makingmoney

Philosophy and Practical Guidance of Currency and Interest Rate Hedging

2009-04-03T23:48:00.001-07:00

Thursday, 19th March 2009, the Directorate of Reserve Management (DPD) of Bank Indonesia hosted a seminar entitled “Philosophy and Practical Guidance of Currency and Interest Rate Hedging”, officially opened by the Deputy Governor of Bank Indonesia, Budi Mulya. The speaker at the seminar was Ian H. Giddy, Finance Professor from New York University’s Stern School of Business, USA.

Many representatives attended the seminar from BPK, Depkeu, KPK, PPATK, BPKP, Perbanas, IBI, IAI, STAN, Pertamina, Indosat, PLN, BP Migas and Ministry of BUMN. Budi Mulya explained that the seminar was particularly beneficial in building common understanding on the concept of derivative transactions for hedging purposes, including the effect of such transactions on risk management strategy and accounting. He also emphasized the importance of studying hedging transactions through a philosophical approach so that a sound foundation is established in terms of understanding hedging derivative transactions and the related aspects more thoroughly. He also took the opportunity to explain that hedging is one of the crucial instruments in managing a portfolio, especially to mitigate risk that arises from uncertainty surrounding market price fluctuations.

Ian Giddy, an international expert in finance, as academic and practitioner alike, stated that hedging can reduce market price risk stemming from unpredictable market price fluctuations. The risk that has to be hedged is market risk not business risk. Business risk such as marketing or production capacity cannot be hedged. One of the principles emphasized by Professor Giddy was that hedging should not be performed based on the view of currency movements and/or the future interest rate. Therefore, hedging remains simple and not complicated because it is performed on the entire exposure. Volatility eases when hedging instruments match the exposed asset or liability. Therefore, hedging cannot be based on expectations or trends, hedging must protect investors no matter where currency movements lead.

Hedging can only be performed should an entity know its own exposure and understand the effectiveness of its hedging instruments (Forwards, Futures, Swaps, and Options). If an entity is exposed but accurately know its exposure level, the entity should perform full hedging (100%). Partial hedging can be used but is inaccurate if risk exposure is known and quantifiable. The effectiveness of hedging can be measured but has to be seen from two sides; the hedged item and its hedging instrument.

Giddy also explained that hedging is a part of risk management. Therefore, an entity must be aware of its risk exposure first, followed by measuring risk exposure and implementing a hedging strategy. The supervision method should also be set to control and supervise the effectiveness of risk management. Financial institutions require a hedging framework and risk management that is clear and transparent.

The Director of DPD, Rasmo Samiun, who acted as moderator, added that common attractiveness and attention among market players, auditors and regulators in derivative transactions for hedging purposes requires a common perception of such transactions, especially during periods of intense market volatility that could trigger downward pressure on asset and liability value such as now. The seminar also provided greater understanding based on best practices/concepts that are accepted internationally, which will improve Good Governance.

BI drops key rate to 7.75 percent

2009-03-06T18:00:00.000-08:00

Bank Indonesia (BI) has reduced its key interest rate by 50 basis points to 7.75 percent, as part of efforts to help the banking sector cope with worsening impacts of the global financial downturn, kompas.com reports. On Wednesday, BI strategic planning and communication bureau head Didy Laksmono R. said that before deciding to reduce the rate, BI had evaluated the performance of the domestic and global economies.
“Inflation pressure was relatively low – at 0.21 percent – during February, thanks to lower fuel prices and availability of food supplies,” Didy said.
The lower prices of international commodities were another factor causing the low inflation pressure, he added.
Bank Indonesia said in a statement the economic slump was "taking a steeper turn" and developing countries were being hit by a fall in exports and negative market sentiment.
Indonesia's exports fell 36 percent in January from a year earlier, the biggest drop since 1986, due to plunging demand for natural resources and manufactured goods, the statistic's agency reported Monday. It was the fourth straight month the central bank has cut the rate, lowering it a total of one and three quarter points from 9.5 percent since early December. Indonesia had been struggling to bring down inflation topping 10 percent, but that figure slowed to 8.6 percent on year and 0.2 percent month-on-month in February, the bank said. The central bank forecast a slowdown in economic growth to 4 percent in 2009, from an estimated 6.1 percent in 2008, "with considerable downside risk if global economic growth worsens even more than expected."At the same time, Indonesia's banking system - which collapsed just over a decade ago in the Asian financial crisis - was in "stable condition," the bank said. International reserves stand at $50.56 billion, with an additional $3 billion

SOurce: The Jakarta Post , Jakarta | Wed, 03/04/2009 4:50 PM | Business

Oil and coal mining firms pollute Balikpapan Bay

2009-02-03T17:11:00.000-08:00

The Balikpapan Bay is one of the city's landmarks, a place where foreign and domestic companies, mostly in the coal and oil sectors, have been carrying out their business for dozens of years.

It is also a place that traditional fishermen and small-scale businesses rely on for their livelihood.

However, the companies have not paid enough attention to the environment and the water quality in the Balikpapan Bay is deteriorating.

The Office of the State Minister of the Environment's Kalimantan Regional Environmental Management Center (PPLH) has noted that oil, gas and coal production had played a significant role in polluting the bay.

"The exceeded level of phenol indicated the presence of pollution caused by oil refineries and the coal oxidation process," B. Widodo, PPLH head, told The Jakarta Post.

Pollutants in the bay area also originated from domestic activities, pesticide use in agriculture, fuel leaks in ships and other activities using organic chemicals.

"Domestic waste has also contributed significantly to the problem," Widodo said.

"These activities have further increased the phenol, or the carbolic acidic level of water, indicating that spatial planning around the Balikpapan Bay should be reviewed immediately.

"The rising level of phenol is attributed to activities at the coal docks, oil refineries, domestic activities and shipping traffic."

The PPLH conducted a water quality analysis in the Balikpapan Bay on Dec. 6 last year and took water samples from a number of observation points, such as at the Semayang Port, the Penajam Port, Baru village and the oil refinery of state-owned oil and gas company Pertamina.

