International Investors: Harm or Help

Apr 16th, 2008, in Business & Economy, by

HizbullahWhether 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
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: republika

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


54 Comments on “International Investors: Harm or Help”

  1. avatar TheWrathOfGrapes says:

    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.

  2. avatar sputjam says:

    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.

  3. avatar Dykarg says:

    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.

  4. avatar TheWrathOfGrapes says:

    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?

  5. avatar Rob says:

    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!

  6. avatar sputjam says:

    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.

  7. avatar Deng Xiao Phing says:

    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

  8. avatar sputjam says:

    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 bullsh*t 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.

  9. avatar TheWrathOfGrapes says:

    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.

  10. avatar sputjam says:

    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.

  11. avatar TheWrathOfGrapes says:

    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?

  12. avatar TheWrathOfGrapes says:

    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

  13. avatar sputjam says:

    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.

  14. avatar TheWrathOfGrapes says:

    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…

  15. avatar sputjam says:

    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?

  16. avatar TheWrathOfGrapes says:

    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.

  17. avatar sputjam says:

    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.

  18. avatar sputjam says:

    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.

  19. avatar Purba Negoro says:

    Sputjam- would it be appropriate quote Mahatir and mention what ethnicity Goldman Sachs, Rothschiilds, etc are?

    Shakespeare warned us of the ways of Shylocks and Dickens about Fagins- how stupid we were not to heed.

  20. avatar Darwin says:

    again, reinesnce are over!thinking are over
    Todays world are LORD OF RING.in every single things

    thanks

  21. avatar Green eye says:

    Foreign investment:

    Indonesia should welcome foreign investors. Because until l now indonesia
    still has quite a bad name among global investors;due to much red tape and corruption .
    But the health minister makes a point if she says that there must be some safeguards.
    The investments should support the local communities.
    And these economic activities should be sustainable. (a lot of mining activities are not)
    In this case I think this Kalimantan governor is just filling his pockets with tis mining
    contact, instead of helping the locals.
    Yes, corruption is a big Indonesian problem!

  22. avatar dragonwall says:

    You mean which governor?

    Kalimantan is full of mines, land mine. People with plenty of contact get attracted and trapped in the middle. HPH, Gold, Coal.

    How many of them are actually concrete.

    I guess you are right when corruption is big time. It starts from the top to the bottom, yang sisa semua konyol…mati miskin..

  23. avatar Astrajingga says:

    I think we should listen to whatever Darwin is trying to say.

    By the way, Darwin, I called you, but no answer.

  24. avatar darwin says:

    Salam wrohmah wbarokah ,
    enough day and night as for us to seeing Allah Swt as SUPERIOR ONE.
    we ting we are in the day light , the real is we are on the night and darkness time.
    so we need someone who been walking on the night to show us the light.

    MR /MRS Astra jingga
    my phone
    62-081584025911

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