:00

BBC News, Jakarta
Indonesian Muslims are angered by plans for a local edition of Playboy Indonesia, home to the world's largest Muslim population, is caught up in a growing debate about pornography.

News that the raunchy Playboy magazine has signed a deal to produce a local edition has fuelled the controversy.

Parliament is expected to pass a new anti-pornography bill by the middle of this year but the draft legislation is proving divisive.

A series of demonstrations has taken place in the capital, Jakarta, in support of the tightening of the laws.

The head of the parliamentary committee which drafted the new legislation, Balkan Kaplale, said Indonesia was in a state of moral decline. "These are Indonesian magazines," Mr Kaplale said, spreading a selection of pornographic tabloids across the table.

"It is terrible, our poor country. We are a religious people but now Indonesia is third worst in the world for porn after Scandinavia and Russia.
"It is so easily available and it is going unchecked. That is why we need this law," he said.

Booming trade
In a narrow, busy alleyway in Jakarta's Chinatown, there are stalls selling pirated DVDs.

New laws would make it an offence to show 'sensual body parts'
In front of most of the stalls there is a cardboard box where the pornographic films are kept.

The DVDs are openly displayed - it is pretty graphic stuff.
Few people in Indonesia would argue against the need to control the sale of such material. And yet the proposed anti-pornography bill has come up against strong opposition.

The draft document includes articles which would make it an offence to show what it calls sensual body parts, including the navel, hips and thighs.
Those found guilty of breaking the law could face a two-year jail sentence.

Drawing the line
Husna Mulya, a women's rights activist, said the anti-pornography law had been hijacked by groups pushing a hardline conservative agenda.

"The people behind this are using religious values to make their argument, especially Muslim groups. It is not stated in the bill, but the standard being used is the standard of Sharia law.

"They say people are not dressing in line with Indonesian culture. But the fashion in Indonesia now is to wear trousers that are tight around the hips, and even traditional clothes are often designed to show off a woman's breasts," she said.

And it is not just women who are worried.

The artistic lobby is up in arms as well. The draft bill would make it illegal to record anything which portrays erotic dancing, or kissing on the lips. It would mean ground-breaking Indonesian films such as Arisan would be banned.
Arisan is a humorous take on the life of wealthy, 30-something Jakartans which addresses traditionally taboo subjects like adultery and homosexuality.

The screenplay was written by one of Indonesia's leading film critics, Joko Anwar.

The issue is where to draw the line on decency

He said the anti-pornography bill was a dangerous and unnecessary form of artistic censorship that would hamper filmmakers' creativity.
"We are not going to make some very graphic sexual scenes because we know that it wouldn't be accepted by an Indonesian audience.
"We already have that filter ourselves so I don't think it needs to be put into law. It's not democracy. It's not about pornography, it's your freedom to express yourself," he said.

This is the crux of the current argument. How far should such freedoms be extended?
The consensus in parliament is such that the anti-pornography bill will almost certainly be passed.
The question then becomes how it will be interpreted and enforced by a notoriously corrupt legal system.
But it is perhaps an encouraging sign of Indonesia's growing democratic maturity that a piece of draft legislation is being debated in public at all.

Source:
Rachel Harvey
BBC News, Jakarta

House told to stay out of tolls

2006-02-09T08:25:00.000-08:00

Anxious to interest wary investors in the infrastructure sector, Toll Road Regulatory Authority (BPJT) director Hisnu Pawenang has called on the House of Representatives to keep out of the toll issue.

Speaking to reporters at the offices of the BPJT on Wednesday, Wisnu said that while legislators had the right to forward their views to the Public Works Ministry, they should not be involved in determining the actual amount of toll increases.

"According to the prevailing regulations, tolls are supposed to be increased every two years. This mechanism must be upheld," he was quoted as saying Wednesday by Antara.

Tolls need to be increased periodically, in line with the regulations, to allow firms to accurately calculate the likely returns on their investments, Hisnu said.
"We want to create a healthy climate in the toll road sector. Only with a better investment climate will new investors put their money into turnpike projects," he said.

He said the 26 percent toll increase for turnpikes in Greater Jakarta that had been proposed by the BPJT to the Public Works Ministry was in line with the inflation rate recorded by the Central Statistics Agency.

"It is bit high due to the fact that inflation was higher than normal in November as a result of the increase in fuel prices in October," he explained.
Tolls, except for those on the Jakarta-Cikampek turnpike, have not been increased for nine years, he added. "So, the proposed toll increase is fair," he said.

Source:
The Jakarta Post

Banks seek greater cost efficiencies by pooling ICT resources

2006-02-09T08:19:00.000-08:00

To help improve service quality and efficiency in the information and communications technology (ICT) field, the country's banks are making plans to share ATM technology and selected data warehouses.

The banks are currently discussing arrangements that would allow both small and large banks to collaborate in the ICT field in the coming years.

It is hoped a blueprint for the program will be completed before the Asia Pacific Conference and Exhibition on Banking Technology (Apconex) 2006, which will be held by the Federation of Private Domestic Banks in Jakarta from May 9 through May 11.

"We really need better banking technology arrangements. Banks can't go on procuring IT on their own because the cost is prohibitive," said APCONEX steering committee chairman Jos Luhukay on Tuesday, adding that ATM and similar technologies were costly for banks in a developing country like Indonesia.

The high cost of banking technology, he said, has resulted in a great discrepancy in terms of cost efficiency between small and large banks.

