Written by Mahendra / Hari S.noegroho    (Monday, 01 August 2005)

Highlights
Politics
·         President Yudhoyono concludes a very successful visit to China
·         Diplomatic initiatives over US House of Representative Bill on Papua
Regions
·         Government amnesty program for Aceh peace accord
·         RI lodges protest with Malaysia over attempted arrest of fishermen
·         Batam Industrial Bonded Zone to upgrade to “Bonded Zone Plus” status
Economy
·         Visit to China netted more than $7 billion in energy and infrastructure deals
·         Government authorizes gas and electricity SOEs to charge market prices for specific use
Macroeconomy
·         Indonesia's key one-month interest rates near to target level
·         Indonesian rupiah ended slightly higher
Investment
·         Hungarian investors are set to invest $4 billion
·         Chinese shoe manufacturers are planning to move their factories to Indonesia early next year
SOEs
·         Government will reduce the number of state-owned companies up to 50% by 2009
·         Telecommunications companies, have projected a twofold increase in telecommunications revenue by 2010
Power
·         Japan Power seeks to invest in Indo electricity and coal sectors
Oil & gas
·         Oil refinery to be built in Tuban

POLITICS
Indonesia, China Build on Strategic Partnership
Indonesian President Susilo Bambang Yudhoyono and his Chinese counterpart, Hu Jintao, on Thursday sealed a series of five economic and technical agreements and agreed on a massive surge in two-way trade, in a move which fleshed out a pledge by the two sides earlier in the year for a strategic partnership.
At the same time, the private sectors of the two nations followed up by signing four agreements and three memorandums of understanding worth more than US$7.5 billion in energy and infrastructure projects. A major deal struck between the two leaders will see trade increased to US$30 billion by 2010, up from $20 billion they had earlier planned to reach in 2008.
Indonesia 's trade with China could soon surpass its trade with the United States , which reached $13.5 billion last year. Chinese exports to Indonesia include electrical machinery and equipment, electronics goods and home appliances, textiles and motorcycles.
China 's principal imports from Indonesia are mainly natural resources and resource-intensive goods like crude oil, natural gas, palm oil, paper, pulp and timber.
The presidents presided over the signing of five agreements on research and development in defense technology, donations to tsunami-hit regions, economic and technical cooperation, a loan agreement of US$100 million under a Preferential Buyer's Credit, and Chinese-language teaching.
Meanwhile, Chinese companies signed deals with Indonesian companies on four infrastructure projects: the construction of the $2.4 billion Tuban refinery in East Java, two coal-fired power stations in Central Java and South Sumatra, and a railway and transportation system to carry coal from state-run Bukit Asam's Tanjung Enim mine to Palembang . The long-delayed $1.1 billion, 1,320MW Tanjung Jati project is a joint venture between the Chengda Engineering Corp., Bakrie Power, the MSH Group and the Bank of China.
The $2.1 billion, 2,400MW plant in power-starved South Sumatra will be financed by the China Development Bank and China Exim Bank, and built by Hua Dian Engineering, an Indonesian consortium and Bukit Asam.
The railway, worth about $700 million, is to be financed by the Industrial Commercial Bank of China and will be built by the China Railways Engineering Corporation. The China Petrochemical Corp (Sinopec) is currently in talks with Pertamina to win the right to explore for oil and gas in the archipelago in return for Chinese investment in the Tuban refinery.
US Legislation Raises Concern by RI Govt
President Susilo Bambang Yudhoyono warned Washington not to interfere in Indonesia 's domestic affairs after the US House of Representatives recently approved a bill that questions the status of Papua. Speaking to reporters on Friday (29/7/2005) during a visit to Shenzen , China , Yudhoyono said the intervention could affect relations between the two countries, which have begun to improve since his election last year and a visit to Washington in May.
"I am concerned (by the bill) ... this (the Papua issue) is Indonesia 's domestic affair,” he said. “"I call on all friendly states and the United Nations to respect Indonesia 's territorial integrity and let us solve our own problems.”
If passed into law, the new bill could increase international pressure on the Indonesian government to allow a vote of self-determination for the resource-rich province.
Part of the bill questions the 1969 Act of Free Choice when selected Papuan elders voted unanimously to join Indonesia "in circumstances that were subject to both overt and covert forms of manipulation.” The legislation requires the US secretary of state to file a report analyzing the 1969 Act of Free Choice within 180 days after the bill is enacted.
Indonesian foreign ministry spokesman Yuri Thamrin said in Jakarta on Friday that the Government will use all diplomatic avenues to block the bill.
The bill is one of four approved by the US House of Representatives, all of which concern financial aid to foreign militaries.
Foreign Loggers Behind Bars
More than 170 foreigners have been arrested for alleged involvement in the illegal felling of forests in Indonesia , Forestry Minister Malam Sambat Kaban said on Wednesday (27/7/2005).
About 178 foreign "barons" of illegal saw mills on the islands of Papua, Sumatra and Borneo had been detained since the imposition of a presidential decree on illegal logging last year, Kaban said.
"From those figures, the largest number of barons arrested came from Malaysia ," Kaban was quoted as saying by the Republika newspaper.
A spokesman for the ministry, Masyud, said a total of 28 Malaysians were currently waiting for court dates in Papua province.
Three other Malaysians had also been jailed for nine years each earlier this month in West Kalimantan province on Borneo while 10 others were still being processed for trial, Masyud told AFP.
About 74 forestry ministry officials had also been detained for backing illegal logging operations, which cost Indonesia over three billion dollars in lost revenue annually, Kaban said.
Indonesian officials warned in April that so-called timber barons have been targeting remote Papua province due to dwindling tree cover on Java and some parts of Sumatra islands.

