International Investors: Harm or Help

April 16th, 2008, in Business & Economy, by Patung

Hizbullah Whether foreign investment in Indonesia benefits the people.

Health minister Siti Fadilah Supari warned on 11th April in South Kalimantan (Borneo) that regional governments in Indonesia should be on their guard whenever dealing with international investment proposals.

Siti Fadilah Supari

According to Siti these things should be considered by provincial governors and regents in respect of foreign investment plans:

Would the international investors take control of Indonesian resources?
Would the foreigners be prepared to be on an equal footing with Indonesian partners, or would they adopt a lordly, colonialist stance?
Would a particular foreign investment benefit Indonesians or harm them?
To exactly what extent would Indonesians gain from the investment? Because foreign investors often lied about this matter.

For example, South Kalimantan’s coal needs were less than 1 million tons per year and there was an electricity shortage crisis, yet at the same time 70 million tons of coal was taken out of the province and sold internationally. A lesson should be learned from this: [1]

Don’t let our natural resources fall into the hands of foreigners while the people don’t get anything.

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Tags: Borneo, Coal, Electricity, Foreign Investment, Foreign Investors, Investment, Kalimantan, Siti Fadilah Supari, South Kalimantan

48 Comments on “International Investors: Harm or Help”

dewaratugedeanom Says:
April 17th, 2008 at 12:55 pm
Has this woman plans to run for president in the next elections? I think that lately she utters a lot of crap to appeal to the longstanding fears and mistrust of anything foreign and gain this way the votes of the wong cilik which is still the largest part of the Indonesian constituency.
The Righteous Dude Says:
April 17th, 2008 at 1:46 pm
I am confused.

She is the Health Minister, right?

Her country has the worst rate of bird flu infections in the world, right?

Why does she feel qualified to comment on international investment and foreign relations, when she clearly isn’t performing well in her own area of expertise?

(And then there is her claim that bird flu is a WHO/US conspiracy).
Rob Says:
April 17th, 2008 at 1:51 pm
wong cilik indeed!
Janma Says:
April 17th, 2008 at 1:58 pm
Well duh…. the ones selling out to the investors are not the wong cilik…. it’s the government innit? And wouldn’t they have some sort of contract with these foreign investors…. I can’t believe they set up these shared projects with a hand shake and a promise….. oh, you wanted some coal? sorry, we lied…. oops.
GJ Says:
April 17th, 2008 at 3:50 pm
Rest assured the “people” get something. Especially the people reaching under the table for that inconspicuous brown paper bag.
Oigal Says:
April 17th, 2008 at 4:09 pm
For example, South Kalimantan’s coal needs were less than 1 million tons per year and there was an electricity shortage crisis, yet at the same time 70 million tons of coal was taken out of the province and sold internationally. A lesson should be learned from this: [1]

Absolutely correct, trouble is our nationalist Siti neglects to mention that the vast majority of international miners are contractors for concession holders who dictate where the coal is sold to..and those concession holders are…WAIT FOR IT…Indonesians

KPC-BUMI (Now granted TATA but who sold it off none other than our….you know who)

Did I hear the term transfer pricing…I wonder what that means…I wonder who is involved…

I agree the Dayk should refuse to let another ton of coal be removed until Jakarta starts to provide the very basics infrastructure…but don’t look overseas for the source of the trouble…is an empire much closer than that…
sputjam Says:
April 17th, 2008 at 6:28 pm
Only way to maximise returns on resorces is to utilise it ourselves. Unfortunately, there is very little industry to speak of. No giant steel mills, car plants, shibuilding etc.
Having sadi that, there is a very active tug and barge manufacturing facilities in Kalimantan, which could move up market and produce offshore vessels to service the oil companies.

Or another way is by introducing forced industrialisation, make the concession holders and exporters use locally built ships, therefore expanding the local economy and magnifying the trickling down effect, creating jobs and industries, and creating more avenues for education to upgrade alongside.

kalimantan can harness hydro eletricity, which it have in abundance. Hydro electricity does not mean drowning huge tracts of jungle. By reducing the scale of the dam, there should be ample power generated to light up a decent size town. Small scale dams can be built by locals without the need of foreign expetise.

When it comes to offshore development, force oil companies to build their platfroms and rigs in indonesia. make sure that these rigs are not built in batam or bintan as it will only benefit singapore, but build near where the oil is found. Make it mandatory.
PrimaryDrive Says:
April 19th, 2008 at 5:49 pm
She has a valid point. Having said that, it is mostly our own stupidity and greed that lead to the current depletion of our natural resources. With full democracy, people now actually have full control of their own fate. Yet people keep voting on leaders based on their popularity rather than their actual merit. I wonder if there is still any point now to commit myself to this Indonesia.
Lairedion Says:
April 19th, 2008 at 8:53 pm
Hey, Tante Siti is back. Election time has started and xenophobia is one of the key issues to score votes with…
Rob Says:
April 20th, 2008 at 12:30 am
Xenophobia is a vote getter as it preaches to those that need something to blame and it is always easier to blame those that are different to us, foreigners, than it is to have a good hard look at ourselves and critically evaluate our own shortcomings.

