Mon, 14 Jan 2008
A preliminary deal between the government and India's state-run National Aluminum Co Ltd on Friday (11/1/08) for a $3.2 billion project to build an aluminum smelter and power plant in Sumatra promises the start of a strong year for growth in Indonesia.

The announcement came after government data showed that foreign direct investment (FDI) rose 73% to $10.3 billion last year, Reuters reported.

FDI rose from $5.97 billion in 2006. FDI approvals surged to $40.14 billion in 2007, from $15.65 billion in the previous year.

Actual domestic investment rose almost 70% to Rp34.9 trillion ($3.69 billion) in 2007.

In other positive news during the week, three major automotive and motorcycle financing firms all announced plans to increase lending this year, predicting that automotive sales would continue to rise through 2008.

Vehicle sales are estimated to have increased around 36% to 434,000 units in 2007, slightly above target.

State-owned PT Jasa Marga and Malaysia’s MTD Capital Bhd also announced plan to borrow a combined total of some $1.5 billion to build new toll roads, urgently needed to assist keep down the cost of business, particularly for exporters.

The government kicked off its fund-raising for the year with an ambitious $2 billion bond sale that was one and half times oversubscribed.

"This is a big success considering the difficult conditions," said Rahmat Waluyanto, the Finance Ministry's Director General of Treasury, referring to the weak US dollar, the US sub-prime mortgage crisis and soaring global oil prices.

The central bank meanwhile left its key interest rate steady at 8.0% on Tuesday (8/1/08), wary of the threat of inflation due to both external and domestic pressures.

Central bank Senior Deputy Governor Miranda Goeltom said although the central bank decided to keep its key rate unchanged, there is still room for commercial banks to cut their lending rates over the next few months.

"Given tight competition among banks and continuing efforts to improve efficiency, there is still room for banks to cut their lending rates," she said.

Banks were also planning expansion of their credit portfolios, with Bank Central Asia stating that it was aiming to disburse Rp5 trillion ($555 million) in new corporate credits this year.

Share prices closed 1.6% up Wednesday at a fresh record high on the back of gains made by PT Astra International, miners and plantation stocks, dealers said, according to Agence France-Presse.

Palm oil stocks such as PT Astra Agro Lestari and PT PP London Sumatra extended their rally on hopes the high price of crude palm oil will be sustained in tandem with crude oil's climb to the historic level of $100 a barrel.

The Jakarta composite index closed up 44.64 points at 2,830.26. The market was closed on Thursday and Friday. For the week, the key index gained 65.07 points or 2.4%.

The rupiah was trading at 9,435/9,444 rupiah to the dollar.



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