REGIONS
Indonesia Granting Amnesty for Aceh Rebels
Rebels of the Free Aceh Movement who have been jailed or arrested for their political views will be granted amnesty by the Indonesian government 15 days after a peace deal is signed next month, a cabinet minister said Wednesday, according to Kyodo News.
"The Indonesian government will grant amnesty for them 15 days after the memorandum of understanding is signed on Aug. 15, 2005, in Helsinki , Finland ," the state-run news agency Antara quoted Minister of Justice and Human Rights Hamid Awaludin as saying, Kyodo reported.
Their rights as Indonesian citizens will also be restored as soon as they receive amnesty, the minister said.
"By the amnesty, all of their political rights will be equal to those of other Indonesian people," he said, Kyodo reported. Awaludin, however, stressed that amnesty will only be granted to those who have been jailed or arrested for treason, Kyodo reported.
"Members of GAM (the Free Aceh Movement) who were involved in criminal cases will not be granted amnesty," he said.
Currently, there are 2,053 GAM members serving prison terms for treason, the minister said.
ASEAN countries, EU to send Aceh peace monitors
Southeast Asian and European countries have agreed to contribute to a peace monitoring mission in Indonesia 's Aceh province, officials said.
Indonesian Foreign Minister Hassan Wirayuda said he made a formal request to colleagues from the Association of Southeast Asian Nations (ASEAN) to help monitor a peace deal to be signed August 15 with Aceh separatist rebels.
He said some nations gave "firm commitments" to supply monitors in Indonesia 's westernmost province, where the rebel GAM movement and the government are due to sign the deal ending some 30 years of strife.
"So far, countries from ASEAN that we have asked to contribute to the Aceh peace monitoring mission have expressed their willingness," Wirayuda told AFP, naming Singapore , Malaysia , Thailand , Brunei and the Philippines .
He said a meeting to work out the mechanics of the proposed mission would take place in Jakarta in the second week of August, and that his government hoped the arrangement would blossom into a regular ASEAN arrangement.
Indonesia 's foreign ministry spokesman Marty Natalegawa said the proposed multilateral Aceh mission would be a sign of the region's willingness to deal with such problems.
"I think that it is very important that the EU and the countries in ASEAN will contribute a monitoring organization as part of confidence building that will help achieve the outcome that the Indonesian government and negotiators of GAM are looking forward to," Goff told reporters.
Indonesia Plans Naval Shake-Up
Indonesia is planning a major shake-up of its naval forces, creating a third fleet to be based in the easternmost province of Papua , a military spokesman said Thursday.
Navy spokesman Major Kadir told AFP that the new fleet would be based in the Papua port of Sorong . He said the Jakarta-stationed western fleet would be moved to the Sumatra province of Riau while the current eastern fleet based in Surabaya would be replaced by a central fleet headquartered in Makassar on Sulawesi island.
RI Files Complaint over Territorial Violation by Malaysia
Indonesia has lodged a protest with the Malaysian government over the foiled arrest of a number of fishermen aboard three Malaysian trawlers and a possible territorial violation.
Director of the Water Police squad Brig. Gen. N. Sutisna said on Thursday the fish poachers had used the presence of an incoming Malaysian warship and helicopter to evade their arrest by Indonesian officers.
The incident took place in the waters off Jumhur island in North Sumatra on Wednesday, when the police patrol boat was escorting the Malaysian trawlers to the nearest port, according to Sutisna.
"We let go of the fish poachers as we were forced at gun point by the Malaysian seamen. They intimidated us and made our officers go aboard the Malaysian naval ship," Sutisna said.
When asked if the Malaysian warship had trespassed Indonesian waters, Sutisna said: "It's a clear intrusion into Indonesian territory."

