Trade and Investment News, 18 December 2006

Highlights 

Politics 

·         President Yudhoyono warned against moves to slow the anti-corruption campaign 

·         New electoral system proposed 

Regions

·         Aceh Monitoring Mission wraps up task after successful polls 

Economy 

·         Banks in India, China and Australia keen to enter banking sector 

·         Budget deficit to come in at around 1% 

·         Consumer confidence moves into positive territory 

Business briefs 

Macroeconomy 

·         Interest rate cuts to slow, says central bank official 

·         End-of-year financial situation strong, says finance minister 

Investment

·         Nestlé to Spend $80m on Expansion

State concerns 

·         Cooperation programs on money laundering with Cayman Islands, South Africa 

·         Asian Development Bank to lend $33.3 million to help aquaculture projects

SOEs

·         Insurance company PT Asuransi Jiwasraya posts gains 

·         Cellular operator PT Telkomsel to spend $1.5 billion on expansion 

Private sector 

·         Bakrie Telecom to get national operating license 

·         Vehicle sales grow on stronger demand, rising exports 

Banks 

·         Two banks expected to merge in line with single presence policy

·         Offshore banks in tie-ups with local operators 

Power 

·         Government promises no power, fuel price rises in 2007 

·         Tender to be held for 30 coal-fired power plants 

Oil & gas 

·         CNOOC, ConocoPhilips and Premier Oil win new concessions 

Mining 

·         PT Trakindo Utama to take 3% in Sumbawa copper mine 

·         Poor rains may affect nickel output 

POLITICS

President Warns About Graft Slowdown

President Susilo Bambang Yudhoyono warned on Monday (11/12/06) against moves to slow down the anti-corruption campaign, but said stakeholders should avoid excesses in the fight to root out graft.

He said authorities should respect the principle of presumption of innocence and avoid issuing accusations or conducting investigations based on insufficient information. 

"In the first five years of a massive anti-graft campaign, one always encounters problems, stagnation, even fear, everywhere. Let's deal with these collectively," he said at the opening of a three-day national meeting of the Development and Finance Control Board.

Dr. Yudhoyono urged police, prosecutors and judges to avoid mistakes that could hamper the country's progress, including disruptions to the business environment.  Attempts to stifle the anti-graft measures, he said, would remain a challenge in the long run, but the government would have to remain consistent in pursuing the fight against corruption. 

"We need to stay on track for better future generations," he said, reiterating the need to create an environment that makes it difficult for officials at all levels to engage in corruption. 

Deputy KPK chairman Erry Riyana Hardjapamekas said on Monday that the public feels disappointed when the anti-graft drive fails to deliver the desired outcome. "The public has high expectations and that is understandable,” he told The Jakarta Post. He said that to meet those expectations, the KPK was working hard to come up with better anti-corruption techniques.

New Electoral System Proposed

A panel of political scientists proposed on Friday (16/12/06) a scheme for streamlining the electoral system to promote a healthier political situation.

The panel, from the Indonesian Institute of Sciences (LIPI), said in an academic draft on several political laws currently being drafted by the government, that to be eligible to nominate candidates in future presidential elections, political parties should be required to garner between 25 and 30% of the popular vote in general elections. 

"Such a mechanism would likely produce two pairs of candidates to contest a one-off election," LIPI member Syamsuddin Haris said in a discussion on the draft.

He said increasing the electoral threshold for nominating presidential candidates would also help develop a healthy political climate with a strong system of checks and balances. "It will lead to the formation of two strong camps in parliament, the governing coalition and the opposition," he said.

Currently, the law on presidential elections states that a political party or coalition of parties that win 15% of the popular vote is allowed to nominate a presidential candidate. The 2003 law resulted in five pairs of candidates contesting the 2004 presidential election, with a winner being declared only after a run-off vote.

Another LIPI analyst, Ikrar Nusa Bakti, said an electoral threshold of 25% would force political parties into alliances. "If we can't reduce the number of political parties to two, then at least we can force them into building coalitions," Bakti said, adding that the current political arrangement was too cumbersome.

The LIPI team also proposed that political parties be required to formalize coalitions under the new law, to create stability and improve ethics in politics. It said the terms and conditions agreed upon by parties forming a coalition should be recorded in a state document that would be open to public scrutiny. 