According to Widodo, the water quality test referred to the Environmental Ministerial Decree No. 51/2004 on field parameters, comprising the water alkaline level, the turbidity, dissolved oxygen and temperature.

Based on lab tests, the turbidity and temperature at Pertamina's waste water cooling outlet had exceeded tolerable levels.

Analysis indicated that total suspended density (TSS) and phosphate content at every observation point had surpassed tolerable levels.

The highest concentration of TSS was at the Semayang Port and the highest concentration of phosphate was at Pertamina's waste outlet.

The high water temperature near Pertamina's waste outlet was caused by the high temperature of waste water that flows from their cooling towers into the sea.

"The oil refinery contributed to these environmental problems. Pertamina should improve its environmental management, especially its waste cooling system, which have made it harder for everyone to cope with this environmental damage," Widodo said.

He added that the high levels of TSS and phosphate at every observation point indicated a high level of pollutants, especially those from domestic waste.

He said the level of phosphate was a concern because it could cause algae booming, which has also occurred in the Jakarta Bay and reduced water quality by limiting oxygen content and decimating marine life.

"This is an early warning sign so stakeholders can coordinate with the local administration and other related agencies to prevent environmental damage," Widodo said.

Meanwhile, Balikpapan Pertamina spokesperson Fety said water quality at the oil refinery continued to meet the required standard.

"We always measure the water standard every day and report it to the Balikpapan Environmental Impact Management Agency," she said.

"The water quality still meets the port's standards and there are no leaks at the oil refinery or with the cooling process.

"However, we are grateful to the PPLH for the warning and we will take action immediately."

Fety added that Pertamina used the water standard parameter for the port while PPLH used the standard for marine tourism.

Source: Nurni Sulaiman , The Jakarta Post , Balikpapan | Fri, 01/30/2009 3:13 PM | The Archipelago

Yamana Gold anticipates gold production of 1.4-1.5 million ounces in 2010

2009-01-24T02:17:00.000-08:00

Yamana Gold Inc. is a Canadian-based gold producer with significant gold production including other precious metals and copper, gold development stage properties, exploration properties, and land positions in Brazil, Argentina, Chile, Mexico, Central America and the United States. Yamana has seven operating mines and five development projects providing direct employment opportunities to over 8,700 individuals.

The company is targeting sustainable production of approximately 2.2 million gold equivalent ounces in 2012.

Yamana Gold Inc reiterated its gold production forecast for 2009 made in October 2008 of a range of 1.3 million to 1.4 million gold equivalent ounces (GEO) in 2009 at declining cash costs, and production is projected to increase to approximately 1.4 million to 1.5 million GEO in 2010 from mines currently in production.

Capital expenditures for 2009 and 2010 are expected to be approximately US$350 million and US$400 million, respectively, including sustaining capital of approximately US$130 million each year.

The majority of capital costs in 2009 is allocated for the expansion at Chapada, for development work at El Penon, for development of the satellite deposits Amelia Ines and Magdalena and initial work on QDD Lower West at Gualcamayo, for the purchase of certain additional mining concessions and for further development at Jacobina.

The decision to develop each of C1 Santa Luz and Mercedes is expected to be made mid-year pending a cost review for improved economics at C1 Santa Luz and an initial feasibility study and further exploration at Mercedes.

The current capex forecasts assume a modest amount for these projects and would increase mostly in 2010 once a construction decision is made.

Exploration expenses in 2009 are expected to total a minimum US$56 million.

Yamana's exploration program in 2009 will focus on mine and near-mine exploration
primarily in Chile, Brazil, Mexico and Argentina as the company concentrates in 2009 on expansions and advanced projects for near development.

Yamana remains well financed to fund its strategic growth plan.

In the fourth quarter of 2008, total production was approximately 255,000 GEO at cash costs of approximately US$385 per GEO which compares very favourably to costs in the third quarter of 2008.

For the year ended December 31 2008, production totaled approximately 1 million GEO at
cash costs of approximately US$385 per GEO.

Yamana expects production to increase from the first quarter in 2009 with costs trending lower as production increases and input costs continue to decline. Aggregate production for the first quarter is expected to be approximately 290,000 GEO, with cash costs of approximately US$345-US$375 per GEO for 2009.

Total production at Chapada, Brazil, in 2009 is expected to be between 140,000 and 155,000 ounces of gold and 145 to 150 million pounds of copper at a cash cost of between US$275-305 per ounce of gold and between US$0.90 -1.00 per pound of copper, respectively.

At , El Penon, Chile, Yamana expects to be mining at an effective rate of 500,000 GEO per year in 2009, targeting production of approximately 435,000 to 460,000 GEO and the creation of a stockpile. It intends to mine at a rate of 3,600 tonnes per day for the next two years before further increasing plant capacity although it will evaluate the further expansion as the proven and probable reserves increase. Cash costs at El Penon are expected to be between US$280-310 per GEO in 2009.

At Jacobina in Brazil, the company remains on track to increase the mining
rate from developed stopes and expects to produce approximately 115,000 to 125,000 ounces of gold in 2009 at a cash cost of between US$380-US$410 per ounce.

Start-up and commissioning commenced at Gualcamayo in Argentina in December 2008 with the first gold pour at the end of 2008. Completion of the primary crusher is expected by the end of February as planned. Total production for the year at Gualcamayo is expected to be approximately 195,000 to 210,000 ounces of gold at a cash cost of between US$380-400 per ounce.

At Minera Florida, Chile, Yamana expects to produce approximately 105,000 to 110,000 GEO in 2009 at a cash cost of approximately US$340-350 per GEO. The company will assess the potential increase to a 150,000 GEO throughput after two years of mining at the current rate.

Operations began at Sao Vicente, Brazil, with the first gold pour at the end of 2008, and the mine remains on track for commercial production in the second quarter of 2009. Total production from Sao Vicente is expected to be between 55,000 to 60,000 ounces of gold in 2009.

At Gualcamayo, Yamana expects to release a feasibility study update at QDD Lower West by the end of January 2009 with a construction decision expected by the end of the year.