ECONOMY

China Visit Gains $7b in Deals

Indonesian President Susilo Bambang Yudhoyono's four-day visit to China last week resulted in agreements worth more than $7 billion of commercial deals.
After the signing of five agreements by the Indonesian and Chinese governments, the two countries' private sectors followed it up with the signing of four agreements and three memorandums of understanding (MoUs) in energy and infrastructure, The Jakarta Post reported.
The four principal agreements cover the construction of two power plants in South Sumatra worth $3.2 billion; the Tuban refinery in East Java worth $2.4 billion; and a railway transportation system for a coal mine also in South Sumatra worth $500 million.
The MoUs meanwhile cover the development of two 100-megawatt power plants in South Sumatra worth $190 million; and a 450-hectare Chinese industrial estate in Karawang, West Java worth $70 million.
Indonesia and China likewise agreed to increase their trade to $30 billion by 2010, up from $20 billion by 2008 as earlier planned.
Statistics show that the two countries' two-way trade volume reached $13.48 billion in 2004, up 31.8% year-on-year. During the first five months of the year, the figure stood at $6.7 billion, indicating a yearly rise of 37%. China is now Indonesia 's 4 th largest trading partner, while Indonesia is China 's 18 th .
Chinese exports to Indonesia include electrical machinery and equipment, electronic goods and home appliances, textiles and motorcycles. Indonesia 's principal exports to China are natural resources and resource-intensive goods such as crude oil, natural gas, palm oil, paper, pulp and timber.
Jakarta and Beijing also agreed to set up an investment promotion center to increase two-way investment between the two countries.
Data from the Investment Coordinating Board shows Chinese investment in Indonesia last year amounted to $6.5 billion.
Chinese Vice Premier Zeng Peiyan during a luncheon meeting with Chinese and Indonesian businessmen in Beijing on Friday (29/7/05), called on the two sides to increase investment in each other's country in the areas of infrastructure, energy, resources, agriculture and fishery to promote the construction of large cooperative projects such as railways, bridges, power stations and dams, Xinhua reported.
"The Chinese government encourages its businesses to invest in Indonesia and the government will offer preferential loans and as much help as possible for some projects," Zeng said. "Meanwhile, the Indonesian business people are welcome to invest in China and participate in China 's regional development and economic construction."
Also signed by the two governments was a general loan agreement of $100 million of Preferential Buyer's Credit from the Chinese government to the Indonesian government.
Yudhoyono said the preferential loan and assistance will support Indonesia 's economic and social development as well as reconstruction in tsunami-hit areas.

Economy to Improve in Q3 - BI Survey

A Bank Indonesia (BI) market survey said the country's economic condition would improve in the third quarter of the year, to be marked by an increase in economic growth, current account surplus and exports, Antara reported.
The country's economic condition for the year would improve, despite setbacks in certain economic indicators such as inflation, which is predicted to rise, the survey said.
Inflation rate is expected to reach 7.1% to 8% this year, higher than the targeted 6.1% to 7%. Exports are forecast to grow by 5.1% to 10%, falling short of the 10.1% to 15% target.
However, in general this year's macroeconomic condition would be better than in 2004, the survey said.

Govt to Allow Pertamina, PLN to Raise Prices

In an attempt to check the ballooning fuel subsidy, the government will allow state oil and gas company PT Pertamina and state electricity firm PT PLN to charge market prices for fuel and power intended for specific use.
The move is expected to help the government cut projected fuel consumption from 59.69 million kiloliters (kl) to 55 million kl, The Jakarta Post quoted Mines and Energy Minister Purnomo Yusgiantoro as saying.
"The government will support any corporate plan from Pertamina and PLN to raise fuel prices and power rates. However, they will not be allowed to raise prices and power rates for five classifications of users protected by the government," Yusgiantoro said.
He was referring to small households, small and medium enterprises, public transportation owners, special transportation operators such as ambulance services and fire departments, and special purposes, which include donations and emergency uses.
The government will continue to provide subsidy for consumers in these five categories, so the Premium gasoline, diesel fuel and kerosene they use will cost less than the global market prices.
However, Pertamina will be able to raise the prices of its non-subsidized Pertamax and Pertamax Plus fuels. Pertamax costs Rp4,000 per liter and the price could go up to Rp5,000.