Banks with small customer bases suffer from high ATM transaction costs, while the ATM cost per transaction of the larger banks is very low.

"The price of an ATM here is the same as in the United States, but the transaction values are different," said Jos, who is also the president of Bank Lippo.

He therefore believes Indonesia's banks would be better off pooling their resources in the technological field.

"We would then need an independent institution to oversee implementation," he said, adding that issues such as the institution's legal basis and structure would be discussed during the conference.

Surveyor International Data Corporation reported recently that Indonesia's total spending on ICT last year reached US$2.28 billion, of which 45 percent, or $1.02 billion, emanated from the banking sector.

Jos forecast that the figure this year would increase by 15 percent to $1.17 billion. "This spending needs to be directed at ensuring an effective and efficient national banking technology structure," he said.

The chairman of the Apconex 2006 organizing committee, Eko Indrajit, said the conference would be attended by 700 bankers, consultants, banking sector regulators, academics and ICT providers.

Source:

The Jakarta Post, Jakarta

Indonesia is considering repaying part of IMF loans early

2006-02-09T08:17:00.000-08:00

JAKARTA (Bloomberg): Indonesia is considering paying part of the money it owes to the International Monetary Fund ahead of schedule, Minister of Finance Sri Mulyani Indrawati said in a report to Parliament.

"The finance ministry and the central bank are studying the possibility to accelerate repayment to the IMF with an amount of as much as US$8 billion," Sri Mulyani said on Thursday in a report. No details were provided.

Source:
Bloomberg

Vietnam's PM to visit Indonesia this month

2006-02-09T08:14:00.000-08:00

HANOI (AP): Prime Minister Phan Van Khai will be heading to Indonesia later this month on a three-day formal visit, the Foreign Ministry said Thursday.
Ministry spokesman Le Dung said Khai is going to Jakarta Feb.22-24 at the invitation of Indonesian President Susilo Bambang Yudhoyono.

His trip is intended to promote further cooperation between Vietnam and Indonesia, particularly in the areas of trade and investment, Dung said.
Khai is also expected to meet with Indonesia's parliament speaker and attend a business forum during his visit.

Source:
AP

Emil Salim, Indonesian environmentalist wins world prize

2006-02-09T08:05:00.000-08:00

JAKARTA, Feb. 9 (Xinhuanet) -- Indonesia's first environment minister, senior economist Emil Salim, has been named the winner of the 100,000 U.S. dollars Zayed International Prize for the Environment for his role in promoting conservation, reports said Thursday.

He shared the award with Angela Cropper, the president of the environmental Cropper Foundation of Trinidad and Tobago. They each received a 100,000 U.S. dollars cash prize, said daily The Jakarta Post.

Emil won the award's third category of Environmental Action Leading to Positive Change in Society.

The organizers said he received the award for his many years of high-level work in environmental organizations, including the United Nations Environment Program and the World Bank.

The prizes were presented during the Ninth Special Session of the UNEP Global Ministerial Environment Forum in Dubai, which runs from Tuesday to Thursday this week

Sources:
Xinhuanet
The Jakarta Post

British PM to visit Indonesia

2006-02-09T08:02:00.000-08:00

JAKARTA, Feb. 9 (Xinhuanet) -- British Prime Minister Tony Blair is slated to visit Indonesia in March, making him the first British leader to travel here since Margaret Thatcher in 1985, an Indonesian official has said.

"It is scheduled for Prime Minister Blair to visit the country next month. However, we haven't accepted any official agenda for the visit," presidential spokesman Dino Patti Djalal was quoted Thursday by The Jakarta Post as saying.

He could not specify the exact date, saying only that preparations for the visit as well as for the issues to be discussed were still being coordinated by the related ministries.

Although the agenda of the state visit is still tentative, several Presidential Palace sources said it was likely to include discussion of counterterrorism efforts as well as cooperation in investment and trade.

According to the sources, the visit will probably take place on March 29-30, before Blair continues on a trip to Australia.

British Embassy press official Edith Loupatty said the embassy could not make a statement yet about the visit.

Blair's visit may be tied to his country's effort to cooperate more closely with strategic and influential Muslim nations like Indonesia in combating terrorism, an issue that has affected both countries in recent months.

London was rocked by deadly coordinated terrorist attacks during morning rush hour on July 7 last year, with 52 people killed and more than 700 injured.

Three months later, Indonesians were shocked by the second terrorist attack on the resort island of Bali, which claimed 23 lives.

Relations between the two countries are also marked by long-standing economic activities. Annual British investment in Indonesia consistently ranks in the top five.

Based on data from the Investment Coordinating Board, investment approvals for British companies last year totaled 1.52 billion U.S. dollars, the second largest amount after Singapore

Source:
Xinhuanet
chinaview
The Jakarta Post

Inside a Lost World

2006-02-09T07:39:00.000-08:00

Researchers find birds of paradise, strange frogs and enormous flowers in New Guinea

More than 25 years ago, Bruce Beehler, an expert on birds of paradise, started planning a trip to the Foja Mountains of western New Guinea.

Last November, he finally got there -- and the trip was worth the wait.
During a 15-day expedition in December, the researchers found hundreds of rare birds, more than 20 new species of frogs, five kinds of previously unknown palms, four new breeds of butterfly, and giant rhododendrons with white blossoms the size of bread plates -- believed to be the largest on record.