The company's Pilar project in Brazil was virtually unexplored when acquired but has since advanced to be an important development project for Yamana. An initial feasibility study is expected to be released for Mercedes in mid-February, the company added.

by Andre Lamberti; source: http://www.proactiveinvestors.com/companies/news/886/yamana-gold-anticipates-gold-production-of-14-15-million-ounces-in-2010-0886.html

Source:

Pulp and paper firms plan mergers

2009-01-20T16:19:00.000-08:00

A plunge in global prices and weakening demand have forced local pulp and paper companies to cut output and plan for mergers.

Indonesian Pulp and Paper Association chairman M. Mansyur said Monday that global demand had plunged to its lowest point ever, forcing local manufacturers to run at an average 44 percent of capacity.

He said the industry’s installed capacity now stood at 8 million tons a year for pulp and 12 million tons for paper.

In 2007, the industry was operating at an average output of 80 to 90 percent of capacity, according to Industry Minister Fahmi Idris.

Mansyur said the global economic downturn had not only affected local manufacturers, but also those overseas, with manufacturers in Europe and North America having to shut down as demand for their products dried up.

A drop in selling prices also discouraged manufacturers from producing and selling their products over fears of mounting losses rather than profits, he added.

According to the association, for example, the prices of short-fiber pulp has dropped to around US$450 to $500 a ton from $1,000 a ton in mid 2008.

“Paper prices have also declined to around $700 to $800 a ton,” said Mansyur, adding that paper prices peaked at between $1,000 and $1,150 a ton during last year’s fourth quarter.

Citing the current situation, Mansyur said local manufacturers were beefing up efforts to weather the storm, including looking at mergers with rival companies. “National pulp and paper manufacturers have to consolidate to adapt to weakening global demand,” he said.

“They are considering mergers now otherwise they will (have to) shut down,” he added.

In response to low output, pulp and paper manufacturer PT Riau Andalan Pulp and Paper (Riaupulp), a subsidiary of Sukanto Tanoto’s Raja Garuda Mas Group, has already discharged 1,000 workers and temporarily laid off another 1,000 out of a total of 4,000.

Aside from lower demand, the company has also been facing a shortage of raw material since the last two years.

Riaupulp director Rudi Fajar said earlier the company had taken a number of efficiency measures to offset a drop in production and rising production costs.

He said the raw material shortage had resulted in a decline in Riaupulp production, from 6,000 to 7,000 tons of pulp to 3,000 tons per day.

Indonesia hosts the world’s largest pulp and paper companies under the umbrella of Sinar Mas Group, owned by tycoon Eka Tjipta Widjaja.

Sinar Mas’s PT Indah Kiat has a total annual production capacity of 3.8 million tons of pulp, paper and packaging. Its other subsidiary PT Tjiwi Kimia produces around 1.5 million tons of paper, packaging and stationery.

PT Pindo Deli, another Sinar Mas subsidiary, can produce 1.1 million tons of output, while PT Lontar Papyrus produces 750,000 tons.

Sinar Mas Group executive director Gandhi Sulistianto currently believes the industry might need some rationalization.

However, when asked about possibilities of a merger affecting Sinar Mas subsidiaries, Gandhi said there was nothing to announce yet.

During their heyday, Riaupulp and Indah Kiat together produced 4.2 million tons of pulp per year, or 63 percent of the 6.7 million tons produced annually at national level.

Every year, the industry earns about US$5 billion in export revenues.

Indah Kiat corporate secretary Yan Partawijaya said in late November the company had cut production by 10 to 20 percent in line with what he said was the company’s annual overhaul program. The company normally produces 2.7 million tons of paper per year.

Pulp and paper companies have been widely blamed by environmental non-government organizations for contributing to the acceleration of forest destruction.

With its massive installed capacity, the industry can only procure about 50 percent of its required raw materials, according to Indonesian Forest Watch (IFW).

The IFW believes that most of companies are taking timber from outside their concessions, including production forests, to offset their supply shortages and maintain their levels of production.

According to the Ministry of the Environment, the deforestation rate between 1987 and 1997 was
recorded at 1.8 million hectares per year including the period up to and during the 1998 economic crisis.

Subsequently from 1998-2000, it rose sharply to 2.8 million hectares per year because of severe forest fires, before falling back to an average of 1.8 million hectares per year between 2000 and 2006, reflecting that forest resources were already being depleted.

Source: Mustaqim Adamrah , The Jakarta Post , Jakarta | Tue, 01/20/2009 2:44 PM | Business

Stumble or fall?

2009-01-09T16:32:00.000-08:00

Will the global financial crisis halt the rise of emerging economies?

Source: http://www.economist.com/finance/displayStory.cfm?story_id=12896793&source=hptextfeature

NOBODY talks about “decoupling” any more. Instead, emerging economies are sinking alongside developed ones. In 2008 emerging stockmarkets fell by more than those in the rich world, and financial woes forced countries such as Hungary, Latvia and Pakistan to go cap in hand to the IMF. Taiwan’s exports have plunged by 42% over the past year, and South Korea’s by 17%; even China’s have shrunk. Singapore’s GDP fell by an annualised 12.5% in the fourth quarter of 2008, its biggest drop on record. Is this the end of the emerging-market boom?

Over the five years to 2007, emerging economies grew by an annual average of more than 7%. But in the past three months their total output may have fallen slightly, according to JPMorgan, as the fall in exports was exacerbated by a sudden drying up in trade finance. For 2008 as a whole, average growth in emerging economies was still above 6%, but recent private-sector forecasts suggest that this could slip to less than 4% this year. That is grim compared with the recent past, though still robust set against an expected 2% decline in the GDP of the G7 countries.

Short-term pain is only to be expected. But some economists argue that emerging markets’ longer-term prospects have been badly hurt by the global financial crisis. From Brazil to China, they claim, the boom was driven largely by exports to American consumers, easy access to cheap capital and high commodity prices. All three props have now collapsed. In particular, as America’s housing bust causes households to save more, they will import less over the coming years. This could reduce emerging economies’ future growth rates.

Yet emerging economies’ reliance on America is often exaggerated. The surge in their total exports as a share of GDP since 2000 might, on the face of it, suggest that their boom was powered by rich-world demand. But their dependence on exports to developed countries has barely budged, at just under 20% of GDP (see chart 1). Most of the growth in exports has been within the developing world.