It also recommended that coalitions formed for a presidential election be required to remain intact for at least two elections. "With these arrangements, political coalitions would no longer be a personal matter among politicians, but an official agreement under the law," Haris said.

The academic draft was created by the LIPI team in cooperation with the Home Affairs Ministry, which is currently drafting new laws that will serve as the legal basis for the 2009 legislative and presidential elections. 

Malaysia Praises Intel Cooperation

Malaysia said on Monday (11/12/06) that sharing quality intelligence with Indonesia has prevented militants from launching any major regional terror attacks since the second Bali bomb blast last year. 

"Malaysia and Indonesia are quite pleased with the situation. There are many factors behind it," Deputy Prime Minister Najib Razak told reporters in Kuala Lumpur. 

"One of the factors is that we have been able to have quality pre-emptive intelligence reports to nip it in the bud," he said, according to the Associated Press.

Najib, who is also the defence minister, said by obtaining intelligence early, authorities could detect groups that plan to conduct "acts of terrorism" long before they are able to do anything. 

He cited the example of Malaysian police's move against a local terror group, Darul Islam, in the eastern Sabah state before it could mount an attack. 

Malaysian police in May said they had crushed the militant group's underground network, which had collaborated with Indonesian militants, through multiple arrests between March and April. 

Reports said 12 men -- six Malaysians, three Indonesians and three Filipinos -- are in custody under a tough security law, while one male Filipino has been released. The group was believed to have been a logistics, transportation and financial support unit for Jemaah Islamiyah (JI) militants.

Date Set for Bali Bomb Review

The first hearing date has been set for the review of the death sentence of the three key 2002 Bali bombers, despite a defense plea to move the trial location away from Bali, Australian Associated Press reported on Tuesday (12/12/06).

Denpasar District Court - where the death sentence was first handed to Amrozi, his brother Ali Ghufron, alias Mukhlas and Imam Samudra - will hear the reopening of the case for the first time on December 22. 

Lawyers for the trio recently filed a Supreme Court challenge to the executions, arguing the anti-terrorism law used to convict the men was retroactive because it was introduced after the 2002 bombings and could not be applied.

The men were convicted of playing lead roles in the Bali nightclub attacks, which killed 202 people, including 88 Australian holidaymakers. The executions of the three - originally set down for July – were delayed after their lawyers said they planned to lodge the judicial review in the Supreme Court months ago.

KL, Jakarta Boost Border Security

Indonesia and Malaysia agreed on Friday (15/12/06) to increase cooperation on border security and set up a joint police committee to tackle cross-border crime. Timber smuggling, illegal immigration, criminal gangs and encroaching fishermen are among the main problems along their long and porous sea and land borders.

Defense Minister Juwono Sudarsono said the two sides had agreed "to form a Joint Police Cooperation Committee where police will (lead) law enforcement for trans-national crimes.” "The armed forces will also support police from both countries," he told reporters.

Sudarsono said there were dozens of criminal cases related to the land and sea borders. "This is why both countries need to increase security force and equipments. We agree to increase transport facilities so we can (react) fast," he said.

Malaysian Deputy Prime Minister Najib Razak, who also holds the defense portfolio, hailed the agreement as "a natural development because of trans-national problems. We will bring the police forward more intensively and formalize it." 

During their meeting to discuss defense and security cooperation, Sudarsono said they also agreed to increase maritime cooperation in the piracy-prone Malacca Strait. 

REGIONS

Aceh Peace Monitors Leave After Successful Poll 

The European Union-led Aceh Monitoring Mission (AMM) ended its mission in Aceh on Friday (15/12/06), after the province’s landmark election which seals the peace process between Indonesia and the Free Aceh Movement (GAM) and most likely will result in a former rebel becoming the new governor of Aceh.

Dutch diplomat Pieter Feith, who headed the mission, told reporters the world community would continue to monitor human rights and help to reintegrate former fighters into society.

Feith also expressed hope that the winner of the just-concluded election in Aceh and officials in Jakarta could ensure peace continued. "A new era will come to Aceh with the establishment of a new administration to maintain peace," he said.

On Monday (11/12), the province held its first-ever direct elections for governor, deputy governor and 19 mayor/regents with the government and international observers, including UN Secretary General Kofi Annan, saying that it was a great success. 