All told, the 3,700 square miles of mist-shrouded tropical forest may be the most pristine natural area in Asia and the Pacific, said Conservation International, which organized the expedition with the Biology Research Center of the Indonesian Institute of Science.

"It is as close to the Garden of Eden as you're going to find on Earth," Beehler said.

Under the forest's lush canopy, animals that have been hunted to extinction elsewhere were so plentiful and unused to human contact that they approached the naturalists unafraid, to be handled and photographed.

Blazing trails with pink and yellow flagging tape, the field team spotted 40 rare species of mammals, including six kinds of kangaroo.

They also encountered a bizarre spined, egg-laying, hedgehog-like mammal called the long-beaked echidna -- so docile that the scientists carried them back to camp for study.

Beehler did not discover a new bird of paradise. But he did discover what he thinks is a new bird species, a honeyeater.

Among the rare and previously unknown species of mammals, birds and plants discovered:

Long-beaked echidna: The largest species of the egg-laying group of primitive mammals called the Monotremes, seen three times during the monthlong expedition and even allowed scientists to pick it up and observe it at their field camp. The enigmatic creature has never reproduced in captivity, and scientists have never seen its eggs.
Berlepsch's six-wired bird of paradise: Described by indigenous hunters in the 19th century and named for the long wire-like feathers on its head. The team of scientists witnessed a male performing a courting dance and took the first known photograph of the bird.
Golden-mantled tree kangaroo: An arboreal jungle-dwelling kangaroo new for Indonesia and previously thought to be hunted to near extinction in New Guinea.
Honeyeater bird: The honeyeater, with a bright orange face-patch and a pendant wattle under each eye, is believed to be the first new bird species discovered on New Guinea island since 1939.
Golden-fronted bowerbird: First known photograph of the bird described in 1895 by Lord Walter Rothschild, based on trade skins collected in an unknown location of western New Guinea.
Rhododendron: Largest known rhododendron on record, measuring 5 7/8 inches across the face of the flower.
New species: Four new butterfly species, more than 20 new species of frogs, and a series of undescribed plant species, including five species of palms.

Source:

Detroit News Wire

Indonesia Expects Overseas Investment to Increase 12% This Year

2006-02-09T07:27:00.000-08:00

(Bloomberg) -- Indonesia's government forecasts overseas investment will probably increase 12 percent this year and help spur growth in Southeast Asia's biggest economy.

The government expects to attract about $10 billion of overseas investment this year up from $8.9 billion in 2005, according to a document prepared by Indonesia's Investment Coordinating Board and obtained by Bloomberg News. The Board also expects to approve projects valued at about $16 billion this year, the document said.

President Susilo Bambang Yudhoyono's government plans to attract $426 billion of investment by 2009 in a bid to create jobs and lift 40 million people out of poverty. The $258 billion economy may have expanded at its slowest pace in almost four years in the fourth quarter as surging fuel prices and borrowing costs crimped consumption.

``You got 2.5 million people hitting the workforce every year, you haven't had any net job creation for eight years,'' Michael Chambers, head of research at CLSA Ltd. in Jakarta, said in an interview. ``You have to find jobs for 20 million people, I don't know how you do that with local investment. The math is pretty compelling. You have to have foreigners.''

The government is counting on an increase in investment to help meet its target of a 6.2 percent gross domestic product growth this year, from an estimated 5.5 percent in 2005.

Economic growth probably slowed to 4 percent to 4.5 percent in the three months to Dec. 31 from a year earlier, the central bank said on Feb. 3. An expansion of 4 percent would be the slowest since the first quarter of 2002.

Economy, Currency

The rupiah plunged to a four-year low against the U.S. dollar on Aug. 30 amid concern rising oil prices may lead to a surge in fuel subsidies and the government's budget deficit. The government's move to double fuel prices in October and six interest-rate increases by the central bank helped it recover.
The rupiah has gained 6 percent against the dollar this year and it the world's second-best performer after the Brazilian real.

Bank Indonesia has increased the rate used as a reference for bill sales to 12.75 from 8.5 percent in July, when it was introduced. That eroded purchasing power in a nation where 126 million people live on under $2 a day.
In January, overseas investment surged 11-fold to $1.31 billion led by investments in paper and pulp and food industries, the investment agency's document said.

Funds flowing into the nation may increase once the government enacts a law that will improve investment procedures. The government may enact the law in March, Muhammad Lutfi, chairman of the Investment Coordinating Board said in Feb. 8 interview in Jakarta.

Investor Conference

The government has delayed a conference meant to attract companies to invest in building roads, ports and power plants to as late as June from February because it wants to pass the law before meeting investors.

Indonesia offered about 91 projects valued at $22 billion at the first such conference held in January last year. Of the total just one project has been completed, while five are being constructed.

The government is completing plans to invite bids for six projects, while it may scrap 19 projects, Suyono Dikun a deputy at the Coordinating Ministry for Economic Affairs said on Dec. 29.

Indonesia needs to simplify its investment rules to compete against region rivals as well as China, which attracted $60 billion of investments in 2005.

Source:
Arijit Ghosh in Jakarta
Bloomberg

Coca-Cola Amatil Profit Up 15%,Costs Worry Market

2006-02-09T07:21:00.000-08:00

MELBOURNE (Dow Jones)--Asia-Pacific drinks and food group Coca-Cola Amatil Ltd. (CCL.AU) Thursday said 2005 net profit rose 15%, but the stock dived due to investor concern about rising sugar and aluminum prices.

