1. Oil ( 2 x 22)

1. Oil ( 2 x 22)

Govt offers alternatives
for oil, gas concessions

Fitri Wulandari
The Jakarta Post
Jakarta

The government has offered a more flexible system for
investors to be granted oil and gas concessions in the country as
part of its bid to revive the investment climate in the sector.

Iin Arifin Takhyan, director general of oil and gas at the
Ministry of Energy and Mineral Resources said the government had
provided two alternative ways for investors to get oil and gas
blocks apart from the normal bidding rounds.

"We want to make easier procedures for investors interested in
oil and gas concessions," Iin said over the weekend.

Aside from the usual bidding round, the government will make
oil and gas blocks that failed to attract bidders in past
bidding, available to any interested investor.

"If there is a company interested in a certain block, it can
submit proposal. The government will award the block if they meet
certain requirements," Iin said.

To maintain transparency, the government will also offer the
block eyed by the company in question to other companies through
the media.

"We will give one month to invite other interested firms. If
no companies submit their proposal, the award goes directly to
the first company that submitted the proposal," he added.

The block will be open for bidding if there are other firms
voicing an interest, Iin said.

Currently, a total of 16 oil and gas blocks remain in the
government's hands becaue they did not attract bidders during a
regularly scheduled auction. The government will still make the
blocks available for interested investors.

Three companies have voiced their interest in three oil and
gas blocks, he said.

Companies now can also propose to get oil and gas blocks of
their interest after they conduct a study of their own, Iin
added.

Iin said the company must submit proposals of their working
commitment program as well as the result of their studies.

According to Iin, there are five companies that have submitted
proposals on five oil and gas blocks apart from the ones offered
in the bidding round.

Iin brushed aside speculation that the steps meant that the
government was selling off the country's resources all too
easily.

"We will choose companies that meet the requirements both
financially and technologically to run the oil and gas blocks,"
he stressed.

Iin said the steps are expected to boost development of new
hydrocarbon resources to maintain production sustainability amid
an ongoing decrease in the country's oil and gas output.

Oil and gas production in Indonesia continues to drop as the
investment climate becomes unfavorable.

2. SMEs (1 x 34)

Resilient SMEs still facing problems

Evi Mariani
The Jakarta Post
Jakarta

Small and medium scale enterprises (SMEs) -- which have proved
more resilient than many corporate giants in coping with the
economic crisis -- still struggle with persistent problems in
tapping overseas markets, according to a government paper.

The problems include the lack of access to banking credits and
lack of skills in packaging products, according to the paper
written by the directorate general for SMEs at the Ministry of
Industry and Trade.

"SMEs' ability in acquiring banking credits is limited,
because, among others, they do not own collateral.

"Also, their products do not have good package designs," the
paper said.

Concerning the problems relating to banking credits, the
government and the Asian Development Bank (ADB) are seeking to
solve them by channeling US$85 million in loans to small and
medium scale exporters by the end of this year, with lending
rates of between 1 to 2 percent below the average commercial
rate.

In order to address problems relating to packaging design, the
government has developed a design center at the ministry, with
the cooperation of art and design students, from the Bandung
Institute of Technology in West Java's capital of Bandung and the
Indonesian Art Institute in Yogyakarta.

"SMEs can choose and use for free from the ministry the
designs for packaging their products," Agus Tjahajana, the
director general for SMEs, told reporters last week. "It is
difficult for them to tap larger markets if they continue using
photocopied logos and packaging."

The design center has produced dozens of computer-designed
logos and brands for products such as snacks, coffee, and various
traditional foods.

Both programs -- the design center and loan assistance -- aim
to boost SMEs' exports. In 2002, SMEs contributed a total of
$2.51 billion to the country's exports, according to government
data.

The ministry is also organizing an exhibition in Sharjah,
United Arab Emirates, to help SMEs boost their export to Africa
and the Middle East. The expo will take place in mid-September.

However, the paper conceded that, thus far, the government was
still focusing on large companies, despite the fact that SMEs
make up most of the country's businesses. In 2002, SMEs reached
3.03 million, or more than 95 percent of the country's total
business units, and absorbed 11.89 million workers.