BUSINESS BRIEFS

MACROECONOMY

Key Rate Stays at 8.49% for 3 rd Week
Indonesia's key one-month interest rates was left unchanged at 8.49% for the third straight week in an auction on Wednesday (27/7/05), very close to the central bank's recently introduced 8.5% target, Reuters reported.
Traders said it was a sign of central bank Bank Indonesia's (BI) desire to underscore the importance of the new policy target by keeping rates as close to it as possible.
The market had forecast one-month BI certificates (SBIs) would rise 1 basis point to match the target, known as the reference rate.
"I think it sent a strong message to the market that the central bank wants the SBI rate to hover at around the reference rate despite the weak rupiah," a dealer at a large local bank said. "They can use other tools to strengthen the rupiah such as through foreign exchange intervention."
Authorities steer SBIs, Indonesia's benchmark short-term debt, through weekly auctions.
The country introduced a target for one-month SBIs in early July to make monetary policy more transparent and increase confidence in the rupiah.
The central bank took Rp38 trillion from the auction, against Rp39.4 trillion maturing on Thursday (28/7/05).
Dealers said that suggested short-term rates, including overnight rates, might remain low due to the expected ample liquidity in the banking system.

Rupiah Higher as Corporate Demand Declines

The Indonesian rupiah ended slightly stronger on Friday (29/7/05) due to a decline in local companies' dollar demand, sparking profit-taking against the US currency, dealers said according to Dow Jones.
The dollar closed at 9,810 compared to Thursday's (28/7/05) close of 9,838.
“Market players sold back the dollars to lock in profit as dollar demand from local companies subsided,” a dealer with a foreign bank said.
Local companies had been buying the greenback actively to pay offshore obligations maturing at the end of the month.
Dealers said banks wound up their dollar-long positions as the overnight rupiah interbank rate shot up to 30% earlier on Friday from the usual level of 5%-6%. Dealers said the interest rate rose sharply as banks held on to their rupiah due to the implementation of the new clearing system on Friday. Under the new system, clearing is done only once in the afternoon. Previously, clearing was done in the morning and in the afternoon.
“Banks kept their rupiah (as) they become familiar with the new system,” a dealer with a local bank said.
Dealers expect the dollar to trade between 9,790 and 9,820 on Monday (1/8/05).

INVESTMENT

Chinese Shoemakers to Relocate to Indonesia
Six Chinese shoe manufacturers, with a combined production capacity of 25 million pairs of shoes annually, will move their factories to Indonesia early next year, the Indonesian Association of Shoe-Making Companies (Aprisindo) said.
They could open 25,000 job opportunities in the country, Aprisindo chairman Harijanto was quoted as saying by Antara.
"We have to respond and be proactive to get the opportunity and we plan to make an approach to the owners of two major footwear industries -- Nike and Adidas," she said.
Aprisindo data shows that national footwear exports have been declining in recent years. Footwear exports dropped from $2.19 billion in 1996 to $1.18 billion in 2003, before increasing slightly to $1.32 billion in 2004. The association expects exports to reach $1.69 billion this year.
The largest markets for Indonesian footwear are the US, which absorbed 36.5% of the total exports in 2004, followed by the European Union (35.8%), Japan (5.6%), and Mexico (1.8%).
Harijanto was quoted as saying by The Jakarta Post that the poor local investment climate had been a major cause for the declining number of footwear factories in the country, from 400 in 1987 to only 236 in 2001.
He however said that if the country succeeds in convincing international brands to enter Indonesia, the local footwear industry would rebound and provide more employment opportunities.

STATE CONCERNS

Toll Road Fees to Rise 15%

The government will raise toll road fees by an average of 15% next month, Public Works Minister Joko Kirmanto was quoted as saying by AFX.
“The government is still calculating the increase but the average is about 15%,” Kirmanto said, adding that the new rates will apply to toll roads whose fees have not been increased in the past two years.
 
