RI'S FIRST RETAIL BONDS UP FOR GRABS

Urip Hudiono, The Jakarta Post, Jakarta

The government officially launched Indonesia' first-ever retail bond sale Monday.

Individual investors interested in the three-year treasury bonds, which carry a 12.05 percent fixed coupon, can place minimum orders of Rp 5 million (US$543) with designated sales agents up until Aug. 4. The actual auction of the bonds will be held on Aug. 9.

Speaking during the launch ceremony, Finance Minister Sri Mulyani Indrawati said she expected the introduction of retail bonds would help encourage the development of an "investment society" in Indonesia, in which citizens could participate in helping finance the country's development needs through capital market investments, besides the paying of taxes and depositing of funds in the banking sector.

The right to purchase the bonds is limited to Indonesian citizens, although non-nationals will be able to buy them later on the secondary bond market.

"All the proceeds of the bond sales will go into the state budget so that investors can rest assured that their money is being used accountably ...," Mulyani said.

The government has set an indicative target of Rp 2 trillion from the retail-bond sale, which will form part of the total Rp 35.8 trillion in expected net proceeds from government bond sales this year. The proceeds will be used to help finance the budget deficit, now expected to come in at Rp 37.6 trillion, or 1.2 percent of gross domestic product.

Mulyani was upbeat about the market's appetite for the retail bonds, pointing to their main attraction for individual investors, namely, higher yields compared to bank deposits, and potential capital gains if their prices rise in trading on the secondary bond market.

"We will see how the market actually responds to this new investment instrument. What is important now is that all the necessary information be made available to potential investors," Mulyani said, adding that the government intended to regularly offer retail bonds in the future.

Fully informing the investing public during the three-week-long offer period was crucial, the Finance Ministry's director of bond management, Rahmat Waluyanto, explained, as the government did not want the retail bond market to experience a similar crash to that seen by the country's mutual fund industry last year. This crash was due to a lack of understanding on the part of investors about capital market investment.

"Investing in bonds and mutual funds is different from stocks, which are higher risk and tend to be shorter term in nature. Investors should have long-term horizons for bonds and mutual funds, and avoid being panicked by market fluctuations," he said, explaining why the government had decided to postpone the retail bond auction from Aug. 2 to allow the sales agents more time to better inform investors.

Meanwhile, Bank Indonesia (BI) Governor Burhanuddin Abdullah welcomed the launching of the retail bonds, saying they would provide an alternative investment instrument for the public, and would eventually help reduce the central bank's monetary costs.

"People can invest their money somewhere else besides deposits, the funds from which are sometimes used by the banks to buy our bills," he said.

High inflation and interest rates have recently eroded the demand for loans, encouraging lenders to put their excess funds into BI money-market bills.

The government also hopes to lower its borrowing costs following the introduction of retail bonds as local bonds are not subject to the same risks of fluctuation associated with overseas bonds and loans.

Bank Mandiri president Agus Martowardojo said that the retail bond sale was timely given the current bullish bond market and that the coupon rate was attractive. However, he said that the government needed to clarify its policies on taxation and funding sources to eliminate investor doubt.

Mandiri is one of the 11 designated sales agents for the bonds , with the others being Danareksa Sekuritas, Bank Bukopin, Bank Permata, Bank Danamon, Trimegah Securities, Bank Mega, Bank NISP, Bank Panin, Citibank and Valbury Asia Securities.

GOVT ROLLS OUT ONE-STOP INVESTMENT SERVICE FOR SEZ'S

The Jakarta Post, Jakarta

The government will set up a "one-stop investment office" for the newly declared special economic zones (SEZs) of Batam, Bintan and Karimun islands, as a first step to making the area a magnet for foreign direct investment.

Immigration procedures and labor permits concerning foreign workers -- along with taxation and customs services -- will be simplified through the integrated investment service, which is expected to be up and running in Batam by September.

Speaking after a meeting Saturday of a Joint Steering Committee for the development of the SEZs, Coordinating Minister for the Economy Boediono said the establishment of the one-stop investment office would be among concrete action taken to fix any remaining bureaucratic snags still hampering investment into the pilot-project area.

"We are taking immediate steps (to develop the SEZs). Even before the meeting, we have been working to set up the integrated investment system," he said. "In the medium-term, we would like the SEZs to be a working model, suitable for application in other areas."

Indonesia and Singapore signed last month a framework agreement on economic cooperation to transform the three major islands of Riau Islands province into SEZs.

A Joint Steering Committee was established for policy-making and oversight, whose members include Boediono, Trade Minister Mari E. Pangestu, Investment Coordinating Board head M. Lutfi, Manpower and Transmigration Minister Erman Suparno, and Finance Minister Sri Mulyani Indrawati.

Singaporean counterparts include Trade and Industry Minister Lim Hng Khiang, Manpower Minister Ng Eng Hen and Singapore Economic Development Agency head Lim Siong Guan.

Singaporean Trade and Industry Minister Lim Hng Khiang said both sides had been working hard to improve the area's investment climate, expecting implementation results over the next three months.

"We are looking at all issues related to how the SEZs can enhance Indonesia's competitiveness in attracting foreign investment.

"First is the institutional framework; second, policies that have to be put in place; third, the regulatory framework according to which the policies are being implemented; fourth is the infrastructure, and fifth is incentives," he said.

Further explaining the one-stop investment office, Trade Minister Mari E. Pangestu said the government was in the throes of integrating the online systems of the tax and customs offices, and would continue to address problematic regulations, as well as looking into possible incentive policies.

"But it is more about creating certainty and consistency, and how to develop the area's bonded zone concept last year to create a better flow of goods for both exports and domestic needs," she said.

Meanwhile, concerning labor issues, Manpower and Transmigration Minister Erman Suparno said his ministry would assign officials at the one-stop investment office to facilitate foreigners applying for their work permits on the spot, rather than having to process them in Jakarta.

The ministry recently issued a decree slashing the processing time for work permits to only a week from two months, although foreigners will still be subject to the country's other labor laws and regulations, Erman said.

EAST TIMOR ANNOUNCES $80 MILLION POWER SUPPLY PROJECT

Dili ANTARA News: - East Timor announced Wednesday that an 80 million dollar biomass power project funded mostly by Thai and British investors was planned for the tiny nation.

The agreement comes despite the nation being embroiled in a political crisis which saw its prime minister Mari Alkatiri step down last month. An interim premier to head government until elections next year is yet to be appointed.

"I am extremely pleased that, despite the upheaval of the last couple of months, international investors continue to show faith in the future of Timor-Leste," Jose Ramos-Horta, who is tipped as a contender for the interim position, was quoted by AFP as saying in a statement.

Ramos-Horta, who resigned his posts as foreign and defence minister a day before Alkatiri stepped down in protest over the crisis, said the investment was East Timor's biggest yet aside from its major gas development projects.

The Nobel laureate is continuing in the positions however until a successor is appointed.

The half-island nation has rich gas reserves which have already earned it millions of dollars in revenue.

The project will be run by Energy Generating Enterprise Timor-Leste, a joint venture between the East Timorese government, which will contribute 10 percent of capital, and Thai and British private investors.

It will initially generate about 10 megawatts of power at a cost of almost half the prevailing price, Praphad Phodhivorakhun, president of Thai company KYTBW, said according to the statement.

East Timor's infrastructure was largely obliterated by the Indonesian military and the militias they supported when the tiny nation voted for independence from Indonesia in 1999.

Unrest again rocked the country in May this year when 21 people were killed and some 150,000 people fled their homes amid battles between rival factions of the military and police as well as violent gangs roaming the streets.