The government has often committed to help improve SMEs'
performance but, the paper said, in reality, it has yet to
instigate regulations favorable to SMEs.

"The government has yet to formulate an incentive system,
special tariffs, subsidies or technical assistance for SMEs or
protect them against (large) corporation's tricks," the paper
said.

Agus said small companies producing machine or auto parts were
often exploited by wholesalers from Jakarta or Surabaya.

"For example, an auto-parts merchant from Sawah Besar
(auto-parts center in Jakarta), ordered cheap auto-parts from an
SME in a small town in West Java," he explained. "The merchant
packaged the parts, stating that they were made in China or
Thailand, only to sell them for much more."

In order to protect small and medium producers from being
manipulated by traders, the ministry is studying the possibility
of developing special markets where they can meet with buyers
face to face, he said.

For instance, he said, the ministry is developing machine and
auto-parts markets, one in Semarang, Central Java and another one
in Cirebon, West Java.

3. Dollar (1 x 32)

Dollar surge against euro peaking

JP/13/Belum

Dollar's 10-percent surge against euro seen peaking

Agence France-Presse
New York

A near 10-percent surge in the dollar's value against the euro
since May, driven by a brightening U.S. economy and spreading
recessions across Europe, has likely peaked, analysts said
Friday.

The euro had sunk to US$1.08 on U.S. trading floors Friday
morning, marking a near 10-percent decline from the euro's rate
of $1.19 seen in late May.

However, the dollar's rapid rise has tapered off in the last
few days since it hit a four-month against the euro on Tuesday.

"We have got a 10 percent move in the last two months," in
terms of the dollar's rise against the euro, explained Greg
Anderson, a senior foreign exchange strategist at ABN AMRO in
Chicago.

A flurry of bullish reports on the U.S. economy, which grew at
a 2.4 percent annual pace in the second quarter, has sparked the
stampede for dollars.

Bullish July numbers included a surprise 1.4 percent gain in
retail sales, a 17-year record in groundbreaking on new housing
projects and a steeper-than-expected 0.5 percent increase in
industrial production.

"The growth numbers coming out of the U.S. in the past two
weeks have caught the market by surprise," said Simon Fowles, a
senior foreign exchange dealer at Wells Fargo Bank in
Minneapolis.

At the same time, euros have lost their allure as concerns
mount about the state of Europe's major economies.

Germany, Europe's largest economy, Italy and the Netherlands
have all slipped into recession, while France reported this week
a 0.3-percent contraction in second quarter gross domestic
product (GDP).

Investors deserted the dollar in late May and early June over
concerns about the bulging U.S. current account deficit, war
jitters and a perception that President George W. Bush's
administration had abandoned a long-held "strong dollar" policy.

Demand for dollars also was sapped by near rock-bottom
interest rates, which lowers the return on U.S. investments.

But the flood of upbeat data has turned the tide.

"We had this bubble of dollar weakness that has just popped,
and as is typical of any financial market bubble it pops much
more quickly than it builds," Anderson said.

As the U.S. economy has picked up, so has the stock market.

The Dow industrials hit a 14-month high Monday closing at
9,412.45 while the Nasdaq struck a 16-month high this week as
rising confidence in the economy raised the hunger for U.S.
equities.

However, the dollar appears to be running out of puff.

"Is it sustainable? Yes. Will it continue at the same pace? I
personally don't believe so," Anderson said.

The euro would likely settle into a range of between $1.06 and
$1.14 for the remainder of 2003, he forecast.

Fowles agreed.

"I think we are going to range-trade for the second half of
the year, but you never say 'never'. The market has seen some
dramatic volatility this year," he said.

"All it would take is one event to see this thing flip
around," Fowles added.

4. Leader (1 x 48)

Pertamina needs world-class CEO to beat competition

Pertamina needs a professional leader
JP/ /

Fitri Wulandari
The Jakarta Post
Jakarta

State oil and gas firm PT Pertamina needs a professional
leader who does not only have extensive experience in the oil and
gas business, but also possesses world-class leadership skills so
as to be see the company safely through the cut-throat
competition that exists in the energy business, legislators said.