Coca-Cola, which operates in Australia, Indonesia, South Korea and New Zealand, said annual earnings rose to A$320.5 million from A$276.6 million in 2004.

The results were slightly above consensus estimates, driven by strong earnings from its core beverage brands. But a lower tax rate, comments about higher raw material prices, and a lack of specific 2006 guidance sent the shares 57 cents or 8% lower to A$7.03. The company is about 32%-owned by Atlanta's Coca-Cola Co. (KO).

"Coca-Cola has delivered a strong result for the business against the backdrop of higher cost of goods sold, softer economic conditions and a more competitive marketplace," said chief executive Terry Davis.

Analyst Scott Marshall, head of industrial research at Shaw Stockbroking, said the lack of specific guidance weighed heavily on the stock.
"They were talking about double digit gains in 2005, now they're just talking about solid EBIT (earnings, before, interest and taxes) growth," he said.

Marshall said he also expects Coca-Cola Amatil will need another price increase this year to recover rising costs, despite the company's strong hedging profile.
Revenue rose 18% to A$4.15 billion from A$3.53 million, with strong gains in Indonesia, while Australian volumes were slightly softer.

The company is pinning its hopes of regaining profit momentum in Australia, which generates around half the company's revenues, with the launch of its new sugar-free drink, Coke Zero.

"I think the guts of it is that core volumes in Australia are down 0.3% and that's not a great sign, because that's their driver," a senior institutional trader said.
Davis said the response so far to the launch of Coke Zero, which is primarily aimed at men, had been significantly better than the launch of the vanilla flavored brand and sales indicate the product had "reignited the cola category".
The company said the costs of good sold was expected to increase by 6% to 7% per case of beverages in 2006, and by 6% to 8% for the food business.
The loss-making South Korean business is expected to return to profitability in 2006, driven by growth in the Minute Maid juice brand, after reporting a 2005 EBIT loss of A$6.6 million.

The company, which also produces Mount Franklin bottled water, bought the SPC Ardmona packaged fruit business last February, which contributed A$45.7 million in EBIT in its first 10 months.

Source:
Susan Murdoch,
Dow Jones Newswires

Standard & Poor's: Outlook On Indonesia's Sovereign Rating Revised To Positive; Ratings Affirmed

2006-02-09T06:45:00.000-08:00

SINGAPORE (Standard & Poor's) Feb. 9, 2006--Standard & Poor's Ratings Services said today it revised its outlook on the sovereign credit ratings for the Republic of Indonesia to positive from stable.

At the same time, Standard & Poor's affirmed its 'B+/B' foreign currency and 'BB/B' local currency sovereign credit rating.

"The outlook revision takes into account the more favorable policy setting that emerged in the wake of significant adjustments in fiscal and monetary policy stance, and the expectation that this will improve deficit and debt ratios further," said Standard & Poor's credit analyst Agost Benard.

Standard & Poor's believes these changes, including the fuel subsidy cuts and a more aggressive monetary policy, combined with a recent change in the government's economic team, will enable the administration to continue improving credit fundamentals of the sovereign, namely, reduce its debt burden and vulnerability to currency weakness. It also reflects the expectation of better policy coordination and implementation, such that future shocks will be tackled in a more timely and appropriate fashion.

Prospects for a more constructive policy environment received a further boost through President Susilo Bambang Yudhoyono's limited but well-targeted cabinet reshuffle in December 2005. Respected technocrats were appointed to the important roles of Economic Coordination Minister and Finance Minister.

These policy shifts helped restore investor confidence in the administration's commitment to responsible macroeconomic management, by demonstrating a capacity and willingness to undertake unpopular measures.

Indonesia's credit rating is supported by improved political and policy climate, continued macroeconomic stability, prudent fiscal management, declining debt and debt-servicing burden, and a favorable external liquidity position. External vulnerability, however, remains high, while structural impediments continue to hamper growth.

The ratings for the sovereign could improve with further progress in microeconomic reforms, together with continued adherence to tight fiscal policies to aid debt reduction and lower the attendant vulnerability posed by its large foreign debt. Demonstrated improvements in the government's administrative and implementation capacity would likewise boost its creditworthiness. Conversely, the positive outlook could come under review should there be slippage or withdrawal from fiscal consolidation and economic reforms, or if policy coordination failures between various parts of the government surface again and constrain timely and appropriate response to emerging macroeconomic challenges.

Source:
Primary Credit Analyst:
Agost Benard, Singapore
Secondary Credit Analyst:
Ping Chew, Singapore

Indonesian Says Waste From Mine Tainted Fish

2006-02-09T06:14:00.000-08:00

The New York Times--MANADO, Indonesia, A star government witness in a criminal trial against the American mining giant Newmont told a court on Friday that waste from the company's mine near here was deposited in the sea at too shallow a depth, causing the contamination of fish.

The witness, Masnellyarti Hilman, a deputy environment minister, said elevated levels of arsenic in the fish and the "reduced biodiversity" in the bay near the gold mine demonstrated pollution.

The company vigorously denies the Indonesian government's accusations of pollution and contends that the waste from the mine, near Buyat Bay on the island of Sulawesi, was safely disposed of through a pipe that ran about a half-mile from the shore into the equatorial waters. As soon as Ms. Hilman mentioned pollution, the lead lawyer for the company, Palmer Situmorang, protested to the judge, who ruled that the word should not be used until there was a verdict.

The president of Newmont in Indonesia, Richard B. Ness, who has been charged along with the company, said he rejected Ms. Hilman's argument on the impact of the mine waste. "That has to be left to outside witnesses," Mr. Ness said.

