Wed, 03 Sep 2008
The decision of Indian aluminum producer Nalco to go ahead with a $3 billion smelter in South Sumatra suggests the province possesses the potential to develop into a new industrial hub.

While Antara reported that feasibility studies are continuing, the plan presumes a plentiful supply of power, a major component in the manufacture of aluminum.

Plans for coal-mouth power stations in the province are likely to be critical to the plan and further development of the region.

Nalco also notes that the promising long-term prospects of the economy in Indonesia are its major motive for choosing the country as a production center.

General Motors’ decision to restart its idle production facilities in the country are also another plus for the development of a modern industrial base.

Indonesia may well have benefited from Thailand’s current political woes in the decision by GM.

The other major investment news came from PT Nusantara Smelting Corp., which said it will build a copper smelter in Bontang in East Kalimantan with an investment of $850 million.

The plan assumes that the new mining law, still stuck in the House of Representatives, will insist on in-country processing, while the Chamber of Industry and Commerce (Kadin) is also pushing for a 10% export tax on unprocessed minerals to push greater processing within Indonesia.

The Middle East’s Islamic Corporation for the Private Sector (ICD) meanwhile agreed to inject $400 million, 80% of paid-up capital, into the new PT BNI Syariah.

While Bank BNI itself has decided to play the role of minor partner in the enterprise, the Middle Eastern investment along with interest in the agribusiness sector suggests Indonesia is now firmly on the radar for investors from the region.

There was a slightly disappointing reception to the government’s first Islamic bond, with investors taking up slightly less than the Rp5 trillion of bonds on offer, but demand was high at over Rp8 trillion, with the government preferring not to meet interest rate demands.

Analysts welcomed the move and said that despite the shortfall in sales the prospects were good for further issues. The government is planning a $1 billion Islamic bond in November at the latest.

On the stock market, shares moved higher in the last days of the week to close at 2,165.94, up from 2120.49 at the end of trading a week earlier. The rupiah was trading stable at 9,150 to the US dollar.



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