The price increases had been planned in June, but were delayed as authorities calculated new rates, which will vary from city to city, the Global Insight daily quoted the minister as saying.

SOEs

Govt to Halve Number of State Firms
The government will reduce the number of state-owned companies by 50% from 158 at present to about 70 to 80 by 2009, mainly by selling their shares through initial public offerings (IPO) and mergers, Antara quoted State Minister for State Enterprises Sugiharto as saying.
Sugiharto said companies which are not considered strategic and those which operate in areas where private firms could operate will be privatized.
Companies, which have public service obligation and operate in areas which concern the interest of the majority of the people, will be maintained, he said, noting that the policy is aimed at improving operating efficiency.
The government has been privatizing state companies mainly to raise fund for the state budget. This year privatization is projected to reap Rp3.5 trillion in additional income for the government.

Fast Growth for Major Telecom Companies
Executives of Indonesia's two largest telecommunications companies, PT Telkom and PT Indosat, have projected a twofold increase in telecommunications revenue by 2010.
In five years, revenues in the telecommunications industry would range from Rp141 trillion ($14.4 billion) to Rp181 trillion ($18.5 billion), far from last year's revenue of Rp48 trillion ($4.9 billion), Telkom President Arwin Rasjid was quoted as saying by The Jakarta Post .
Rasjid said by 2010, fixed-line subscribers would almost double from 2004 figures, while mobile phone subscribers and Internet users would triple.
 
Fixed-line subscribers number about 9 million, about 4.8% of the population, while cellular subscribers total 35 million (14%), and Internet users 16 million (7.4%).
He said he based his projection on the cellular industry's rapid growth, with the number of subscribers surging to 35 million in only 12 years.
Meanwhile, Indosat President Hasnul Suhaimi said the rapid growth started after the prepaid system was introduced in 1998, boosting the number of cell phone subscribers by 73.5% last year.
"The growth was also influenced by cheap handsets and competitive prices offered by cellular operators," he said.
Suhaimi said Indosat gained 3.7 million new cellular subscribers in the first semester of the year, bringing its total to 12.87 million, and expects to push the figure further to 14 million by yearend.
"With our planned capital expenditures for 2005 and 2006, we expect that the service quality and coverage of our cellular service business will continue to improve," he was quoted as saying by Dow Jones.
Indosat plans to spend about $900 million to develop its telecommunication business this year, some 85% of which will be used to develop its cellular business.
Telkom said its mobile user base climbed to 22.5 million as of the end of June from 12.4 million 12 months before. Its unit, PT Telkomsel, said it plans to grow its subscriber base to 25 million by the end of the year, 53% higher than last year.
With the skyrocketing number of new mobile phone subscribers, Telkom saw a 47.6% increase in its net profit in the first half of the year, Reuters reported.
Telkom booked Rp3.7 trillion ($376.6 million) in net profit during the six months ending on June 30, compared to Rp2.51 trillion in the same period last year. Revenues rose 20% to Rp19.38 trillion.
First half sales reached Rp19.38 trillion, up 20% from Rp16.13 trillion a year before, AFX reported. In the cellular phone business, sales grew even more strongly, rising 29% to Rp6.4 trillion from Rp4.95 trillion the previous year.
The fixed line business meanwhile posted only modest sales growth, rising to Rp5.47 trillion from Rp5.42 trillion.
In another development, Telkomsel said it will raise its subscriber target in West Java, one of its main markets, for the second time this year due to higher-than-expected growth.
The company's number of subscribers has already reached 1.75 million by the third week of July, close to the full-year target of 1.8 million, Bisnis Indonesia quoted Telkomsel-West Java's general manager for sales and customer services Dahoko Baskoro as saying.
He said Telkomsel has yet to decide on a new full-year target.