For sure, emerging economies will not return to their exceptional growth rates in 2007 (no bad thing either, since many of them were overheating). But it is equally wrong to assume that they cannot recover until America rebounds. There are good reasons to believe that emerging markets’ share of world growth will continue to climb (see chart 2).

Gerard Lyons, chief economist at Standard Chartered, argues that most emerging economies are not plagued by America’s deep structural problems, such as an overhang of debt, which could cramp growth for several years. Although 2009 will be a painful year for poorer countries, those with high savings and modest debt could recover fairly quickly. On many measures, such as government and external balances, emerging economies look much sounder than the big rich ones.

Unfortunately, aggregate numbers conceal many horrors, most notably in eastern Europe. Countries such as Hungary, Estonia, Latvia and Turkey have huge current-account deficits and foreign debts. Between 2000 and 2008, the ratio of foreign debt to GDP dropped from 37% to 20% in Latin America and from 28% to 17% in emerging Asia, but jumped from 45% to 51% in central and eastern Europe.

As foreign capital dried up, GDP fell by 4.6% in Latvia and by 3.5% in Estonia in the year to the third quarter of 2008. Capital Economics, a research consultancy, expects another 5% drop this year. Hungary’s economy is expected to contract in 2009. Turkey may also be heading for trouble. Its debt-service payments due in 2009 amount to 80% of its foreign reserves, the highest ratio of any big emerging economy.

Russia has run current-account surpluses for many years, yet it has also been badly hit by an outflow of capital and a credit freeze. Banks and companies are finding it hard to roll over their foreign debt. Official reserves have fallen by $160 billion, or 25%, since August. As a result of lower oil prices, Russia is likely to run its first current-account and budget deficits in a decade, and its economy may well contract in 2009.

Asia’s export-led economies have been hurt by the collapse in global demand. Output is already falling in Singapore, Hong Kong and Taiwan. However, current-account surpluses and modest domestic debts mean that most of the region is much less exposed to the credit crunch than eastern Europe is. Asia has two other advantages. First, as a large net importer of raw materials it will benefit from the plunge in commodity prices, unlike Latin America. And second, with the exception of India, Asian countries have low public-debt-to-GDP ratios, giving them more room for fiscal stimulus than other emerging economies. Such policies take time to work, but after a nasty 2009, Asia is well placed to be the first region in the world to recover.

China is crucial to Asia’s fortunes. Many economists expect GDP growth to slow to around 7% in 2009, down from almost 12% in 2007 and its slowest rate for almost two decades. Thousands of factories have closed in southern China, triggering concerns that rising unemployment will cause social unrest. This prompted the government to unveil a large fiscal stimulus in late 2008, which should help to boost growth in the second half of this year. With debts of only 18% of GDP, the government has plenty more room to boost spending. And if China has to rely more on domestic demand, this will help to steer it onto a more sustainable path.

A comparison of China with India in any case shows that exports are not the main thing that determines how vulnerable economies are to the global crisis. India’s exports as a share of GDP are much smaller than China’s, so one might expect it to be holding up better. But a big chunk of Indian investment—the main driver of recent growth—has been financed by overseas borrowing or new equity issuance. Both have dried up. The government’s huge budget deficit also limits its room for fiscal easing. On January 2nd India announced its second monetary and fiscal stimulus package within a month, but the extra spending is tiny. Standard Chartered thinks that GDP growth will dip to 5% in 2009, well below its recent 9% pace.

Latin America’s prospects lie somewhere between those of Asia and emerging Europe. Weak commodity prices could push the region into running a large current-account deficit, just as private-capital inflows decline sharply. Latin America also has less scope for fiscal stimulus than Asia, because many governments (including Argentina and Brazil) used the windfall from higher commodity prices to boost spending rather than cut debt. Goldman Sachs forecasts that Brazil will grow by only 1.5% in 2009, whereas Mexico’s GDP could fall by 0.5% because of its stronger trade links with America. The bank reckons that both should recover fairly quickly. Argentina is another matter. Credit-default-swap spreads on its government debt have surged to horrifying levels, signalling that investors see a high risk of default.

During the past five years virtually all emerging economies boomed. Now their fortunes will diverge much more. The most important factor determining how they cope with the recession in the rich world will be whether they are high savers, able to stimulate their own economies, or big borrowers. If international investors continue to shun risk and rich-world governments swamp markets with their own borrowing, it will be hard for emerging-market governments to issue bonds and for banks and firms to roll over debts. Some developing countries will therefore remain sluggish for longer than others.

Overall, however, their long-term prospects remain good, thanks to structural reforms and better macroeconomic policies over the past decade. In December the World Bank forecast that GDP per head in poorer countries would rise at an annual pace of 4.6% during 2010–15, similar to that during the past decade, and more than twice as fast as in the 1990s. That word “decoupling” may yet get dusted off again.

demonstrations in Indonesian can not educate children

2009-01-09T05:15:00.000-08:00

I even do not agree with the idea Bung to educate children. For what happened today will not necessarily take place imperishable. Education is not careful will be the attitude and prejudices rasis the children themselves that he continues to mature. One day the children will meet with the wider world, and when they find differences according to the teachings of obtaining it is negative tolerance of the assets will be very minimal.

I think that it is always use common sense us. To the Israel-Palestine conflict is going on at this time we it must be tactical. At this time I are studies in the Netherlands and the chance months ago in my campus exhibition held pictures of Palestinian students by the network Palestinians in the Netherlands, also have the exposure of the conditions that apply in area. They alone can carefully distinguish between Jews with Israel. They do not hate Jews but reject oppression by
Israel as a country. They even question the pace countries Arabs are still more than a voice for them - not just in crisis, but even in peaceful times. One thing again, with globalization and capitalization, the company's capital a large United States not only belong to them and the Jews only ... but also belong to the king Arab oil in there, Citibank example.

So why we would like rash, do sabotage against foreign brands, but produced in our country? Here is the logic function, not only emotional moment.

