Capital shifting may not profit<\/p>\n
JAKARTA (JP): Shifting corporate assets overseas causes more
\nharm than good to the country's economy, an economist said.<\/p>\n
Faisal Basri, an economist at the University of Indonesia,
\nsaid here yesterday that Indonesian companies which have so far
\noperated overseas, had not yet brought much capital inflows to
\nthe country.<\/p>\n
"The activities of Indonesian companies which operate abroad
\nor shift their assets to a foreign subsidiary, does not usually
\nresult in significant capital inflows," he said at a seminar on
\nassets shifting.<\/p>\n
He said the current trend of shifting assets of some
\nIndonesian companies overseas was unique because it was against
\nthe practices of other countries.<\/p>\n
Capital outflows such as shifting operations overseas, he
\nsaid, usually occurred when a country's current account was
\nsurplus. Capital inflow, on the other hand, occurs when the
\ncurrent account is in deficit.<\/p>\n
"But in Indonesia capital outflow occurs when our current
\naccount is still deficit," he said.<\/p>\n
This highlighted inadequate economic fundamentals in the
\ncountry where the inflow of foreign capital was still needed to
\nstimulate the economy.<\/p>\n
"It is as if the economic motor does not run because it does
\nnot have the oil and fuel it needs," he said.<\/p>\n
Earlier this year, the country's major food producer PT
\nIndofood of the Salim Group sparked controversy when it announced
\nits plan to inject its assets into a small Singapore listed
\ncompany, QAF Ltd.<\/p>\n
The move was criticized by some people as not being
\nnationalistic, as the company, owned by noted tycoon Sudono
\nSalim, had been a recipient of many government favors. Many
\npeople labeled the move capital flight.<\/p>\n
Indofood defended the move, saying it would keep its operation
\nin Indonesia and that the acquisition would in turn deliver
\ncapital inflows to the country.<\/p>\n
Indofood is not the first company to transfer its ownership or
\nassets overseas. Several groups have operated several businesses
\nin Singapore, Hong Kong and China.<\/p>\n
Faisal said the effect of Indofood's move would depend on how
\nSalim used the money.<\/p>\n
"Whether it will raise the company's output and exports or
\ndecrease the current account deficit, we will find out in two or
\nthree years after the acquisition," he said.<\/p>\n
Faisal said assets shifting is also encouraged by the fear of
\npolitical uncertainties. Many business owners wondered what would
\nhappen to them under the country's future leader, he said.<\/p>\n
Shipping company PT Samudra Indonesia announced earlier it
\nwould float its shares on the Singapore stock exchange.
\nEngineering and design company PT Bukaka Teknik Utama, which is
\nlisted on the Jakarta Stock Exchange, said it would follow suit.<\/p>\n
Faisal attributed the recent trend of local companies to list
\non the Singapore Stock Exchange to new regulations issued by
\nSingapore's stock exchange authority.<\/p>\n
The new regulation allowed any foreign company to float their
\nshares on the Singapore Stock Exchange, as long as the company
\nowned at least 30 percent stocks in a local Singaporean company
\nand operated in infrastructure, with a minimal concession period
\nof 10 to 15 years, he said. (das)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/capital-shifting-may-not-profit-1447893297",
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"sponsor": "Okusi Associates",
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