There certainly have been some excesses perpetrated by foreign mining companies but most of these excesses have been facilitated by the Indonesian government. The reality is that most foreign mining companies are in compliance with the regulations. There are always going to be compliance issues and these will be rectified through the implementation of the prevailing laws and regulations in the areas involved.

The idea of forcing investors to use locally made goods when they can be imported more cheaply from overseas is ultimately a hinderance to investment and investors will look for other locations to invest or seek to garner concessions from Indonesia. Indonesia is being very concessionary as part of a policy to develop and grow investment both domestic and foreign.

The only way that foreigners control Indonesia’s natural resources is if Indonesia allows them to! Thus, perhaps what is needed is some introspection on the Government’s part to decide whether the right policy approach is to concede everything to attract investment or something which is more “balanced” and protect of Indonesia’s national interests. To be sure it is a fine balancing act!

The wong cilik do not make the policy but they are the voters who must be swayed. Playing to stereotypes and fears is one way of swaying those votes.

GJ…whatever happened to envelopes? I guess inflation will get you everytime! I have heard that the poor Zimbabweans are now wheeling barrows full of cash about to buy basic necessities…at least we are not at that level yet!
Cukurungan Says:
April 20th, 2008 at 9:40 am
dewaratugedeanom said:
‘Has this woman plans to run for president in the next elections? I think that lately she utters a lot of crap to appeal to the longstanding fears and mistrust of anything foreign and gain this way the votes of the wong cilik which is still the largest part of the Indonesian constituency.’

Me :
She was no different with other a normal people who want to get better life and work and the only different with you she was a qualified doctor’s and she succeeded to become a health minister whereas you are a qualified cowboy Kuta and I hope once day that you also will get better position at least to become a pimp pimp in your area.
sputjam Says:
April 20th, 2008 at 9:41 pm
I think most indonesians are worried about their future when their resources dry up. Reason, they do not have very much else to offer. No core industrial focus. Hence when the resourses dry up, most indonesian may end up in middle east, or worse, in malaysia/singapore for work.
Up to the government to inject some fund to create industries. But if government is unwilling, then maybe force those with mining concession to do so. I doubt very much there will be many who protest in this era of high commodity prices. Foreign investor can of course get better deals, but in places such as sudan or congo, which I think many will just ignore.
Major developed nations became what they are because of fear of being annihilated by their enemies, hence govenrment spent enormous amount of money on defence, which indirectly assisted in industrialisation e.g europe.
Same with japan.
There should be no fear if government funds are used to create jobs which will benefit the country, or forcing investors to use locally made products as a condition for their ventures. The cost may be slightly more to the mining consessionaires, but the benefit to the indonesian people far outweighs the small difference in cost and quality. Did not britain and germany became industralised nations by mining coal, then created industries based on coal mining, and expanded from there?
tomaculum Says:
April 20th, 2008 at 11:14 pm
She was no different with other a normal people who want to get better life and work and the only different with you she was a qualified doctor’s

Are you sure? Or maybe she has a membership of the right party and the right connection?

Let us be realistic: someone know any investor who doesn’t think of his benefit primarily?
Or an investor who likes to confer the control of his money on his partner or share it with him if he knows that this partner is unqualified and sit on his chair because he/she is just a son/daughter, niece/nephew, brother/sister or even a friend of someone sitting in the government or in DPR?

Because foreign investors often lied about this matter.

They don’t lie but “only” color their aims. And the negotiation partners (who are they?? ) know it. But their eyes are covered by dollars (or maybe nowadays better by “Euro”?) so they don’t need to see it.
Rob Says:
April 21st, 2008 at 6:33 am
Sputjam…

Better still nationalize all industries, close all sectors to foreign investment under the guise of protecting the national interest, and the government take over the running of and providing for Indonesians.

The reason this isn’t happening is because the Indonesia government does not want to throw the financial resources it has available to do this. Perhaps Indonesia could spend down its financial reserves to re-acquire consessions from foreigners and then mine those concessions for themselves.

Do not be so sure that investors will spurn the likes of the Sudan and Congo; quite simply a dollar is a dollar in business terms! Don’t quite see the connection between the industrial revolution in Europe and the current plight of Indonesia. The industrial revolution was akin to inventing the wheel. If you are suggesting Indonesia needs to go through an industrial revolution of its own, then quite simply why invent the wheel when someone else has already done it! Why not exploit their expertise and resources in this area. This is not going to be a freeby and investors will want specific types of terms and facilities in place.

The Indonesian government is committed to attracting foreign investment (and domestic investment too) and this involves providing facilities that are likely to peak the interest of investors. However, Indonesia has already indicated that it is going to seek fairness in any contractual dealings and concessions that saw 100% or profits going to investors are a thing of the past.