The trial, a rare case of a major American corporation facing criminal charges in a developing country, pits one of Indonesia's valued foreign investors against the nation's little-tested environmental laws. The government took action in 2004 after villagers near the mine complained of tumors, skin rashes and dizziness, for which they blamed the company.

Newmont, a Denver-based corporation and the world's biggest gold producer, has said the illnesses are common to poor coastal communities, and denies responsibility. Most of the villagers, citing fears for their health, moved to another area in Sulawesi last June.

The deputy minister did not make any connection between the contaminated fish and the people's health. She said only that the villagers ate the fish. Experts have said it would be virtually impossible to prove that the mine caused the illnesses.

The chief environmental issue in the trial involves the disposal of the waste, known as tailings, by a method called submarine tailing disposal, which is essentially banned in the United States. Ms. Hilman testified that Newmont's 1993 operational license for the mine called for the company to place the waste below the thermocline, a layer below which water is colder and has less oxygen.

In 1999, she said, a study by the Environment Ministry and the University of Sam Ratulangi here in Manado found that the thermocline was at a depth of 110 meters, or 120 yards. But the company, she said, released the waste from the pipe at a depth of 82 meters, or 90 yards, where the waters were still warm. At that depth the heavy metals in the tailings — arsenic, for one — were able to enter the food chain, she said.

Newmont has consistently argued that the arsenic remained inert and insoluble in the ocean.

Another issue in the trial is the government's accusation that the company did not have the proper permit to dispose of its waste.

Ms. Hilman, who has a degree from a prominent mining school in the United States, the Colorado School of Mines, and is known among the foreign mining companies in Indonesia for being a stickler on pollution, argued that the company had failed to obtain the right permits for toxic waste.

"You can dump waste if you follow the standards and have the permit," Ms. Hilman said.

The company was granted a temporary six-month permit in July 2000 by the environment minister at the time, Sonny Keraf, who told Newmont in a letter that a permanent permit would depend on the company's completing an environmental risk assessment, Ms. Hilman said.

She told the court that Newmont had completed the risk assessment but that it had been rejected by the Environment Ministry because the methodology was faulty.

Source:
JANE PERLEZ
The New York Times

Indonesia Receives U$150 Million Worth in Loan From IDB Annually

2006-02-09T06:03:00.000-08:00

Indonesia received at least US$150 million worth in loan from the Islamic Development Bank (IDB) annually, a minister said.Speaking in a hearing with the House`s Commission XI at the parliamentary building here on Wednesday evening, Finance Minister Sri Mulyani Indrawati said IDB provided a mark up (a term used by IDB for interest) of about five to six percent.

The total loan from IDB till December 31, 2005 was recorded at US$344 million, which was used to finance 43 government and private projects, while the amount of loan received from Saudi Fund since 1976 till December 31, 2005 has reached over one billion US dollar, she said.

The minister further pointed out that with a five to six percent mark-up (interest), IDB`s loan was relatively high if compared to such soft loan provided by Japan with interest rate ranging from 1.3 to 1.5 percent. Loan from Japan till now has reached over 50 percent of Indonesia`s total foreign debt, she noted

Source:
Antara

Toyota Indonesia Eyes 13 Pct Rise in Export Revenue

2006-02-09T05:54:00.000-08:00

The Indonesian unit of Japan's Toyota Motor Corp. expects its export revenue to increase 13 percent to around $850 million this year, company data obtained by Reuters showed.

PT Toyota Motor Manufacturing Indonesia's (TMMIN) revenue from exports of vehicles, engines and parts reached $750 million in 2005, almost double a target of $400 million, the data showed.

Toyota, the world's second-largest auto maker, controls 95 percent of TMMIN, with the rest owned by top Indonesian automotive distributor PT Astra International Tbk.

TMMIN exports two multipurpose vehicles, the Avanza and Innova, to the Middle East, South America, and some Asian nations including Malaysia, the Philippines and Thailand.

Its vehicle exports, predominantly in knock-down kit form, accounted for around 85 percent of Indonesia's total automobile export volumes last year.
Analysts and industry executives say increasing exports may cushion automotive companies in Southeast Asia's biggest economy from declining domestic demand for vehicles this year because of high fuel prices and interest rates.

Some have expressed concern that the recent strengthening of the rupiah, which was at its strongest level in a year on Wednesday, could affect exporters, including Toyota.

The rupiah rose to 9,175 to a dollar before slipping to 9,290, but the central bank says there is room for further strengthening of the currency. The monetary authority has said an exchange rate of around 9,400 is ideal for exporters.

Currently, about one of eight vehicles sold by Indonesian firms goes overseas and that number is expected to grow.
TMMIN plans to export 181,250 vehicles this year, more than double last year's 78,352 and 46,550 in 2004. TMMIN also plans to raise its engine exports to 102,000 units from 100,008 last year.

Indonesia's government more than doubled domestic fuel prices in October, a move that triggered inflation rates to six-year highs and bit the auto sector.
Despite posting record domestic sales last year, vehicle sales in December slipped by a third from a year ago -- its weakest showing in four years -- and some expect the unfavorable conditions to continue in the first half.

The country's automotive industry association, Gaikindo, has forecast domestic vehicle sales will fall to 500,000 units this year from nearly 534,000 in 2005.
Astra is controlled by Singapore's Jardine Cycle & Carriage Ltd. and distributes a number of brands including Peugeot, BMW, Isuzu and Daihatsu.

