Focus on Astra leadership

January saw the sudden death of Michael Ruslim, president director of Astra International, from dengue fever. Astra International, a diversified group and one of the country’s leading conglomerates and now owned by Singapore’s Jardine Cycle & Carriage, moved quickly to install Priyono Sugiarto, who heads the non-Toyota car division, as interim president director until a formal replacement is announced in the company’s next annual general meeting of shareholders.

In 2009, auto sales industry-wide dropped 20 percent from a year earlier to 486,061 units, which proved better than analyst’s forecast. Astra remains the dominant auto producer with a 58 percent market share.

Astra produces and distributes Daihatsu, Toyota, Isuzu and Nissan Diesel. For Astra itself the slump was less drastic, with 281,013 cars sold from 289,838 a year ago.

The low interest rate environment also led companies to tap the bond market. State oil company Pertamina plans a US$1.5 billion bond issue, state pawn broker Perum Pegadaian, a Rp 2 trillion bond issue, while PT Telkom, a similar sized Rp 2 trillion bond issue.

January headlines:

Jan. 2: BHP maintains 75 percent share of Maruwai

BHP Billiton will keep its 75 percent stake in the Maruwai coal project, despite previous statements hinting at withdrawing from Indonesia. The company plans to divest 25 percent of its stake in the Central Kalimantan coal project. The project consists of seven coal contracts of work covering 330,000 hectares.

Jan. 5: Oil & Gas recovery cap scrapped

The government is doing away with a ceiling on the annual cost of recovery payment reimbursed to oil contractors. Under the existing production sharing contract (PSC) scheme, the government reimburses all eligible contractor expenses. However, due to concerns of insufficient transparency in the cost recovery payments, these expenses have been capped each year.

In 2009, the cap was set at $11 billion and the plan for 2010 was to cap these payments at $12 billion. Coordinating Economic Minister, Hatta Rajasa, confirmed that the 2010 state budget would not carry this ceiling.

Jan. 6: Guarantor of state projects set up

The government has set up PT Penjaminan Infrastruktur Indonesia or Indonesia Infrastructure Guarantor agency to issue guarantees for those financing infrastructure projects.

The government will provide Rp 1 trillion worth of capital and multi-lateral agencies, like the World Bank, have pledged up to Rp 1.5 trillion in soft loans.

Jan. 12: Bapepam queries CP Prima bond issue

The Capital Markets Supervisory Board, Bapepam, is seeking clarification on shrimp producer, PT Central Proteinaprima’s (CP Prima), failure to service the coupon on their USD 325 million bonds. Fitch Ratings has downgraded CP Prima’s credit rating to C.

The company noted that the failure to pay $17.9 million in coupons due last December was due to a virus infection in the company’s shrimp ponds, which adversely affected production and sales.

Jan. 15: Domestic coal sales obligation

The Energy and Mineral Resources Ministry has issued a regulation requiring coal producers to allocate a portion of their production for the domestic market. This annual domestic market obligation will be set equal to the domestic consumption level of the previous year. In 2009, domestic demand was about 56 million tons, while total production reached 250 million tons.

Jan. 16: Jamsostek plans to acquire sharia banks

State insurance company Jamsostek plans to acquire two major sharia banks, BNI Syariah and Bank Syariah Bukopin, by the end of 2010. The acquisition will be made by Jamsostek’s investment arm, Jamsostek Investment Company. The plan is to acquire more than 50 percent stake in Bank Syariah Bukopin and between 20-30 percent stake in BNI Syariah.

Over the last five years, sharia banking has grown on average 34 percent per year, exceeding the growth of conventional banks.

Jan. 19: Pertamina to build East Java LNG terminal

State oil and gas company Pertamina plans to build a $200 million floating LNG terminal in East
Java with a capacity of 500 million cubic feet.

The terminal is to provide gas to address rising domestic demand, especially from power stations. Another similar terminal is planned in West Java.

Both terminals are expected to be completed by September 2011 and will source LNG from domestic (Tangguh and Bontang) and overseas producers (Qatar).

Jan. 21, 26: House wants FTA delayed

Parliament urged the government to delay the ASEAN-China Free Trade Agreement (ACFTA) and renegotiate the tariff terms agreed earlier to protect local industries.

The ACFTA, signed back in 2002, comes into effect Jan. 1 this year with zero tariffs on 6,682 tariff posts in 17 sectors, including 12 in manufacturing and five in agriculture, mining and maritime.