Indonesia needs to protect her interests but the idea of blaming foreigners for all of Indonesia’s current woes is naive at best and somewhat xenophobic at worst! Blaming foreigners is not a uniquely Indonesian thing it happens all over the world…hey, it’s not that different from Pauline Hanson in Australia or a whole range of people in the US or perhaps even people like the now (in)famous Dutch politician Geert Wilders — xenophobes one and all!
sputjam Says:
April 21st, 2008 at 5:21 pm
Investors, business opportunities and maximising trade links are essential for a country to progress. Investors interest should not be given at the expense of indonesians well being.
mining coal requires very little local input, apart from the coal that is being extracted, and manual labour.
All machineries and shipping equipment are manufactured outside of indonesia except for the tug and barges, which indonesia can produce locally.
For the enormous amount of coal being exported, and funds generated by exporting the coal, very little is retained locally apart from govenrment taxation. Prices of coal almost doubled within the last one year alone. But have you seen much wealth that is being generated in the coal mining areas? The wealth from mining coal eventually ends up in jakarta (local concession holder) or singapore (financial centres). Cost of extracting coal is peanuts compared to the price these miners are getting now.
Will we see huge bonus being paid to miners, especially the lower rank workers? After the resources dried, only ugly landscape left. Most of the locals who used to reside on the land before being forced to evict will inherit a wasteland.
Rob Says:
April 21st, 2008 at 8:36 pm
Once again Sputjam you are conveniently missing the point; Investors and Foreigners are not solely to blame for the plight of farmers forced off their lands and the distribution of wealth or the profits derived from the exploitation of resources.

Yes, environmental degredation and poor returns to locals from the profits derived from their resources is an issue! But, the issue is one of why can the Indonesian government not get this right? The Indonesian government is complicit in this situation and this is what is generally forgotten or neglected in any debate. The debate degenerates into an “us” and “them” mentality which may in some cases reflect the reality of the situation, in this case it does not!
sputjam Says:
April 22nd, 2008 at 1:21 pm
I am merely highlight the happenings in the jungles of kalimnatan, that have been exploited over the decades with nothing in return for the locals. This include timber, plantantion and mining.
If the government were to ban timber from being exported, then maybe these guys may be forced to manufacture furniture before being exported, thus creating jobs and expertise for the locals.
Same with mining. Force mining companies to use locally made ships for export. If they cannot do this, then tough luck. concession goes to the chap who can deliver this. Maybe give three to five years for concession holders to comply.
I understand investors sentiments. Their idea is to minimise capital usage and generate cash flow asap. Mining and timber are ideal for these chaps as the resources are just lying there waiting to be plucked. Of course, another option is for concession areas for mining and timber to be sold via auction, like the 3G phone licenses in europe. But the money will end up in federal government’s hand and nothing ends up locally.
It came in the news recently about Congo granting china mining company to extract copper from a remote mountainous area. In return, china have to build highways and railroads, in tandem with mineral extraction. Of course, the congolese got nothing as they did not build these machines. The Congolese will probably provide the manual labour, while all the machinery comes from china. However, the congo gets to vital infrastructure, which includes road/rail and hundreds of rural hospitals/medial centres and two universities.
If all the mines are nationalised and granted to china, with a condition that the coal will be exported using Locally made ships, with expertise given by China, long term wise, it is a better bet for indonesia.
Syonan Says:
April 26th, 2008 at 3:14 am
As a Minister of Health, she should not comment on issues that is not within her jurisdiction. If the Central Government and DPR thinks that international investments does hurt the people and the country rather than develop and pull the people out of poverty,then might as well close the borders and live in isolation.
Rob Says:
April 26th, 2008 at 7:12 am
Personally, I think that she can comment on anything that she wants! Indonesia is a developing democracy and it is important for citizens to be engaged in public debate even where those citizens are members of Cabinet and commenting outside their portfolio!

However, when they make comments which appear to be lacking on substance and playing to xenophobic fears, then the person making those comments should have and expect those comments to be subject to scrutiny!

The flip side is that the problems facing the Indonesian economy and in particular the natural resources sector is a case of reaping what you sow! Simply, the government is responsible for allowing a governance and corporate culture to develop where there is inadequate legislation, rampant corruption, and a complete lack of vision for the future!

Rather than always looking to external factors and looking to blame foreigners for the ills of the nation, perhaps it is time some internal reflection or introspection is required in order to identify any failings or deficiencies and rectify them! Admittedly, foreigners play a role but are they the ones that are primarily responsible for the problems that the Health Minister sees with investment? (I have an idea on what Achmad might say here…)