Former GAM spokesman Irwandi Yusuf, though dropping from his 39.27% lead on the polls Monday night to 32.5% on Saturday, is projected to win by a landslide. Official results will be announced on January 2.

Yusuf himself vowed to coordinate with the central government in pushing for reconciliation, despite the fact the law on the Truth and Reconciliation Commission was recently annulled by the Constitutional Court. 

"We will consider establishing a commission under the Aceh administration, but it will be set up in close coordination with Jakarta since the majority of those allegedly involved in human rights abuses are security personnel," he told The Jakarta Post

Navy to Reorganize Bases 

The Indonesian Navy will reposition its bases to focus on the country's outer islands, its chief of staff said. 

“The aim is to monitor and defend our territorial waters,” Admiral Slamet Soebijanto told Detik.com on Wednesday (13/12/06). The Indonesian Navy headquarters will be in Surabaya, East Java while the base for the western area will be in Tanjung Pinang, Riau Islands, for the eastern area in Sorong, Papua, and for central Indonesia in Makassar, South Sulawesi. 

The Navy will also have more patrol vessels to boost security in the country’s waters. Soebijanto said that currently, Indonesia has 114 vessels but only 50 of them are working. With its vast area, the country should have at least 274 vessels, he said. “However, we are still dealing with limited funds. We will overcome it gradually,” he added.

W. Sulawesi Gets First Governor

Home Minister M. Ma'ruf installed Anwar Adnan Saleh and Amri Sanusi as the new governor and deputy governor of newly established West Sulawesi for the 2006-2011 period, reported The Jakarta Post.

The ceremony, which was held Thursday (14/12/06) during a plenary session of the West Sulawesi Legislative Council, was attended by House of Representatives Speaker Agung Laksono, People's Consultative Assembly Deputy Speaker Aksa Mahmud and a number of governors, mayors and regents from Sulawesi and Kalimantan. Over 1,000 people attended the ceremony which was also marked by local traditional cultural attractions.

The minister urged Saleh and Sanusi to build partnerships with members of the legislative council to help speed up development in the province. Ma'ruf reminded the two officials to think of furthering the interests of the people because the essence of the establishment of the new province was for the improvement of people's welfare.

The pair won the regional elections on July 20, beating governor candidates Hasyim Manggabarani and Arifuddin Katta and running mates Salim Mengga and Hatta Dai. 

ECONOMY

New Fever for Banks 

Indian and Chinese interests announced they would buy banks in Indonesia, as Australia’s Commonwealth Bank also said it was eyeing a new purchase and Bank Lippo said it wanted to acquire a smaller operator. 

Bank of India is to buy a majority stake in Bank Swadesi early next year, central bank deputy governor Siti Fadjrijah said Monday (11/12/06).

"The SPA (sales and purchase agreement) with Swadesi is likely to be done in the first quarter of 2007," Fadjrijah told reporters, Antara news agency said, adding that the bank wanted to take a majority in the bank, but would continue to work with a local shareholder. 

It will be the second purchase of an Indonesian bank by an Indian one after the State Bank of India bought a 76% stake in Bank Indomonex last month.

Industrial & Commercial Bank of China completed its purchase of PT Bank Halim, Fadjrijah said earlier. She didn't elaborate on the financial terms of the sale, or the size of the stake purchased.

ICBC, China's largest lender by assets, announced in September that it had signed a memorandum of understanding to buy an undisclosed stake in Bank Halim, a small lender based in Surabaya. 

Commonwealth Bank of Australia (CBA) is also to buy a second retail bank in Indonesia. The bank revealed it was in discussions with Bank Arta Niaga Kencana (ANK) that analysts said could be worth about $30 million.

Surabaya-based ANK operates 19 branches in Indonesia and employs 349 staff. Last year it reported a profit of 11.9 billion rupiah ($1.67 million).

The investment would add to the 21 branches operated through the profitable PT Bank Commonwealth in Indonesia, of which CBA owns 99.9%.

PT Bank Lippo said it wants to spend at least $200 million to buy a local lender next year to expand its consumer-banking and small-scale-business operations, a senior bank executive said Tuesday.