Source: Thinking my friend

Pertamina profits may fall by as much as 54% this year

2009-01-04T16:12:00.000-08:00

Despite estimating to post a 22.45 percent jump in net profit in 2008, state oil and gas firm PT Pertamina remains cautious about its 2009 target, saying profitability will largely depend on the volatility of crude oil prices.

President director Ari H. Soemarno said the company expected to book a total net profit of around Rp 30 trillion (US$2.74 billion) by the end of 2008, up from Rp 24.5 trillion in 2007.

"As of the third quarter of 2008, we had booked an unaudited pre-tax profit of about Rp 40.30 trillion and a net profit of somewhere between Rp 26 trillion and Rp 27 trillion."

"Based on that, we estimate our full-year net profit will amount to around Rp 30 trillion," he said Wednesday.

About 70 percent of Pertamina's profit came from its upstream business, with the bulk of the money coming in the third quarter of the year after the global oil price smashed previous heights.

"Up until the third quarter of 2008, the average Indonesian Crude Price index (ICP) was still at US$112 a barrel," Ari said.

At present, oil prices are hovering between $35 and $40 a barrel.

Pertamina upstream director Karen Agustiawan said the company's oil sales during the third quarter of 2008 reached 35.97 million barrels, up from 34.22 million barrels in the same period in 2007.

Karen said Pertamina's oil production in 2008 might reach 156,000 barrels of oil per day, adding that the company was planning to increase production to 169,750 barrels per day next year.

Nevertheless, the company took a cautious approach to next year's forecasts.

Ari said Pertamina's profit this year was estimated to decline by 37 percent on optimism base, and 54 percent on pesimism base.

"With an ICP assumption at $80 a barrel and the rupiah at 9,400 per dollar, we estimate net profit to reach Rp 19 trillion. But, if the ICP reaches $50 and the rupiah 11,000, the estimate will be lowered to Rp 13.80 trillion," he said.

Ari said another factor that might damage the company's profit this year was the reduced payment the firm would receive from the government for distributing subsidized fuel.

Pertamina has a monopoly on the distribution of all subsidized fuel in the country.

Under existing regulations, the government reimburses Pertamina under the so-called Mean Oil Platts Singapore (MPOS) plus alpha formula.

The MOPS is the average monthly price of oil transactions in Singapore. Alpha is the margin of distribution and profit.

The House of Representatives and the government has set the alpha value in the 2009 state budget at 8 percent of the MOPS, compared to 9 percent last year.

Despite the gloomy outlook, Pertamina will move forward with its plan to spend Rp 19.4 trillion in investment this year, up from its investment target of Rp 17 trillion in 2008.

Of the total Rp 19.40 trillion investment, the firms will allocate Rp 11 trillion for its upstream business, Rp 2.30 trillion for processing, Rp 2.40 trillion for marketing and trading and Rp 3.7 trillion for investments currently being negotiated by the company and the government.

Of the Rp 17 trillion allocated for investment in 2008, only Rp 11 trillion was spent, Ari said. The unrealized projects will carry over to 2009, he added.

Source:Alfian , The Jakarta Post , Jakarta | Fri, 01/02/2009 10:30 AM | Business

Retail business to see slower sales growth on declining purchasing power

2008-12-22T06:46:00.000-08:00

The decrease in people's purchasing power because of the recent fuel price hikes means the retail industry will likely fail to meet its targeted growth of 30 percent this year, a spokesman says.

""After the fuel prices hike, people are likely to hold back on their consumption. This would cause slower growth in the retail sector in terms of annual sales,"" Indonesian Retail Merchants Association (Aprindo) chairman Handaka Santosa said on Friday.

This year total annual sales would only grow by 10 percent to 20 percent, Handaka said.

Last year, the 72 retail companies in the association recorded total sales of Rp 35 trillion.

The decline was mostly due to a decreased purchasing power in middle to lower-income consumer groups while sales in the upper income group would likely remain stagnant, Handaka said.

""People are still in shock with higher transportation costs that they must set aside money for. We will see after a couple of months if conditions will return to normal,"" he said.

Handaka said that total annual retail sales, taking into account traditional retailers, would reach Rp 150 trillion this year.

The national retail industry, according to an AC Nielsen survey, had in 2004 an annual turnover of Rp 600 trillion ($65.22 billion), second in the Asia Pacific region after China.

While growth in sales are showing signs of a slowdown, the industry still had plenty to offer in term of revenue, the survey says.

As of September, there were 4,200 outlets as compared to 3,500 stores reported at the end of last year.

The country's economy relies heavily on consumption as exports and investment are yet to pick up -- a condition economists say will not be sustainable in the long term.

However, during the past couple of years, local and foreign retailers here have been aggressively opening new outlets. From 1998 until the first half of this year, five hypermarket operators opened 54 outlets in Greater Jakarta alone.

""With tighter competition, retailers must be more efficient. To survive, one only has to increase gross profits or to lower operating costs,"" Handaka said.

""Companies trying to survive face challenges from supermarkets and hypermarkets now. This is OK, as long as it is done through healthy, fair competition,"" he said.

Source: The Jakarta Post , Jakarta | Sat, 10/22/2005 1:55 PM | Business

Difficult conditions continue

2008-12-18T12:44:00.001-08:00

Difficult conditions continue and I expect this will carry on until we see exactly how bad things are. There have been a lot of statements recently from companies, which while cautious, weren't exactly disastrous.

But until the market see how interest rates cuts and everything else works out I can't see where any good news is coming from just yet. Of course falling oil and food prices should help. But markets do look forward quite a way and they will be going up well before the recession has ended.

So all in all I continue to think it's best for me to hold mainly cash and continue to keep stakes low and not be tempted to get stuck in for the mo.

However rightly or wrongly I'm excited about next year because I think the markets will bounce back very strongly and if I can get in near the bottom there's going to be a lot of money to be made.. but probably not just yet!

I've been fiddling round here and there with a little shorting while waiting for a turnaround - I alighted on Spectris (SXS) only because it hasn't been hammered as bad as some of the companies in its sector and went in for a tenner at 415. Target 350 stop 425. Set a fairly tight stop in case the markets turn.