Indonesia, despite the ramblings of the Health Minister, are unlikely to become isolationist as the foreign reserves that Indonesia has stashed away will not last long if they pull themselves out of the global economy!
sputjam Says:
April 26th, 2008 at 4:47 pm
Since 1997, indonesia have more or less sold their country to foreigners, thanks to IMF impositions. now banks, plantations, sattelites, telecommunications have fallen into foreign hands. Many funds who had bought these assets for peanuts, have sold then for handsome profit to other foreign entities.
Even Singapore, the supposedly most open economy in south east asia, does not allow these things to happen.
In matters where indoensian have the expertise, priority should be given to indonesian companies to prosper, such as plantation, timber, coal mining,consumer banking, telecomunication, shipping etc.
Indonesia should be open to foreigners only where high technical skills are required and/or where huge amount of capital is required such as steel foundry, aluminium smelter(using hydro power).
Darwin Says:
May 3rd, 2008 at 10:26 am
Rooms has to change in Indonesia, let young man handles of course with young who being treat examination by Allah and Rasull SAW since 1998!
I am sure the Gua kafi young man will perform in Indonesia.
but the establishment an old man the way of thing will be rejected.
The problem in Indonesian is not the sources but the people.
Infrastructure not the systems but Human Infrastructure more further discussion will be waiting.
Darwin
62-08158932851
Marisa Says:
May 3rd, 2008 at 12:46 pm
A truly intelligent government (officials) should’ve stood far outside the border between harm and help, because they’d find themselves trapped inside walls and not being able to move forward and level with the international world. The government should’ve taken steady grip of each possibility heading their way, even if it means that they should forcefully process the seemingly harmful ones into profitable help. It’s the risk they must learn to deal with. Problem is, we’re not sure how exactly the government defines “harm” and “help” in this scenario.

International investors, they’re simply doing their job: to gain as much profit as possible, and they sure have their own ways. Let’s just assume that those investors are all corporate leeches, but it’s the government’s job to protect, control, and regulate it in a way that an investment could significantly be an opportunity, not a threat. Ironically, we’ve learned that leeches find the government as a much more comfortable habitat, rather than in private sectors/companies. One particular private sector trades 70 million tons of coal, the government trades moral values.

Anyhow, is it Euro? US Dollars? Yen? Or Rial? ..that she is referring to.
Rob Says:
May 4th, 2008 at 1:00 pm
Marissa,

I think that is the point in a nutshell!

Simply, this is not soley the responsibilty of foreign investors but some of the blame for the lack of benefits trickling down to the various local communities is partly the government of Indonesia’s fault as well!

Foreign investors are here to make a Euro, a Dollar, a Yen, or a Rial or millions of them but they are here to make money and return the original investment to their respective shareholders.

The government’s responsibility is to put into place a regulatory framework that is not only conducive to business (investment) but one that protects the interests of the relevant local communities. The failure of the government to do this, or where it has to enforce it, is not an error on the part of business or investors!

My original opinion of the Health Minister’s statement has not changed it is a xeonphobic vote grabber in the lead up to the next general election and is representative of the mentality of don’t blame me syndrome but blame those big bad foreigners who are only here to subvert our way of life and steal our resources!

Very sad!
Dylan Says:
May 4th, 2008 at 10:25 pm
Indonesia needs to open their policies to free trade and investment. We have seen how China does it, “bring the money to us”. We cannot only rely on our domestic economy as to speed our economic growth, we need to inject money into the economy through foreign trade and investment. Part of which is to make the policies simpler, provide infrastructure, and clean the “dirty bureaucracy”.

What she mentioned however is true, but instead of complicating the policy, teach our Entrepreneurs how to make a DEAL instead. This is a difference between hiding and standing up. Well its very simple, the deal is that “I get more than 50% at least”.

Foreign investment would help us, with capital flows and technology flowing into the economy, it will benefit our production efficiency. The only thing that can harm us is ourselves, so instead of preventing foreign investment, improve yourself further so that you can actually play the game right. Run and hide, or face it.
sputjam Says:
May 5th, 2008 at 11:15 pm
Indonesia is completely different from china. During the time before deng xiao Peng, china had heavy industrial complexes, producing steel, making ships and locomotives, diesel engines, bridges, electricals, hydrogen bombs, tanks, bombs etc.

In other words, despite the upheavals in china, it was an industrial nation. Thus when china opened up, the had overseas chinses who were able to provide modern management skills and techniques to the communist, backed by investments. Initially it was the hongky tonks with shenzhen, followed by others to the rest of china later on.

In china presently, arts and culture is promoted on a big scale. You can see some of the dances/musicals/art on CCTV 9. Plus they value their heritage and if a building site was found to be on some heritage, work stops immediately and the local museum alerted.

Indonesia does not have much in terms of industrial know how. If it opens up, almost all the machinery will come from overseas. therefore foreign investment will benefit only the landlord and local manpower only, plus the few service industries, unlike in china where the local maufacturers can contribute to the investor and hence the trickling effect is much greater locally.

Presently, there is already capital flowing into indonesia, the bulk of it into palm oil plantation and coal mining. Unlike in china, whereby local machinery and talent are used to mine coal, in indoensia, all the machinery and some talent are imported. In china, oil is a local heavy industry, while in indonesia, without foreign expertise, crude oil will never be extracted.

Indonesia lack human resource assets/talents and experience, especially in metal working, whereby the iron age seems to have bypassed the malay archipelago.
Purba Negoro Says:
May 6th, 2008 at 1:18 am
I side with Rob on this one. I’m surprised too.

As for the Dayak and Kalimantan inhabitants getting their peice of the pie- this brings into question the whole issue of the post de-centralisation dilemma of Raja Cilik and regionalism.