Source:
Harry Suhartono
Reuters

Indonesia's Sharia Banks Report Improved NPR Ratio in Q4 2005

2006-02-09T05:46:00.000-08:00

The non performing financing (NPF) ratio of sharia banks in the country dropped to 2.8 per cent in the last quarter of last year from 4.7 per cent in the previous quarter.

The decline was attributable to increase in sharia financing and credit restructuring, head of the Sharia banking directorate of Bank Indonesia Harisman told the newspaper Bisnis Indonesia.

Data at the central bank showed that the NPF of sharia banks tended to increase until the third quarter of 2005 from only 2.8 per cent in the first quarter.

The financing to deposit ratio also declined to 97.8 per cent in the fourth quarter from 110.4 per cent in the third quarter as a result of a faster increase in deposit than in financing, Harisman noted.

Source:
Bisnis Indonesia

Purnama says he may quit over Cepu field dispute

2006-02-09T05:40:00.000-08:00

Widya Purnama, head of Indonesia's state oil company PT Pertamina, said he will quit unless the company leads the operation of the country's Cepu oil field, which it plans tojointly develop with Exxon Mobil Corp.

"Pertamina should become the operator of Cepu," Purnama told a parliamentary hearing in Jakarta yesterday. "We can jointly operate Cepu in many forms or rotate the operatorship later, but Pertamina should be the leader or I would resign."

The dispute between Exxon and Pertamina over which company will operate Cepu, Indonesia's biggest untapped oil reserves, has stalled its development for four years. The field, located in the border of Central and East Java provinces, may contain as much as 500 million barrels of oil and could add about 18 percent to Indonesia's production.

President Susilo Bambang Yudhoyono wants the companies to start production from Cepu in 2008. Pertamina should become the operator of the field for the first five years and rotate the lead with Exxon every five years, Purnama said. The company wants to operate Cepu to be able to better control costs, he said.
The government wants Pertamina and Exxon, the world's biggest publicly traded oil company, to set up a joint operating unit to make decisions and alternate control of cash flow and fieldoperations, Vice President Jusuf Kalla said on Nov. 28.

Exxon and Pertamina are still in talks, said Maman Budiman, vice president of Exxon's Indonesian unit. "We hope to reach an agreement as soon as possible," he said by telephone today. Lower Costs Exxon has offered Pertamina "key" management positions in a committee that will supervise Mobil Cepu Ltd., a unit Exxon set up to operate Cepu, in a bid to end the dispute,Peter J. Coleman, president of Exxon's Indonesian unit, said on Dec. 12.

The supervisory body will oversee Mobil's work and have the authority to approve budgets and expenditures, he added. Pertamina can drill Cepu at US$4 million for each well, a cost that is a third of that proposed by Exxon, Purnama said.

On Sept. 17, Exxon and Pertamina signed an agreement with the state oil and gas regulator, BPMigas, giving the companies a 30-year license to develop Cepu. The agreement didn't identify theoperator and left the decision to the two companies.

Source:
Bloomberg

Indonesia to repay IMF debts early

2006-02-09T05:29:00.000-08:00

The Indonesian government plans to speed up repayment of debts from the International Monetary Fund ( IMF) amounting to some 8 billion U.S. dollars, Finance Minister Sri Mulyani Indrawati said Thursday.

"The Ministry of Finance and Bank Indonesia are working on a plan to accelerate debt repayment to the IMF," the minister said in an open hearing with the House of Representatives' commission nine here.

She did not elaborate further.

The minister said Indonesia didn't take IMF's program loans. The debts taken from the IMF were aimed at strengthening the country's foreign exchange reserves at the central bank, she said.

Indonesia quitted IMF financial assistance during the Megawati Soekarnoputri administration but the international creditor maintained its presence under the post-program monitoring stage.

Source:
Xinhua via COMTEX

Govt to promote development of petrochemical clusters

2006-02-08T20:15:00.000-08:00

Mindful of the strategic importance of the petrochemical sector, the Industry Ministry says it will prioritize the development of three large, integrated petrochemical clusters in East and West Java, and Kalimantan.
These areas have hosted a number of major petrochemical plants since the mid-1990s.

"Our focus will be on expanding the upstream sector to secure supplies to downstream industries," Benny Wahyudi, the ministry's director general of agro, forestry and chemical industries, said Wednesday.

"We aim to develop each cluster as an integrated industrial zone where all the necessary support industries will also be present," he said.

The development of the upstream industry has slowed in recent years, with many planned expansion projects delayed because of the economic crisis. Slower growth in the upstream sector has, in turn, led to supply shortages in downstream industries, such as plastics and synthetic fiber producers.

While the local annual demand for ethylene -- a major raw material in plastic production -- stands at 1.3 million tons, the nation's sole ethylene producer, PT Chandra Asri Petrochemical Center, only has the capacity to supply 520,000 tons.

Petrochemical firms forecast that domestic demand for their products is set to grow by at least 10 percent annually.

With a population of 220 million, Indonesia represents a lucrative market for downstream petrochemical products, including polymers and fibers.
The government also says that a delayed aromatic products project in Tuban, East Java, is set to restart. The company, PT Trans Pasific Petrochemical Indotama, will commence operations in June 2006 and produce up to 1.06 million tons of aromatic products, such as paraxylene, benzene, toluene, orthoxylene, per annum.