A mixed and hard to read statement from Vislink which I've been holding a while. Revenue up not so sure on profits. I got seduced by some really substantial director buying very recently - seems to me that statement was already in the price. So strangely perhaps I sold some at 23.5 to take a loss of £425 on one position.. but I also bought because I thought the sudden spin to 20p looked overdone and got 5,000 at 20.9. Yes, I'm just a crazy kinda guy. Hey, maybe the directors have a death wish and will get stuck in again..

I sold half my Celsis at 156.72 for a profit of £146 and kind of regret it as it remains very strong in a weak market - however I guess at least some profit banked and I keep the other position going. Looks like it's going higher though..

Redhall's been looking weak again so I exited at 202 for a profit of £307 - would eye up a re-entry as when recovery comes this is going to be a big winner.

I wasn't bowled over with Waterman's statement and was surprised to be able to exit first thing at 81.5 easily for a profit of £20. Oh and I got a dividend too! Possible recovery candidate at some point. Fenner was heading towards the stop fast and with sellers coming in again I exited at 80.53 for a loss of £55. Since then it's sunk even further - it looks a really tempting buy - a director bought more today so keeping an eye for another entry. Got to be worth more than currently?

Oils not surprisingly remain under the hammer. I sold Heritage at 182.5 for a profit of £319. However I do think it'll get taken over at some point and remain vigilant for reentry. And I sold part Dragon at 147.5 to take profits on the last pos of £247. Still seems buying interest there and I might buy some back.

All of which malarkey makes profits for the site today of £559.

So, really not much open right now. Telecom Plus remains a solid hold but for now- it could be a surprise entry into the FTSE 250 in December if it can maintain the current price.

Spreadbetting looks a bit dangerous for now given the sudden and vicious spikes.

Things can change quickly but I intend to let the market guide me and I just can't second guess it - way too hard at the moment. As the volatile conditions continue I think generally better mainly out than in and wait and see. Best trade could continue to be no trade for a bit.

Source: http://www.proactiveinvestors.co.uk/columns/the_naked_trader/362/difficult-conditions-continue-0362.html

Things seem a bit calmer

2008-12-18T12:40:00.000-08:00

Things seem a bit calmer. Whether this is a manipulated because bonuses are shortly to be paid out or whether it's all real is debatable..

For the moment anyway things going well for recent picks..

I've bottom fished a couple of others since I last updated. As with the others if the market starts to rise I'll hold onto them, if there's another collapse I'll probably get out. They are:

PV Crystalox (Pvcs) where I got 2,500 shares at 82.74. Target 100 stop 75. This looks to have been oversold after a similar company elsewhere in Europe put out a warning. No warning yet here and at this kind of price I'll take the risk given the excellent balance sheet. It went up nicely late yesterday and wish I'd bought more. It did appear to bottom out in the 80p area but of course it is risky because they could issue a warning. So maybe it's best I did this for a small amount!

I've also taken a little punt in Lamprell (LAM) which has been massively hit because of connections with Dubai. At the current price it looks a steal to me I got 2,500 at 92.5p. Target 140 stop 70.

As usual for now, all buying is in small quantities which seems sensible for the time being. No point in being a hero and sticking in too much during uncertainty.

Elsewhere some good gains for some recent picks. Close to doubling on Unite which is very nice.

Dmatek continues to shine and up 20 pts now on the buys in that one.

A superb rise by Fenner today - because it went ex dividend for 5p the 2p rise today is equivalent to 7p! Very happy to have banked the dividend along with a great rise. Eaga goes well too.

Dragon Oil has been having a good time of late and I'm nicely up there now. Mucklow mucks about a bit, but any rise above 250 would be bullish, happy with the rise so far especially as it was a bit of an unknown gamble. Petrofac goes pretty strongly though it is rather volatile.

So all in all, very pleased with current holdings. Obviously in this current market anything can happen but I would be ever so pleased if some of the recent buying was near bottom buying. I suspect though I am probably wishing something that simply isn't the case and remain on guard.

Source: http://www.proactiveinvestors.co.uk/columns/the_naked_trader/375/things-seem-a-bit-calmer-0375.html

Mud money a land-grab transaction, says Aburizal

2008-12-15T14:01:00.000-08:00

Chief welfare minister Aburizal Bakrie said Thursday the money being provided to mudflow victims in Sidoarjo, East Java, was not compensation but rather constituted a business deal to acquire their ruined land.

He said his family had so far disbursed some Rp 4.5 trillion (US$ 409 million) in cash for the victims since the mud started erupting in 2006, adding that the money was not being provided by PT Lapindo Brantas.

Lapindo is a gas drilling company partly owned by the Bakrie family, and has widely been blamed for sparking the disastrous eruption of the mud volcano.

“This is a business transaction, not compensation provided to the victims because there is no legal verdict as yet to determine whether or not Lapindo is guilty in the case,” Aburizal said.

He said his mother had ordered him to share his family’s money to help the mudflow victims in Sidoarjo. “For us, my mother’s voice is just like a fatwa issued by the MUI (the Indonesian Council of Ulema); we have to abide by it,” Aburizal said.

He said the mudflow case was a natural disaster and had nothing to do with gas drilling activities under Lapindo.

In October, a meeting of renowned international geologists lead by England’s University of Durham concluded that the disaster was caused by Lapindo’s drilling activities.

However, both the Central Jakarta District Court and the South Jakarta District Court have rejected lawsuits filed by the Indonesian Environmental Forum against Lapindo over the mudflow.

“Similar mudflows have also appeared in several areas across the country, including in South Kalimantan, West Java and South Sumatra,” Aburizal said.

In South Sumatra, he said, the mud had gushed out at a location near a drilling site of state oil and gas company Pertamina.

“Pertamina was not sued for the mudflow. But because Lapindo is a private company, we (the Bakrie family) have been invited to talk to resolve the Sidoarjo case and the government can’t put pressure on us,” Aburizal said.

He said his family still needed to spend between Rp 1.5 trillion and Rp 2.5 trillion to help the mudflow victims in Sidoarjo.