You would be surprised to find the Central Governemnt gets very little- gut instead the Regions- especially the Bupati, Kabupaten etc- the Little Kings- are unbelievably wealthy.
We now have business leaders lobbying us to revert to Centralisasi.

Returning to the issue of minorities- we must provide always for the greater good and thus via poroprtional representation- such minorities unfortunately must by necessity recieve only their populations’ fair shore.

The sad reality for the developing world is so many outstretched and equally needy hands- not enough alms to go around. It is a delusion to think poverty can ever be reduced to the level of a Western nation. There is simply not enough money on the planet.

If we halved our population- our country would be in far stronger economic position.
But that’s another tale.

Perhaps I am dumbstruck I agree with Rob…
Dylan Says:
May 9th, 2008 at 12:54 am
Indonesia is completely different from china. During the time before deng xiao Peng, china had heavy industrial complexes, producing steel, making ships and locomotives, diesel engines, bridges, electricals, hydrogen bombs, tanks, bombs etc…

My normative statement does not require the contrast and comparison of Indonesia and China, as it leans towards rhetorical, which is obvious of what you say and leads towards no thesis.

Indonesia does not have much in terms of industrial know how. If it opens up, almost all the machinery will come from overseas. therefore foreign investment will benefit only the landlord and local manpower only, plus the few service industries, unlike in china where the local maufacturers can contribute to the investor and hence the trickling effect is much greater locally.

I come from an entrepreneur family and for your information, all those products you see in Dubai hotels, Prada, Guess jeans, Wall Mart are mostly made in Indonesia. Indonesia do have expirience in industrial “know how”. In China the trickle down effect is not greater as you say. Read the news please. Moreover, my American friend prefer buying shower towels made in Indonesia from Wallmart more than the ones made in China.

Presently, there is already capital flowing into indonesia, the bulk of it into palm oil plantation and coal mining. Unlike in china, whereby local machinery and talent are used to mine coal, in indoensia, all the machinery and some talent are imported. In china, oil is a local heavy industry, while in indonesia, without foreign expertise, crude oil will never be extracted.

My parents and their friends invested in various sectors of the economy and I see no evidence of talent being imported, I do see them equipping foreign machinery and hiring foreign professionals to teach labors how to operate those machines.

Indonesia lack human resource assets/talents and experience, especially in metal working, whereby the iron age seems to have bypassed the malay archipelago.

I do not understand why your concern focus on metal working. Indonesia should specialize on production that gain comparative advantage, which means producing with the least opportunity cost. Indonesia does not have a comparative advantage over producing steel and therefore we do not need to focus on metal working. I encourage you to judge your statements with theory before promoting them to this blog. Producing steel in Indonesia would make no sense, as we have to import furnaces mainly from Australia which cost a lot. I can earn profit triple right now by investing on agricultural instead.

For your concern, Indonesia does not need complains anymore, it needs encouragement, motivation, creative ideas, and optimism. I come to this forum to embrace this message. And speaking of which, you are talking to a 17 year old right now.
sputjam Says:
May 9th, 2008 at 2:19 pm
benefits to locals from foreign investment is minimal, due to low labour cost. Foreign investors get to use subsidised fuel and power, tax breaks etc.

Of course without foreign investors, there will be insufficient jobs. But there should be a formula whereby, if extracting natural resources, priority should be given to firms that uses locally made machinery, especially in transport (which indonesia can manufacture, but have no incentive from the authorities), cranes and tractors, oil rigs and supply vessels, tugs and barges.

those guys that manufactured jeans and towels in indonesia got their cottons and machinery from outside. Only benefit is that locals get employed and some may eventually buy cars and houses, broadening the economic cake. What I am suggesting is to broaden further that cake to benefit more locals.
sputjam Says:
May 9th, 2008 at 2:21 pm
especially in mining and industries that involves natural resources.
Sylvester Says:
May 9th, 2008 at 7:02 pm
Foreign investment is important even for the developed West. Recently, UK welcomes Chinese investment worth USD 200 billion
http://edition.cnn.com/2008/BUSINESS/04/15/britain.china.ap/index.html?eref=edition_business

The point is how the local government is able to protect its own people from greedy capitalists. Indonesians should not easily submit to any bules such like during colonization era.
TheWrathOfGrapes Says:
May 9th, 2008 at 9:17 pm
Indonesia has to make up its mind whether it wants international investors to invest in Indonesia. When Indonesia is down and out in the wake of the Asian Financial Crisis, it welcomed investments for SingTel into Telkomsel and ST Telemedia into Indosat, at very high premiums. Now that those sick companies are back on their feet, they want to get out. This is sending a very bad signal to other would-be investors - your money is only welcomed when it is needed.
sputjam Says:
May 10th, 2008 at 3:04 pm
In the case of UK, its already higly developed, hence they can induce rich and proffesional migrants and any kind of investors to park their money there. (like what singapore is currently doing)

In the case of temasek, who have shares in both singtel and ST telemedia, it was against a local law which forbid a single entity from holding more than one interest in a similar industry. This law applies rto locals also and prevents a monopolistic tendency.