In addition, it will also produce up to 1.06 million tons per annum of light naphtha, an important raw material for ethylene.

The development of the project, which is owned by Tuban Petrochemical Pte., Japan's Nissho Iwai and Itochu Corp and Tirtamas Majutama, was put on the back burner in 1998 as a result of the economic crisis. The Japan Bank for International Cooperation has provided financial support of US$400 million for the restart of the project.

Elsewhere, Indonesian Plastics Producers Association (Inaplast) chairman Didik Suwondo said the East Kalimantan petrochemical cluster should be developed as a natural gas-based production center for ethylene.
Didik explained that the price of gas-based ethylene would be 30 percent cheaper than that made from light naphtha.

"If we could develop more gas-based ethylene crackers, the downstream industries would benefit from more competitive prices," he said.

Source:
The Jakarta Post, Jakarta

Law Must Be Enforced in Settling Debtors Problems

2006-02-08T08:54:00.000-08:00

Jakarta - The government has to look into the legal aspects in handling debtors of Bank Indonesia (BI)`s non-performing liquidity credits (BLBI), former chief the State Audit Board (BPK), Satrio B. Joedono said here on Wednesday."The question is whether the money or the law is important. For me, the law is important," Joedono said referring to reports that four debtors had plans to return the non-performing credits to the government.Reports quoted the finance minister as saying earlier that there were four BLBI debtors who wanted to return the money to the government.

The finance minister said she would discuss with the chief economic minister and the police chief the legal aspect that could be imposed on settling the debtors problem. Joedono said BLBI debtors had been given a chance to settle their debts through the Master of Settlement and Acquisition Agreement (MSAA).With the MSAA settlement, the debtors agreed to return the money but they failed to do so, he said.With the MSAA mechanism, debtors who had signed the agreement were given the `release and discharge` facility, whereby debtors would be freed from legal findings if they returned all amount of the credits they had received from BI, the central bank.

Earlier on Monday, three debtors came to the state palace to meet President Yudhoyono. The three were Lukman Astanto, Ulung Bursa and James Januar who respectively owed the government Rp615 billion, Rp190 billion and Rp123 billion.According to National Police chief Gen. Sutanto, they came to the state palace to follow the steps of Bank Bira`s commissioner Atang Latief who has earlier expressed readiness to return the BLBI funds to the government.Latief has been in hiding in Singapore along with many other debtors.

The government provided BLBI funds totaling Rp144.5 trillion from August 1998 to early 1999 to assist 48 ailing private banks. However, in May 1999, a Supreme Audit Agency report revealed that 95 percent of the troubled banks had misappropriated the funds.Based on reports, the Police Chief said, the debtors actually wanted to return their debts through the Indonesian Bank Restructuring Agency (IBRA) which was already liquidated.

"They wanted to return their debts, but don`t know to whom. So they issued a statement on their readiness to return their debts. In the absence of an institution to handle their debts, the settlement of their debts became protracted. Now they are able to solve their case," he said.Police Chief Gen Sutanto said on Tuesday that debtors who have surrendered themselves may not have to undergo a legal process, because according to law enforcers there was no indication they had violated the law although they had yet to secure a document stating they had paid their debts (SKL)."Their past and present status are not classified as having violated the law," Sutanto

Source:
ANTARA News

Malaysian Company to Invest in Furniture in Indonesia

2006-02-08T08:47:00.000-08:00

Jakarta - A Malaysian company, Bandar Development Berhard, would invest in furniture industry in Indonesia, said Indonesian Agriculture Minister Anton Apriantono here Wednesday.

Minister Apriantono and Industry Minister Fahmi Idris accompanied President Susilo Bambang Yudhoyono when receiving Bandar Development Berhard Chairman Dato Mohammad Muis and its share holder Dato Seri Akbar Khan at the presidential palace here Wednesday.

The minister encouraged the Malaysian company to invest in the furniture industry. However, the company has not yet given the amount of money to be invested in Indonesia. The talks with the President were not in detail, said the agriculture minister.

Source:
ANTARA News

Indonesian Ulema Council Asks Muslims to Accept Danish Media's Apology

2006-02-08T08:42:00.000-08:00

Jakarta - The Indonesian Ulemas (Muslim Leader) Council MUI said here Wednesday that the Muslims must accept apology of Jyllands-Posten which first published the caricatures of Prophet Muhammad last year.

MUI, however, also asked the West, which always praises the freedom of press, no to violate religious norms and to respect everything which is considered sacred by religions.

"It is the obligation of the Muslims to accept the apology of the Danish media, the Danish ambassador to Indonesia, and the Danish Government, said Vice Chairman of MUI Din Syamsuddin following a meeting of religious leaders, the media and Indonesian Foreign Affairs Minister Hassan Wirajuda at the foreign affairs ministry s office.

Din, who is concurrently general chairman of Muhammadiyah, the country s second largest Muslim organization, said Islam teaches its followers noble deeds such as accepting apology and to be forgiving.

Jyllands-Posten and the Danish Government have expressed their regrets about the publication of the caricatures, following a series of demonstrations throughout the world, which some had ended violently.

Din asked the Muslims, especially those in Indonesia, not to be trapped in violence and anarchy in responding the blasphemy of Prophet Muhammad by Jyllands Posten, which has apologized for the publication of the caricatures.

I think they have already gotten the message of the demonstrations so far. If it is considered insufficient, the messages should be presented through effective channels, he said.