Asked whether it was likely the government would impose sanctions should Lapindo fail to complete the compensation payments, the minister said, “there is no sanction because this is a business transaction”.

The government has so far dubbed the payment as compensation for the victims.

President Susilo Bambang Yudhoyono who ordered Lapindo to immediately being paying the remaining 80 percent of compensations for the victims, saying that he had become angered by the drawn-out debacle.

Nirwan Bakrie, Aburizal’s younger brother who currently chairs Bakrie group, agreed to settle the remaining 80 percent of the payments in monthly installments of Rp 30 million for each family. Each family will receive in total between Rp 100 million and Rp 150 million.

In addition to the Rp 30 million, each family is also entitled to Rp 2.5 million to allow them to extend their rent periods. The mudflow disaster, which engulfed four village and hundreds of hectares of farmland beginning May 29, 2006, was fed by mud that is still spewing from Lapindo’s gas exploration site.

Source:Adianto P. Simamora , The Jakarta Post , Jakarta | Fri, 12/12/2008 7:23 AM | Headlines

Govt cuts and caps fuel prices

2008-12-15T13:58:00.000-08:00

The government will on Monday cut the prices of subsidized Premium gasoline and diesel as world oil prices fall, and will cap them next year in case of a global oil price rise.

The government decided on the price cuts Sunday, during a limited Cabinet meeting chaired by President Susilo Bambang Yudhoyono and attended by Vice President Jusuf Kalla and economic ministers.

“Considering inflation and growth, we have to set the right fuel prices,” Yudhoyono said as quoted by Antara. “I have decided to cut the prices of Premium and diesel.”

The price of subsidized Premium gasoline will be cut by Rp 500 to Rp 5,000 (45 U.S. cents) per liter, and diesel by Rp 700 to Rp 4,800 rupiah per liter.

“In future, if the trend (of crude prices) tends to decrease, further cuts are possible. We will continuously monitor this. We hope the trend is downward because the assumption is that the demand is also down,” the President added.

This is the second cut the government has made this month. At the start of December, it cut the price of Premium by Rp 500 per liter.

The cuts are in line with falling crude oil prices on the international market, from more than US$100 per barrel earlier this year to $44 last Friday.

Finance Minister Sri Mulyani Indrawati said the fuel price cuts should help reduce inflation by between 0.3 percent and 0.5 percent, adding this “should help maintain people’s purchasing power”.

In addition to the price cuts, the government has also set a cap on the prices of the two fuels as it guards against a possible increase in international crude oil prices next year.

The cap for Premium is set at Rp 6,000 per liter, and for diesel at Rp 5,500 per liter.

The caps are made possible because of the large fuel subsidy allocated in the 2009 budget, Mulyani explained.

She added they were expected to boost confidence among businesses to encourage them to keep investing in the real sector next year.

Businesses welcomed the fuel price cuts, saying they would help reduce operating costs amid the global economic downturn.

Murphy Hutagalung, chairman of the Organization of Land Transportation Owners (Organda), welcomed what he described as a “significant cut”.

But he warned transportation fares would not automatically decrease, saying cryptically, “We are ready to sit with all parties to discuss all possibilities.”

Meanwhile, State Minister for State Enterprises Sofyan Djalil said the government had promised to compensate owners of gas stations over the fuel price cuts.

“We will calculate how much they stand to lose. We have discussed this with Pertamina,” Sofyan said.
Earlier this month, the association of gas stations deliberately postponed ordering fuel from Pertamina because of the imminent price cuts, causing widespread fuel shortages.

Source: The Jakarta Post , Jakarta | Mon, 12/15/2008 7:10 AM | Headlines

Coremap preserves reef, improves livelihoods

2008-12-13T21:39:00.001-08:00

Mapur Island could now be considered among the many attractive diving spots in the western part of Indonesia, thanks to Coremap, a coral rehabilitation and management program started in 2004.

It is not hard to find the beautiful coral gardens in the waters around the 1.48-hectare island, which is located some 28 nautical miles to the east of Riau Islands province's capital of Tanjung Pinang.

"There wasn't as much coral here before," said the head of Mapur's coral reef conservation institution (LPSTK), Jamaluddin.

A 2007 research project conducted by the Indonesian Institute of Science (LIPI) concluded that there were 72 species of coral found around the island.

The research, conducted at six surrounding locations, found that the coverage of living coral had reached between 43 percent and 81.5 percent, which was categorized as "good".

The coral reefs are home to some 103 species of fish. It is estimated that there are more than 40,000 fish that occupy each hectare of the area, dominated by the species Chromis atripes.

The condition of the reefs was categorized as "poor" during 1990s, when fishermen still used potassium cyanide and dynamite bombs to catch fish.

"Fish bombing was carried out every day," Jamaluddin said, adding that it was mostly outsiders who committed the destructive fishing, not the local fishermen.

"Local people didn't really pay attention because they were more focused on meeting their daily needs. They were not aware of environmental preservation," he said.

As the destructive fishing continued to degrade the marine ecosystem, Coremap stepped in and kicked off its program.

An initiative by the Ministry of Fishery and Marine Affairs, the Coremap program aims to maintain sustainable management of marine resources that have been degraded by human and natural threats.

The scheme empowers local residents to play active roles in protecting the environment, especially from destructive fishing and overfishing.

People in each village under the scheme were responsible for conducting public awareness activities on coral conservation.

Through this program, it is expected that the coverage of living coral in Bintan regency will increase by 2 percent every year.

"The hardest thing is to change the locals' attitudes. We should approach and teach them how to go about their daily activities while preserving the environment," said Coremap's regional advisor for Bintan area, Bambang Wahyudi.

The community has slowly become aware of their responsibility to safeguard the area, Jamaluddin said, and their efforts have begun to bear fruit.

"Outsiders do not come here now, because local fishermen guard the area every night while they are out catching fish. People are thankful that Coremap has encouraged them to protect the environment," he said.

There are 214 families living in Mapur village, 98 percent of which are fishermen.

Increased awareness of the importance of water ecosystem protection from destructive fishing, the local residents set up a protected zone that occupies a 40,000-square meter area where fishing is prohibited.