Irwan Prayitno of the House of Representatives' Commission
VIII said Pertamina needed a world-class chief executive officer
(CEO) to run the company instead of a bureaucrat.

Pertamina needed a CEO who was progressive in his thinking,
decisive and able to find markets for the company's oil and gas
products, Irwan told The Jakarta Post over the weekend.

Sharing Irwan's view, Emir Moeis, another Commission member,
added that Pertamina's future leader should have a strong
entrepreneurial spirit.

Bureaucrats did not possess this as they were accustomed to
working in an ordered working environment.

"Pertamina needs a leader who is highly creative and dares to
make innovations," he said, adding that such a leader needed to
be able to make decisions quickly in view of the highly
competitive environment in the oil and gas business.

Irwan stressed that Pertamina's future leader should have a
background in the oil and gas business.

Both were commenting on the need to replace top Pertamina
managers as a consequence of the government's decision to turn it
into a limited liability company. A presidential decree on this
was issued in June 2003.

It came after the government decided to liberalize the
country's oil and gas industry, and stripped Pertamina off its
decades-long monopoly with the implementation of Law No. 22/2001
on oil and gas.

Names tipped to replace current Pertamina president director
Baihaki Hakim include deputy minister of state enterprises Roes
Aryawijaya, president of liquefied natural gas firm PT Badak NGL
Harry Poernomo, former Pertamina upstream director Gatot Karyoso
Wiroyudo, director general of oil and gas Iin Arifin Takhyan, and
the current chairman of the Indonesian Bank Restructuring Agency
(IBRA) Syarifuddin Temenggung.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro
is reluctant to say much about the issue. He only said that the
power to appoint Pertamina's future leaders now rested solely
with Minister of State-owned Enterprises Laksamana Sukardi. He
hinted that the reshuffle would take place in November.

Whoever the new leader of Pertamina is, he or she will face
the challenging task of turning what was once labeled "the most
corrupt business in the country" into an efficient company.

The Development Finance Comptroller (BPKP) and
PricewaterhouseCoopers found hundreds of irregularities worth
trillions of rupiah in the company in the past. A number of
Pertamina's directors were also brought to trial for corruption
in the past.

The corruption was perpetrated by politically well-connected
individuals.

Since 1994, the company has been undergoing restructuring to
improve efficiency, including the institution of an early
retirement program that has reduced the number of the firm's
workers from 46,000 in 1994 to just 27,000 now. It is also been
attempting to develop a new corporate culture.

But more importantly, over the past several years Pertamina
has been trying to resist efforts by the government and political
parties to turn it into their cash cow to be milked for all it
was worth.

Unfortunately, the issues surrounding the future Pertamina's
leader have already shown signs of politicking by the government
officials involved.

Tempo magazine reported that Laksamana, Minister of Finance
Boediono and Purnomo had proposed Roes Aryawijaya to President
Megawati Soekarnoputri. But she had flatly rejected him.

State Secretary Bambang Kesowo was supporting Gatot Karyoso
Wiroyudo, the magazine said. A subsequent report in the Kontan
business weekly said Laksmana was now promoting Syarifuddin
Temenggung for the job.

But the underlying issue is that there are moves afoot to
replace Baihaki Hakim as director. Reports said Baihaki was not
particularly welcome as he was deemed less than cooperative when
it came to collusion.

Baihaki, the former number one in the U.S. oil and gas firm
Caltex Indonesia, is known for its professionalism and honesty.

Baihaki's critics point to what they say are shortcomings in
Pertamina as a sign of Baihaki's failure to run the company
properly. For instance, they blame the steady decline in the
country's oil output on Baihaki's "failed" leadership.

Emir, however, maintained that Baihaki should not be replaced
as he was familiar with the situation in Pertamina and had
notched up some successes in restructuring Pertamina and turning
it into a professionally managed business.

At least, he said, Baihaki should be allowed to lead Pertamina
"during the transition period" from the change in the company's
status until the appointment of a new leader. He did not say how
long this transition period would be.