He said the reactions of the Muslim were normal, but it must not be violent which is forbidden in Islam and could damage the image of Islam, especially Indonesia, which has the world s largest Muslim population.

Din urged the Western media and countries to try to understand Islam in order to prevent a clash of civilization between Islam and the West.

Because if a similar incident will repeat in the future, and they do not understand Islam, I think it would promote radicalism in the Islamic world, including in Indonesia and it would be potential to cause a clash of civilization between Islam and the West. Of course we must avoid this, he said.

Danish newspaper Morgennavisen Jyllands Posten first published the caricatures in September 2005, and later picked up by a dozen publications across Europe.

Indonesian President Susilo Bambang Yudhoyono said recently the Indonesian government condemned the publication of caricatures of the Prophet Muhammad and he could understand the public`s strong protest against the publication.

"But as religious people, we should accept the apology conveyed by both the Danish government through its ambassador in Jakarta and the editorial staff of the newspaper," President Yudhoyono said.

The embassy of Denmark in Jakarta has informed the Indonesian foreign affairs ministry of its plan to temporarily close the office, while the Danish honorary consulate in Surabaya was closed indefinitely starting on Tuesday, following a series of demonstrations in a number of cities throughout Indonesia.

Source
ANTARA News

Police Intensifies Security Precaution for Foreign Consulates

2006-02-08T08:39:00.000-08:00

Surabaya- Police have intensified security precautions at European and US consulates following widespread demonstrations over the publication of cartoons depicting Prophet Muhammad in a Danish newspaper which were later published in several other papers in Europe, a police spokesman said.

"The police personnel reinforcement is aimed at anticipating further demontrastions and at training newly recruited police personnel," Surabaya Police Chief Snr Commr Anang Iskandar said on the sidelines of security precautions during a demonstration of Hizbuttahrir Indonesia in front of the US consulate here on Wednesday.

He said further that as many as 900 police officers were dispatched to secure the US, German and Dutch consulates at Jalan dr Soetomo and Jl dr Wahidin here.

Earlier 400 to 500 police personnel were sent to secure the area and another 200 to secure the Danish honorary consulate at jalan Sambar.

"The force will be evaluated in accordance with the development of the situation," he added.

Police also set up a police line about 100 meters from the office buildings

Source:

ANTARA News

Marubeni boosts stake in Indonesia's Astra group company

2006-02-08T08:16:00.000-08:00

Kyodo News International (Tokyo) -- Marubeni Corp. said Wednesday it has boosted its stake in PT Surya Artha Nusantara Finance, a construction machinery financing firm of Indonesia's PT Astra International Tbk group, to 40 percent from 4.9 percent for 1 billion yen.

Expecting rapid growth in demand for construction machinery in Indonesia, the Japanese trading house said it aims to expand its financing business by strengthening its bond with the Astra group, which possess a wide retail network in the country.

Surya Artha issued new shares solely to Marubeni earlier this month for the stake hike. The Astra group holds the remaining 60 percent stake in the Jakarta-based company.

Marubeni said it has been engaged in exports of construction machinery by Japan's Komatsu Ltd. to the Astra group amid active infrastructure building in Indonesia.

Source:
Kyodo News International (Tokyo)
February 08, 2006

Freeport-McMoRan Copper & Gold Inc reports 4Q and 2005 results

2006-02-08T08:10:00.000-08:00

CHEMICAL BUSINESS NEWSBASE - COMPANY REPORTS - CBNB

Freeport-McMoRan Copper & Gold Inc reported a net income of $463.2 M in 4Q ended Dec 2005 (net income of $212.5 M in 4Q ended Dec 2004). For year ended Dec 2005 net income of $934.6 M (net income of $156.8 M for year ended Dec 2004). PT Freeport Indonesia's (PT-FI), FCX's Indonesian mining unit, share of 4Q 2005 sales was a record 468.4 M pounds of copper and 1.1 M ounces of gold (419.2 M pounds of copper and 618,000 ounces of gold in 4Q 2004). PT-FI's share of 2005 sales totalled 1.46 bn pounds of copper and a record 2.8 M ounces of gold, (1 bn pounds of copper and 1.44 M ounces of gold for 2004). PT-FI's share of estimated recoverable reserves as of 31 Dec 2005 totalled 40.3 bn pounds of copper and 43.9 M ounces of gold. Mill throughput, which varies depending on ore types being processed, averaged 236,900 tons/day of ore in 4Q 2005 (229,800 tons of ore in 4Q 2004). Production from PT-FI's Deep Ore Zone (DOZ) underground mine averaged 41,800 tons/day of ore per day in 4Q 2005, representing 18% of mill throughput. PT-FI's share of annual sales in 2006 is expected to about 1.3 bn pounds of copper and 1.7 M ounces of gold, compared with previous estimates of 1.4 bn pounds of copper and 1.9 M ounces of gold, with the shortfall expected to be substantially recovered in 2007. The following tables are included: summary financial table of Freeport-McMoRan Copper & Gold Inc; share of sales of copper and gold; unit net cash (credits) costs; reserve additions, exploration and mine development activities for copper, gold and silver; selected operating data; consolidated statements of income (unaudited); consolidated statements of cash flows (unaudited); product revenues and production costs; cathode cash unit; consolidated financial statements; consolidated provision for income taxes; business segments; and condensed consolidated balance sheets data (unaudited) as of 31 Dec 2004 and 2005.

Sources:
Elsevier Engineering Information
Financial Times Information Limited
Asia Intelligence Wire