The secretary of Coremap's project implementation unit of Bintan regency, AG Turisno, said the protected zone was only allowed to be accessed for education and research purposes.

Coremap not only focuses on environmental preservation, but also aims to improve the livelihoods of local people.

A survey on socio-economic conditions conducted by LIPI last year indicated that Mapur villagers' lives had been significantly improved since 2005.

Per-capita income of the villagers increased by 60 percent, from Rp 194,000 in 2005 to Rp 326,000 in 2007.

Jamaluddin said the fishermen could catch between 50 and 60 kilograms of fish per day on average, from which they earned Rp 300,000 profit.

Coremap is targeting an increase of per-capita income by 2 percent each year through alternative livelihood projects, which also involve housewives in the village.

Among the projects is the production of kerupuk (fish crackers) and fish breeding in keramba (net cages in water). Under the project, local groups are given job-skills training. As of last year, 450 people had undergone the training.

The kerupuk project is also being conducted in Malang Rapat village, which is located some 53 kilometers from Tanjung Pinang. Housewives in the village are reportedly content that they can help their husbands make money by participating in such an activity.

"Each of us can earn about Rp 200,000 per month," said Surya, who leads a groups of housewives in the project, which was kicked off last March.

The group can usually produce about 35 to 40 kilograms of kerupuk in one day, she said.

The kerupuk are sold for Rp 30,000 per kilogram in areas outside the village.

Zul Iskandar, Coremap's coordinator for the alternative livelihoods project in Bintan regency, said the Coremap team continued to ensure the sustainability of the project while maintaining communication with local groups to accommodate their needs in developing small businesses.

Source: Desy Nurhayati , The Jakarta Post , Bintan, Riau Islands | Tue, 11/18/2008 12:39 PM | Environment

Antaboga saga: Another case of BI, Bapepam incompetence

2008-12-13T21:36:00.000-08:00

The sky came crashing down for Budi last week as he left the three-story office building of PT Antaboga Delta Sekuritas Indonesia in South Jakarta. He had yet again failed to find a way to withdraw his investment of Rp 5 billion (US$415,000) from the ailing firm.

"This is my sixth visit in the space of a week and nobody can give me an answer as to how I can get my money back," he said, adding that he had put almost all of his savings in a form of reksadana (mutual funds) issued by Antaboga, a securities company affiliated with recently bailed out Bank Century.

Budi was among hundreds of Century customers who had been tricked by Antaboga into believing they would get a high return if they invested in their product.

The Antaboga case began as hundreds of worried investors were unable to redeem their investments from Antaboga after its selling agent Century was recently taken over by the government amid severe financial distress.

Earlier this month, three investors -- now it has increased to 65 -- had reported the company's payment default to the Indonesian Capital Market and Financial Institution Supervisory Agency (Bapepam).

Bapepam and the National Police had brought Antaboga president director Hendro Wiryanto in for questioning Thursday for 11 hours and later announced that Hendro and two other Antaboga executives, director Anton Tantular and Commissioner Hartawan Aluwi, were suspects in the case.

The police however, have failed to arrest them all as two of them escaped. The two have since been put under a travel ban.

"They promised a number of Century's costumers that they would invest their money in the form of reksadana for high returns," said National Police spokesman Insp. Gen. Abubakar Nataprawira on Friday.

Antaboga has allegedly embezzled a total of Rp 233 billion, according to reports from costumers in three Century branches in Kelapa Gading, North Jakarta; Medan, North Sumatra; and Bali, the police said.

The amount, however, may still increase as a Bapepam investigator said earlier that Antaboga had collected more than Rp 1 trillion from its sales at Century branches all over Indonesia.

Founded in 1989, Antaboga, which was named after the Snake God in Balinese Hindu mythology, provides financial services including equity broking, investment banking and asset management to retail, corporate and institutional costumers.

Antaboga is linked to Century as it has a 7.44 percent stake in the lender. Moreover, Anton Tantular is the brother of Robert Tantular, a key shareholder of Century, who has been detained by the National Police for allegedly abusing his power by breaching regulations that led to Century's financial mess.

Meanwhile, Robert and Hartawan at Antaboga are sons-in-law of Sukanta Tanudjaja, the former owner of the giant textile producer PT Great River International.

Budi and hundreds of others could be said to have been naive in believing Antaboga and Century so easily. But most of the responsibility should be directed to the regulators, notably the central bank that oversees the banking sector and its products and Bapepam that oversees nonbank financial institutions.

Observers say that even though Century was only a selling agent for the product, it should have thoroughly screened all the products it sold and notified costumers of any risks.

It is still fresh in many people's minds what happened to dozens of Indonesian Citigroup customers who -- due to the central bank's weak supervision -- lost all their money in products linked to Lehman Brothers after the U.S. financial giant collapsed a few months ago.

While the customers lost a sizable amount, Citigroup has not been punished for selling products without first properly explaining all the risks to their customers.

"There is no reason that BI and Bapepam knew nothing about this case," said economist Ichsanudin Noorsy to The Jakarta Post over the weekend.

The Antaboga case proves the lack of law enforcement in the Indonesian financial market, Ichsanudin said. "BI and Bapepam undoubtedly have contributed to this mess."

Legislator Dradjad Wibowo echoed the argument, saying the regulators of capital markets and banking have once again put their competence and integrity into question over the Antaboga case.

"They should have strong market knowledge in the fields they regulate," said the member of House's Commission XI overseeing the banking sector and state finance.

"It is important for people to thoroughly research any financial product before investing their money in it, especially products which offer a particularly high gain," Dradjad added.

Last week Bapepam was in an ambiguous position by declaring that Antaboga's product was not a banking product or a capital market product. "Antaboga has no permission to issue mutual funds," Bapepam chief Fuad Rahmani said Friday.

For Budi, who has fallen victim in part to the weak regulatory supervision in the financial sector, all his dreams are fading away.

"They promised a 13 percent annual yield with a three-month term," Budi said, lamenting his decision to invest his money in the product in the first place.

"I do not know now where to turn." (hwa)

Souerce: The Jakarta Post , Jakarta | Tue, 12/09/2008 11:43 AM | Business