And John McFarlane, CEO of another Australian bank, ANZ, told Dow Jones Newswires earlier that ANZ would like to increase its presence in Indonesia where it has a stake in both PT Panin Indonesia Bank and PT ANZ Panin Bank.

In other news, the Minister for Finance, Sri Mulyani Indrawati, said the budget deficit was expected to come in at between 1% and 1.1%, below the budget forecast of 1.3%. A group of Japanese investors said they would invest $1 billion for projects in North Maluku, including a desalination plant. 

Representatives of the group have met North Maluku officials to discuss the plan, Asril Ahmad, head of the North Maluku administration's information and communication bureau, said Tuesday.

Ahmad said the Japanese businessmen also wanted to invest in seaport and airport expansion, agricultural irrigation networks and tourist facilities.

On the manufacturing front, Toyota Motor Manufacturing Indonesia said it expected a 12% boost in vehicle exports this year to $952 million.

The company announced it would start exporting its Fortuner SUV to Middle East markets, and would introduce a new 1500-cc small SUV in a joint cooperation with Daihatsu, another Toyota group company, for the local market. 

Consumers remained upbeat about the economy, according to a Bank Indonesia survey conducted in November. 

The consumer confidence index rose 3.5 points to move into overall positive territory at 101.6 in November from 98.1 in October, the first time the poll had been positive for a year.

Consumer spending, a key driver of the economy, is already up, Reuters reported. Sales by Indonesia's top three motorcycle makers jumped just over 50% last month, hitting a record monthly volume.

BUSINESS BRIEFS

MACROECONOMY

Slower Rate Cuts Seen in 2007 - BI

Indonesia is likely to see a slower pace of cuts in benchmark interest rates next year due to inflationary pressure and to maintain an attractive interest rate differential for rupiah holders, a top central banker said on Wednesday (13/12/06).

Senior Deputy Governor Miranda Goeltom also said inflation is likely to hover at about 5% in 2008 against the 6% expected next year.

"If we cut the rate by another 300 basis points next year, that means it will hit 6.75% at times when inflation is at 6% plus minus one percentage point.  In terms of interest rate differentials, that is not wise and not prudent," Goeltom was quoted as saying by Reuters.

Bank Indonesia (BI) cut its key interest rate by half a percentage point the previous week to 9.75%, bringing total cuts this year to 300 basis points and hitting its lowest in more than a year.

Annual inflation rate fell in November to 5.27%, the lowest level in more than two years and a far cry from late last year when a doubling of domestic fuel prices pushed it to more than 18%.  In cutting rates, BI is a standout among Asian central banks.  It has reduced the BI rate seven times this year from a high of 12.75% as inflation rates fell.

Analysts had said BI may be more cautious about lowering rates next year if plans to raise civil servants' pay and the minimum wage are pushed through.

Finances to Close Year on Solid Ground

Indonesia's finances are expected to wrap up the year in good shape, with the current account in surplus and the budget deficit ending up within a slightly lower-than-expected range of between 1% and 1.1% of the gross domestic product.

This is due to the likelihood of growth continuing to pick up during the year’s final quarter, despite the recent weakening of the US dollar, which could affect Indonesian exports, said Finance Minister Sri Mulyani Indrawati.

"We are comfortable so far with the budget deficit.  There are no problems at all.  We see the deficit at between 1% and 1.1%," she was quoted as saying by The Jakarta Post on Wednesday (13/12/06).  "The recent movements in the dollar are, from the budgetary perspective, also manageable." 

She said government spending from January 1 to November 30 reached Rp528.17 trillion, or 75.55% of its initial full-year forecast of Rp699.1 trillion, XFN-Asia reported.

Over the same period, actual revenue and grants received by the government reached Rp507 trillion, or 76.92% of its initial full-year forecast of Rp659.11 trillion.  As a result, the actual budget deficit for the period reached Rp21.17 trillion, compared to the government's initial full-year forecast of Rp22.43 trillion and revised forecast of Rp40 trillion.

The minister admitted that a number of problems had affected this year's budget revenues and expenditures, but said that the budget is well on track in the final quarter.

"There will be some envisaged spending that won't now take place.  But that's better than spending the money just for the sake of spending it," she said.  "We're optimistic about income tax revenues, as well as value-added tax revenues on domestically produced goods, although revenues from VAT on imported goods may decline a bit."

