Realized local investment decreased 70% in the first half as compared to the first six months of last year. To avoid paying Indonesia's taxes, local investors have begun to invest in global legal entities. In the first half, realized foreign investment increased 153% as compared to the first half of last year.

Bank Negara Indonesia (BNI), a state-owned lender, will spin off its sharia unit into a joint-venture with Saudi Arabia-based Islamic Corporation for the Development of the Private Sector (ICD). BNI will probably get a 20 to 30% stake while ICD will have the remainder. Due to this joint-venture, BNI should increase the number of customers in the Middle East.

Indonesia, Southeast Asia's largest economy, has the lowest average price of cigarettes in the world, and analysts believe the livelihoods of 12 million people are directly or indirectly dependent on the country's tobacco and cigarette sector. Finance Ministry's Director General of Customs and Excise Anwar Surpijadi said he was concerned a further rise in the excise would hurt the cigarette industry and risk the jobs of its millions of workers. He also disagreed with analysts who believe a 60 percent rise in excise duty would boost state revenue, cut the number of smokers and retain a robust cigarette industry.

According to Indonesia's business community and entrepreneurs, the state budget allocation for infrastructure is insufficient. The allocated budget for infrastructure is 3%. Many believe that it should be at least doubled to 6%. The lower budget reflects a cautious move in light of unstable oil prices.

According to the central bank, lending should expand by 27 to 30% this year. The bank had previously estimated that it would grow by only 24%. Agribusiness and trade and industries are expected to demand the most loans. Banks usually increase lending in the second half because firms need funds to materialize the business ventures they began at the start of the year.

The European Commission (EC) will get a tax cut on wood products imported from Indonesia starting in 2009 and lasting until 2011. The European Commission (EC) will get a tax cut between 3 percent and 6 percent on wood products such as sheets, while tax on plywood and boards will be reduced by 3.5 percent.

Amid soaring inflation, Bank Indonesia (BI) raised its benchmark rate to 9%. BI's rate increase is the fourth consecutive hike as inflation rose to a 22-month high of 11.9% in July. BI claimed that the increased rates had not affected Indonesia's economy thus far. At the end of June, bank lending grew to 31.6%, higher than the expected 22 to 26%.

Indonesia's bluechip companies gained sizable profits in the first half of the year. Seven publicly listed hotshot companies recorded an average of 52.1% increase in profits compared to the first half of 2007. Mining giant PT Bumi Resources had the highest increase in profit, probably due to surging coal prices and increase demand from China and India.

Due mostly to a decrease in the United States' demand for oil, Indonesia's September delivery of oil dropped more than half a dollar to $121.68 a barrel. The price of oil is down 17% from its peak of over $147 a barrel earlier this month. Even with falling prices, oil is still 60% more expensive than it was one year ago.

In the first half of the year, Bank Central Asia (BCA) distributed Rp 95.6 trillion, a 49.6% growth compared to the first half of 2007. The growth in lending helped to increas total profits by 11.6%. Corporate loans grew by 64.5% due to a higher demand from companies in agriculture, mining, telecommunications, and plantations. BCA is Indonesia's second largest lender by assets.