In the case of indonesia, the authorities must ensure maximum returns to its citizens from its mining(depleting assets) and commodities. I believe prior to 1997, everyone in south east asia welcome all sorts of investors only to be sold for a penny when situation turned sour. There must be a law to prevent short term capital flight. This may deter many, but eventually, long term stability is better than short term gain.
Dykarg Says:
May 11th, 2008 at 7:49 am
I agree with Rob, investors are here for dollars and it has to be goverment who ensured that some of the benefits reach locals who needs them the most.
What had been applied so far, like imposing minimum local contents or partnership with local companies did not work as expected, mostly because of not enough “grip” from the government officials and also from local partner,just as Marissa said.
Our local companies in foreign partnership are never intend to grow (except their wallet), and at the end they seems to be happy taking role as “agents” that live from commission.
One key element is human resource quality, Malaysia send a lot of their bumiputras overseas and came back home they were taking post as goverment officials. So our BPPT in Habibie era, but yes, they are minority.
The sad thing is despite some wealthy local leaders as said by Purba Negoro, it seems that they are not spend enough to improve educations for their own people.
TheWrathOfGrapes Says:
May 11th, 2008 at 2:26 pm
n the case of temasek, who have shares in both singtel and ST telemedia, it was against a local law which forbid a single entity from holding more than one interest in a similar industry.

Sputjam - how did those investors got approved in the first place? And the Indonesian government is a major shareholder, so how can SingTel influence pricing?
Rob Says:
May 11th, 2008 at 3:50 pm
TheWrathofGrapes…

The mind boggles doesn’t it? How a government approves an investment and the KPPU taketh that investment away! How a minority shareholder fixes prices? and some other players waiting in the winds for the all expected fallout!

Rumors and goossip along with smoke and mirrors makes for an interesting business climate!
sputjam Says:
May 11th, 2008 at 10:15 pm
The stakes were bought before the law came in force. hence some entities like temasek and govenrment of malaysia’s version of temasek - khazanah were caught off guard.
Despite this setbacks, indonesian economy is quite liberal.It does not attract much attention due to language barriers, as many investors have their regional headquarters in singapore, as many singaporeans do not speak the language.

It could also be due to this law, plantation giants, guthrie-sime darby-etc, in which the govenrmen had some stake, were forced to merge in malaysia order to comply with indonesia’s legislation, as they had huge investment in indonesia under their various local subsidiaries.(personal opinion only) with their combine acreage, they are probably the largest plantation owner in indonesia.

Just wondered why singapore did not use nominees like it did when buying into thaksin’s shincorp to circumvent the law.
Deng Xiao Phing Says:
May 12th, 2008 at 9:11 pm
KPC-BUMI (Now granted TATA but who sold it off none other than our….you know who)

…. you mean BUMI RESOURCES of BAKRIE ?

SFS maybe targeting as 2nd Indon women president, she talks loud & as if she owns Indon. She might be protecting Jakarta’s businessman predators, old tricks do not really work today. Who doesn’t know who own KPC ? why always blaming foreign’s investors ? what Bakrie have done with Porong mud flow ? the with coal extraction ? who benefited except for a few Bakrie managers ? … so sad
sputjam Says:
May 13th, 2008 at 12:29 pm
A right wing bumi will give priority to foreigners than to indonesian minorities. That is true, whether in Indonesia or Malaysia.And they will use racial and religious issues to suppress minority opinion.
Fortunately, more educated ones can see through this bullshit and as the recent malaysian election has shown, kick the right wingers out of the door.

The so called political tsunami in Malaysia could not have happened if the country was under mahathir, an indian half breed with bumi status. And if mahathr had obtain similar results in the election, he would have called the extremist to create havoc, or scare the elctortes into voting for him, in order to stay in power, using racial/religous sentiments, much like 1969, the last time UMNO lost credibility.

It just shows that if there is a level playing field, most bumis do not resent minorities, All these problems of riots and mayhem are created by a few for their own benefits and interests. Ruling a country by dictatorship means plenty of financial rewards for the corrupt and greedy.
TheWrathOfGrapes Says:
May 13th, 2008 at 12:35 pm
The stakes were bought before the law came in force. hence some entities like temasek and govenrment of malaysia’s version of temasek - khazanah were caught off guard.

Sputjam - the more you explain, the scarier it gets. So, laws are applied retroactively? No wonder foreign investors are not coming in.

How about, changing the law to declare telco and mines, and foodstuff as strategic industries and foreigners are not allowed to hold more than 1% - change the law tomorrow and apply the law retroactively.