Tax revenues -- at Rp425 trillion -- make up the bulk of this year's total Rp659 trillion in budget receipts.

Sri Mulyani explained that revenues from VAT on imported goods would possibly miss their target due to the economic slowdown in the first part of the year, and the shifting of growth from the manufacturing sector to such other sectors as services, trade and agriculture -- which contained less imported components.

She was upbeat, however, that economic growth would continue to pick up speed, thus leading also to increased government revenues.

Growth rebounded to a revised 5.1% and 5.5% in 2006's second and third quarters, respectively, from 4.6% in the first.  It is expected to come in at a full-year rate of about 5.8% -- slightly better than the 5.6% recorded in 2005 -- and increase to 6.3% in 2007.

"We'll watch how the momentum of growth plays out, and if we can maintain the upward trend, then revenues will also improve next year," she said.

Meanwhile, the central bank said the US dollar will likely move between Rp9,000 and Rp9,500 in 2007, with an average exchange rate of Rp9,300.

Consumers Upbeat About Economy - Survey

Consumers were optimistic about the economy in November for the first time after more than a year of continued pessimism about the economy, a central bank survey showed on Monday (11/12/06).

The consumer confidence index rose 3.5 points to 101.6 in November from 98.1 in October.  A reading above 100 means consumers are optimistic about the future.  The last time it was positive was when it read 101.7 in June last year.

The improving confidence comes after  annual inflation plunged in the fourth quarter of this year as the impact of a big fuel price rise in October last year faded, allowing the central bank to sharply cut borrowing costs.

"I think consumer confidence will continue to rise.  There should be no reason for it to fall, especially if economic conditions remain stable," economist, Helmi Arman of Bahana Securities, said, according to Reuters.

Consumer spending, a key driver of the economy, is already up.  Sales by the country's top three motorcycle makers jumped more than 50% last month, hitting a record monthly volume and providing more evidence of a rebound in the sector.

The country's $6 billion motorcycle market is seen as a barometer of consumer spending, which sagged in the wake of the oil price rise last year and the accompanying surge in inflation.

INVESTMENT

Sun Business to Buy Content Firm for $6.2m

Sun Business Network Ltd (SBN) said it will buy Maestro Mind International Ltd, a holding company that owns 95% of mobile content developer PT Monstermob Indonesia (PMTI) for $6.2 million, XFN-Asia reported.

“PTMI will help us penetrate the rapidly expanding Indonesian mobile media industry,” SBN's managing director, Ricky Ang, said in a statement.

We are confident that PTMI will contribute significantly to our business in the years to come,” he added.

Nestlé to Spend $80m on Expansion

Milk processing company, PT Nestlé Indonesia, will invest $80 million to expand the capacity of its factory in Pasuruan, East Java from 50,000 tons to 93,000 tons a year, senior Industry Department official Imam Haryono said.

The company is seeking support from its parent company in Switzerland, Haryono said, according to Antara.

He said the factory needs to be expanded as it already operates almost at full capacity, while demand continues to increase.

Chinese Investors May Build Precious Stone Center 

Chinese entrepreneurs will explore the possibility of building a precious stone center and selling jewelry in Bali, Industry Minister Fahmi Idris said recently.

"I don't have any objection to the Chinese investors' plan so long as they train our precious stone craftsmen to develop specific Indonesian products," Idris was quoted as saying by Antara.  He did not name the investors, but said they will come to Indonesia in March.

Idris said he met with the Chinese investors during a visit to China some time ago.  He said the investors are very well known in China, especially for their precious stones, notably jade.

The minister said his department might allow the Chinese entrepreneurs to produce Chinese-style jewelry in Indonesia so long as they use raw materials from Indonesia, such as onyx.

The government will allocate Rp600 billion ($66 million) for the building of small and medium industries next year, and has invited Chinese, Japanese and South Korean precious stone experts to train Indonesian craftsmen.

STATE CONCERNS

Agreements to Combat Money Laundering

Indonesia, through its Financial Transaction Analysis and Report Center (PPATK), has forged cooperation programs with the financial intelligence agencies of the Cayman Islands and South Africa to prevent and combat money laundering, Antara reported.