BANKS
BRI H1 Net Profit Up 13%
Indonesia's fourth largest bank, PT Bank Rakyat Indonesia (BRI), said its net profit rose 13% to Rp1.94 trillion in the first half to June from the year-earlier Rp1.71 trillion, as growth in new loans led to higher interest income, AFX reported.
The bank's Vice President Wayan Alit Antara said interest income in the first half rose 6% year-on-year to Rp8.2 trillion, while net interest income grew at a faster pace of 9% to Rp6.05 trillion.
He said BRI's outstanding loans as of end-June amounted to Rp68.95 trillion, up 25% from Rp55.04 trillion in the previous year. The bank has no plan as yet to revise its full-year loan target of Rp76 trillion, Antara said.
Following the loan expansion, BRI's capital adequacy ratio (CAR) fell to 17% as of end-June from 19.33% a year earlier, while its loan-to-deposit ratio improved to 77.06% from 69.11%, he said.
BRI posted lower non-operating gains of Rp69 billion in the first half compared to the year-earlier Rp89 billion.
POWER

Japan Power Eager to Invest in Indonesia

Japan Power is keen on investing in Indonesia`s electricity and coal mining sectors, its President Yushihiko Nakagaki was quoted as saying by Antara.
Nakagaki asked Mines and Energy Minister Purnomo Yusgiantoro during a meeting about licensing procedures for investments in the mining and electricity sectors.
He also said his company wants to join a tender for the procurement of electrical power in Cilegon, Banten province and manage a number of infrastructure projects, such as the expansion of the Cirebon power plant and the construction of an LNG terminal in Cilegon.

OIL AND GAS

Pertamina, Sinopec to Build Tuban Refinery

State oil and gas company PT Pertamina will work with the China Petroleum & Chemical Corp (Sinopec) to build the country's 10 th oil refinery in Tuban, East Java, Mines and Energy Minister Purnomo Yusgiantoro said.
Construction of the refinery, which will produce 150,000 to 200,000 barrels of crude oil per day (bpd). is expected to start as soon as possible, The Jakarta Post quoted Pertamina President Director Widya Purnama as saying.
The plan to build a new oil refinery in East Java is part of the government's long-term solution to meet domestic oil products demand, Reuters reported.
Indonesia has nine refineries with a combined capacity of about 1 million bpd, but they cover only 70% of the domestic oil consumption. The rest of the demand are imported.

MINING

Inco H1 Nickel Output Up

PT International Nickel Indonesia (Inco) said its output in the first half of the year rose to 79.3 million pounds of nickel matte, or 36,000 tons, up 2.6% against the same period last year, Reuters reported.
Deliveries of the anti-corrosive metal used in stainless steel rose to 35,000 tons from 34,200 in the same period last year, compensated from shipment delays in the beginning of the year, the firm said in a statement.
The nickel produced by the local unit of Canada's Inco Ltd is sold mainly to Japan .
The nickel miner said its net profit in the first half rose 13% to $141.9 million, largely due to increased sales and higher prices.
Revenue also jumped 18% to $434.3 million compared to $369 million a year ago.
The firm plans to fund a $280 million hydroelectric dam through bonds or bank loans in its mining area in Sulawesi in an effort to boost production, until it gets government approval to expand. The dam is scheduled for completion in 2009 and is seen raising production of nickel matte to about 200 million pounds a year.
In 2005, production is estimated to stay flat at 160 million pounds, against 159 million last year.
End of June stocks of nickel matte, an intermediary product from the smelter that must be further refined to make pure metal, fell 8.3% to 1,475 tons or 3.3 million pounds compared to the same period last year.
Meanwhile, it said its unit cost of production will rise by 7% due to the government's decision to apply market prices on fuel supplied to mining companies, The Jakarta Post disclosed.
Production costs will rise by 15 US cents per pound, starting with July's delivery of fuel, Inco President Director Bing Tobing said.
"Energy represented about 40% of our costs last year," Tobing said. Unit cost production stood at $2.23 per pound in the three months ending on June 30.
Inco uses about 3.4 million barrels of high sulfur fuel oil (HSFO) and between 80 million liters and 85 million liters of diesel fuel per year in its operations.
State oil and gas firm Pertamina, with leave from the government, has announced that mining companies and export industries will have to pay market prices for fuel. Diesel fuel prices more than doubled from the subsidized Rp 2,200 (about 22 US cents) a liter to Rp 4,740 per liter.
Inco is planning to increase its hydroelectric capacity by constructing a 90-megawatt hydropower plant near its mine in Sorowako, South Sulawesi, to enable it to hike output to 200 million pounds of nickel in matte in 2009 from the 160 million pounds targeted this year.
The increased power would reduce production costs by between 10 US cents and 15 US cents per pound, Tobing said.
The development of the $280 million dam has been stalled as Inco has not secured a permit to increase its mining output from the government, which has insisted that the company double its royalties in the event nickel prices go above $3.50 per pound.