So, investors beware - Indonesia can suka suka change its laws and catch you off guard.
sputjam Says:
May 13th, 2008 at 4:20 pm
I believe laws to prevent monopolistic businesses practices are used worldwide. Laws are made in parliament by reps voted in by the citizens of Indonesia. So don’t pick a fight with me. Go ask your MP’s.
If a law is passed in parliament, it is the the perogative of those within the territory to comply.
TheWrathOfGrapes Says:
May 13th, 2008 at 4:29 pm
sputjam - no, not picking a fight with you. Just that laws should not be made retroactively - you don’t shift your goal posts during the game. Even so, the laws should be apply equally - have they?
TheWrathOfGrapes Says:
May 13th, 2008 at 4:51 pm
Court ruling on Temasek reveals govt mismanagement
Opinion News - Tuesday, May 13, 2008

Vincent Lingga, The Jakarta Post, Jakarta

Legal matters, however complex and technical, should also follow commonsense logic.

To the laymen, the Central Jakarta District Court’s ruling Friday that the Singapore government-owned Temasek holdings and its subsidiaries breached anti-competition laws through minority cross-ownerships in PT Indosat and PT Telkomsel is both a worrisome and confusing logic.

Consider the following facts:

Fact I: The Indonesian government-controlled PT Telkom owns 65 percent of Telkomsel and holds almost 15 percent of Indosat and a golden share that gives it special veto rights over corporate action, while Temasek indirectly holds only 35 percent of Telkomsel and almost 31 percent of Indosat.

Yet the court upheld the ruling by the Business Competition Supervisory Commission (KPPU) last November declaring Temasek guilty of violating article 27 of the anti-trust law which prohibits a business group from owning majority stakes in companies operating in the same business activities which result in the control of more than 50 percent of the market.

Temasek therefore was ordered to sell all its stake in either Indosat or Telkomsel or halve its holdings in both cellular companies within 12 months.

Fact II: The boards of Indosat and Telkomsel include representatives of the Indonesian government and many prominent Indonesian businessmen who would have been aware of the operational and business issues at the respective cellular phone operators. The majority of Indosat’s directors, including the chief executive officer, and the majority of Telkomsel’s directors and commissioners, are nominated by the Indonesian government.

Yet the court decided that Temasek, through its cross-ownerships at both Indosat and Telkomsel, had controlled business decisions and corporate actions at both cellular operators.

Fact III: Both Telkomsel and Indosat are regulated businesses, operating within the guidelines of the Telecommunications Regulatory Authority.

Yet the court also upheld the KPPU ruling that Temasek and subsidiaries were guilty of monopolistic price fixing (article 17 of the anti-trust law).

The mind-boggling question then is this: Have the government, the regulatory body and Minister of State Enterprises Sofyan Djalil been so ignorant or pathetic as to have allowed Temasek to commit all the anti-monopoly practices cited by the KPPU and the district court despite its minority shareholdings at both Indosat and Telkomsel?

If Temasek, despite its minority shareholdings, was able to commit all the business sins as concluded by the court and the KPPU, that should raise big questions over the management of dozens of other state companies which have foreign or domestic investors as minority shareholders.

Further down the line, if the poor management and inadequate oversight of Indosat and Telkomsel, as revealed by the KPPU and the court rulings, is typical of the way the government treats state companies, then the Parliament should oppose the planned strategic sale of state-owned PT Krakatau Steel to either one of the four global steel giants — ArcelorMittal, Tata Steel and Essar, all from India, and Australia’s BlueScope Steel, which have been eying a stake of up to 40 percent in the country’s largest steel company.

Temasek will certainly appeal against the decisions at the Supreme Court. Since the court also ordered divestment, the government should brace for a long legal battle as Temasek may bring up the case with the World Bank’s arbitration body, the International Center for the Settlement of Investment Dispute, in Washington.

Simply throwing in the towel out of frustration with the court system here could be interpreted by the market as Temasek’s admission of business sins at the expense of its reputation all over the world.

A ruined reputation would adversely affect Temasek investment operations overseas, investments on which this government’s investment holdings have relied increasingly for income growth.

Hence, there is no other alternative for Temasek but to fight it out up to the Supreme Court even in spite of all the risks and uncertainty about the legal proceedings and final results.

Until a credible appeal verdict — favoring either side — is issued, the case will continue to cast a long shadow over Indonesia’s legal system and the KPPU as an independent body responsible for enforcing the 1999 competition law, which serves as the constitution of the market mechanism.

———

http://old.thejakartapost.com/detailheadlines.asp?fileid=20080513.A04&irec=3
sputjam Says:
May 14th, 2008 at 8:13 am
Maybe Indonesian govenrment taking advantage of this law to buy back the stake it was forced to sell to foreigners in the aftermath of 1997-8.

I remember a rumour that was spread via sms that a certain bread company in malaysia had used preservatives that contain ingredients obtained from pigs, although it had a halal certificate.
The result, sales dropped, shares plummet, and lo and behold, a new substantial shareholder, the pilgrims fund (Tabung Haji), came into the picture. Could this be a new method for takeover of the future.

In the case of indosat and telkomsel, minority stakes should not be considered monopolistic in nature, unless, the indonesian government is considering divesting, and getting themselves out of the business, therefore making temasek, the largest sharholder in both companies.
TheWrathOfGrapes Says:
May 14th, 2008 at 9:28 am
Maybe Indonesian govenrment taking advantage of this law to buy back the stake it was forced to sell to foreigners in the aftermath of 1997-8.