PPATK spokesman Natsir Kongah said Monday (11/12/06) the cooperation programs are strategic, considering that the Cayman Islands is one of the biggest financial centers in the world, while South Africa is the biggest financial center on the African continent.

The signing of the agreement between PPATK and the Financial Reporting Authority (CAYFIN) of the Cayman Islands and the Financial Intelligence Center (FIC) of South Africa will help strengthen international cooperation in the fight against money laundering and other crimes.

At least 350 banks and trust companies are operating in the Cayman Islands, with about $1 trillion circulating in the region.  The small country is also home to 8,000 mutual funds and 65,000 corporations.  Some 1,000 companies have listed their shares at the Cayman Islands' Stock Exchange.

According to Kongah, the procedure of PPATK cooperation with CAYFIN and FIC was based on article 25, point 3, 2002 of the revised Law No 25/2003 on money laundering, which allows PPATK to combat money laundering through cooperation programs with other relevant national and international parties.

The substance of the agreement relates to the exchange of financial intelligence relating to the prevention and eradication of money laundering and the funding of terrorist groups.

ADB to Loan $33m for Aquaculture Operations

The Asian Development Bank said Thursday (14/12/06) it will loan the government $33.3 million to develop aquaculture projects.

"ADB will help boost the incomes of 14,000 poor fish farmers in Indonesia through a loan of $33.3 million to enhance aquaculture production and productivity in select provinces," it said in a statement on its website.

The loan, which will have a 32-year tenor, will "support a government program to promote community-managed freshwater, brackish water and marine aquaculture development among poor communities of the country," the statement said, according to Dow Jones Newswires.  

The government will pay 1% interest per annum during the first eight years of the loan and 1.5% per annum for the remainder, the statement said.

SOEs

Jiwasraya Overshoots Premium Income Target

State-owned life insurance company PT Asuransi Jiwasraya posted Rp1.9 trillion ($211 million) in premium income in the first 11 months of the year, exceeding its full-year target of Rp1.8 trillion.

Company president Herri B Simanjuntak said he is optimistic income would rise to Rp2 trillion by the end of the year, Antara reported on Thursday (14/12/06).

Simanjuntak said the company's premium income target for 2007 is set at Rp2.1 trillion and investment will increase to Rp450 billion from Rp410 billion this year.

The company’s assets grew to Rp4.1 trillion by the end of the third quarter from Rp3.7 trillion in the same period last year.  It posted risk-based capital (RBC) at 141% by June, well above the mining level of 120% set by the Finance Department.

Telkomsel to Invest $1.5b to Expand Coverage

The country's largest mobile phone operator, PT Telkomsel, said it will build 5,000 more base transceiver stations (BTS) to expand its coverage in 2007.

Currently, the subsidiary of state-owned telecommunications provider PT Telkom already has 15,000 BTS.

Telkomsel will set aside $1.5 billion in capital expenditure to finance the construction of the new BTS, company president, Kiskenda Suriahardja, was quoted as saying by Antara.

Telkomsel’s subscribers numbered 32.5 million last month.

PRIVATE SECTOR

Bakrie Telecom Gets National License

Indonesia has given mobile phone firm, PT Bakrie Telecom, currently operating only in some cities on Java, a license to operate nationally, the communications department said on Wednesday (13/12/06).

"PT Bakrie Telecom will get three channels nationally," the department said in a statement, referring to three frequency channels that could be used by the mobile operator, Reuters reported.

The statement said the move was part of government reforms aimed at strengthening the sector.

The company, owned by diversified PT Bakrie & Brothers, has slightly more than 1 million subscribers and expects to end the year with 1.5 million, on the back of an aggressive marketing campaign aimed at lower-income users.

Toyota-Astra Sees 2006 Vehicle Sales Up

PT Toyota-Astra Motor expects its vehicle sales in 2006 to exceed its target of 120,000 units in Indonesia, an official said Wednesday (13/12/06).

"I think it (our sales) will exceed our target," Johnny Darmawan, president director of the joint venture company between Toyota Motor Corp and PT Astra International, said on the sidelines of the launch of the Toyota sports utility vehicle called Rush.

Looking into 2007, Darmawan expects the company's sales to increase in tandem with the likely rise in overall vehicle sales in Indonesia.  He said total new vehicle sales are forecast to rise to between 350,000 and 400,000 units in 2007 from about 315,000 units expected this year, amid falling interest rates, easing inflation, and stable exchange rates.