Yes, I think this is one of the real reasons. The other rumoured reason is that someone is trying to sell the stakes to the Russians (looks like somebody is going to make a huge commission).

But the fact remains that such actions will send a very strong signal to potential investors. If you remember, in the aftermath of the Financial Crisis, Indonesia was in very bad shape. Foreign investors would not touch Indonesia with a ten-foot pole. Singapore & LKY tried to help its neighbour by sticking its neck out and advocated investing in Indonesia. The investments in Telkomsel and Indosat was done at huge premiums then. That was a huge gamble. On hindsight, it looks cheap now. But in those days, one can never know how the investments will pan out.

Anyway, as I said before, Indonesia alone will have to decide whether she welcomes foreign investments and send out its signals accordingly. Investments and money will flow to countries where they can make a profit after considering the risks. And there are many countries who welcome foreign investments - Vietnam, India, China, etc…

Peace…
sputjam Says:
May 28th, 2008 at 9:43 am
There was a documentary on bbc about china’s involvement in africa’s mineral wealth. China poured money into building the infrastructure of Congo, including road and rail, for the rights to extract copper. Now shouldn’t that be the way to maximise returns from investors and benefit locals?
TheWrathOfGrapes Says:
June 10th, 2008 at 7:00 am
June 10, 2008

Indosat sale: Jakarta minister says yes, but watchdog agency says no

Mixed reaction puts Jakarta’s commitment to attracting foreign investors in doubt

By Leslie Lopez, South-east Asia Correspondent

INDONESIA issued mixed signals yesterday over a plan by ST Telemedia to sell its entire holdings in telecommunications giant Indosat to Qatar Telecom (Qtel), raising fresh concerns over the government’s commitment towards attracting foreign investment into the country.

Barely hours after Indonesian State Enterprises Minister Sofyan Djalil said that the government would not stand in the way of Qtel’s decision to pay US$1.8 billion ($2.4 billion) for the 40.8 per cent interest in Indosat, the country’s anti-trust agency KPPU objected to the deal on grounds that it allegedly violated Indonesian law.

KPPU chairman Syamsul Maarif told reporters in Jakarta that the regulator ‘is considering legal action to block the sale’. He did not elaborate.

The uncertainty swirling over the deal deepened late in the afternoon when Qtel announced that it would make a general offer for the shares it does not already own in Indosat, which is listed on the Jakarta stock exchange and boasts 30 million mobile phone subscribers.

ST Telemedia and Qtel executives insist that the sale, which was announced on Saturday, is legal and consistent with Indonesian laws.

ST Telemedia moved into the Indonesian market in 2002 when it paid US$634 million for the 40.8 per cent interest in Indosat. The company reorganised its shareholding in the Indonesian company early last year when it brought in Qtel as a shareholder in Indosat.

Analysts say that ST Telemedia’s move to sell its interests in Indosat stems from the troubles faced by its parent holding company Temasek with the Indonesian authorities over its holdings in the country’s lucrative telecommunications sector.

Temasek owns a 56 per cent interest in SingTel, which in turn holds a 35 per cent stake in PT Telkomsel, Indonesia’s largest telecommunications operator.

The KPPU has alleged that Temasek’s holdings through ST Telemedia and SingTel in Indonesia’s two main telcos violates the country’s anti-monopoly laws.

A Jakarta district court last month upheld the KPPU ruling and ordered Temasek to either give up entirely its stake in one of the two telcos or reduce its shareholdings in both by half within a year.

The Supreme Court is expected to rule on an appeal by Temasek against the lower court’s decision sometime later this month.

KPPU officials told The Straits Times over the weekend that the Qtel acquisition was in violation of the district court’s decision which stipulated that when divesting its interest in either Indosat or Telkomsel, Temasek can only dispose of the shares in 10 per cent blocks to unrelated parties.

The executives noted that the sale to Qtel went against the court’s decision on both counts because the Middle Eastern company already had business dealings with ST Telemedia.

Several senior foreign bankers based in Jakarta say that the opposition over foreign ownership in Indonesia’s telecommunications sector has raised questions over the government’s commitment towards attracting foreign investment into the country.

The bankers also say that the problems faced by Temasek stem from intense behind-the-scenes competition among several cash-rich Indonesian conglomerates eager to move into country’s potentially lucrative telecommunications sector.
sputjam Says:
June 10th, 2008 at 1:21 pm
Indons sold the stake for peanuts and now figures for the stake has ballooned. Indons forced to sell these stakes by IMF, so naturally this have antagonised the nationalist.

But as I have mentioned before, the rise in prices of coal/palm oil does not trickle back to the man on the street.

Follow the Malaysian way. Introduce windfall taxes for capital appreciation and commodity players such as palm oil plantations.
sputjam Says:
June 10th, 2008 at 5:22 pm
and while we are at this, speculative hedge funds are attacking thai baht all over again. Why? the thais spent an enormous amount of money on oil, draining their resources. Who wants this kind of investors.