Toyoto-Astra expects to continue carving out a 35% market share in 2007 and the introduction of several new product ranges planned for next year looks set to help boost sales, he added.

The Toyota Rush, a medium SUV jointly developed by Toyota and Daihatsu Motor Co, will hit the roads in 2007.  The 1,500-cc vehicle was launched Wednesday but the first delivery to buyers will commence in January, Darmawan said, according to Dow Jones Newswires.

The Toyota Rush, which has 70% locally made parts, will be priced between Rp155 million ($17,000) and Rp179 million.

Toyota-Astra's sister company, PT Daihatsu-Astra Motor, was slated to launch its own version of the SUV on Thursday (14/12/06).  Called the Daihatsu Terios, it will have slightly different accessories.

BANKS

Bank Buana, UOB Discuss Possible Merger

Publicly listed Bank Buana Indonesia and Bank UOB Indonesia have announced that they are considering a merger to comply with Bank Indonesia's single presence policy.

Under the rule, to be implemented next year, a banker may not have a controlling stake in more than one bank.

The central bank has suggested that bank owners holding a majority share of more than one bank, can comply with the rule either by divesting their stake, establishing a holding company or through a merger.

"We will study the options and we will make our decision before the deadline in December 2007," Bank Buana president, Jimmy H Kurniawan, said, according to Antara.

Bank Buana is 61% owned by the UOB Group, which also owns 99% of Bank UOB Indonesia.

Banks Attract Foreign Investor Interest

Bank consolidation efforts got a boost on Monday (11/12/06), with a senior central bank official confirming stake sales in local operations to foreign investors from China, India and Australia.

Relatively lenient regulatory restrictions on the size of foreign bank stakes are also a potent lure, said Adrian Chee, Standard & Poor's financial services director.  Bank Indonesia (BI) allows foreign investors to own up to 99% in domestic banks.

"A lot of other bank systems in the region have tight constraints on foreign ownership, but Indonesia doesn't have these restrictions in place," Chee said, according to Dow Jones Newswires.

Analysts say that the prospect of control is likely a prime motivator behind the most anticipated deal announced Monday -- the purchase of a more-than-50% majority stake in Bank Halim, a small lender based in Surabaya, by state-owned Industrial & Commercial Bank of China.

"ICBC is buying a majority share in Bank Halim... (the stake) is over 50%," BI Deputy Governor Siti Fadjriah said.  Fadjriah declined to comment on how much ICBC will pay for the Bank Halim stake.

She also said Bank of India will sign a sales and purchase agreement with Surabaya-based Bank Swadesi in the first quarter of 2007, while Australia & New Zealand Banking Group Ltd (ANZ) and Commonwealth Bank of Australia are also seeking to "buy banks" in Indonesia.

Commonwealth Bank has bought a more-than-50% share in another Surabaya-based operation, Bank Arta Niaga Kencana, Fadjriah said.  A Commonwealth Bank spokesman confirmed stake purchase talks with Arta Graha Kencana were ongoing.

Bank Halim, ICBC's first overseas bank investment, marks the Chinese lender's efforts to start small as part of a long-term strategy to develop a regional banking network, analysts say.

Indonesia's medium and small-sized banks, including Bank Halim and Bank Swadesi, offer foreign investors opportunities for stakes in geographical "niche players" with a highly attractive medium-term growth outlook, Chee said.

"The opportunities in (foreign investors') home countries are already limited, while our market is still big (and) is proven successful by foreign banks who are here already," Peter B Stok, chief executive officer of Bank Niaga, said.

An ANZ spokesman in Sydney told Dow Jones that the bank is interested in expanding its presence in Indonesia in the longer term, but said "there are no bank (acquisition) opportunities at present".  ANZ chief executive, John McFarlane, said in October that ANZ would like to increase its presence in Indonesia where it has a stake in both Bank Pan Indonesia and ANZ Panin Bank.

Fadjriah said that several Middle East-based banks have expressed interest in buying stakes in existing shariah banks or establishing new ones in Indonesia. 

Japan's Acom Co and Bank of Tokyo-Mitsubishi said last month they will jointly buy a 75.4% stake in Indonesia's small size lender Bank Nusant