Important asset sale<\/p>\n
The Indonesian Bank Restructuring Agency's sale of 24 oil palm
\nplantations formerly owned by the Salim Group for Rp 3.6 trillion
\n(US$370 million) to Malaysia's Kumpulan Guthrie Bhd on Monday
\nshould be hailed for several reasons.<\/p>\n
First of all, the sale, concluded through an open and
\ncompetitive bid, could become a confidence-building deal for the
\npowerful IBRA, which often has been criticized for questionable
\ntransactions, both in debt restructuring deals and asset
\ndisposals.<\/p>\n
The sale will enable IBRA to achieve the Rp 19 trillion
\nrevenue target it has been assigned for the current April-
\nDecember 2000 fiscal year. In the past week, IBRA raised almost
\n$250 million from the sales of the Mosquito Coil Group, food
\nseasoning manufacturer Indomiwon, Indomilk and an oleochemicals
\ngroup, which were all part of the assets pledged by the Salim
\nGroup to IBRA.<\/p>\n
The latest deal also could bolster investor confidence in the
\nhuge pool of assets (about 108 companies) pledged by the Salim
\nGroup to settle its Rp 52 trillion debt to the government. The
\nrecent legal wrangling over the government's demand for
\nadditional assets from the Salim Group on top of those ceded
\nunder a master settlement and acquisition agreement signed in
\nlate 1998, had raised some doubts about the legal status of the
\nalready pledged assets.<\/p>\n
That the sale of 260,000 hectares of oil palm plantations in
\nseveral provinces in Sumatra, Kalimantan and Sulawesi took place
\nat a time when international crude palm oil prices are near
\neight-year lows, or half as high as last year's prices, indicates
\nthat Kumpulan Guthrie, a company controlled by the investment arm
\nof the Malaysian government, Permodalan Nasional Bhd, is strongly
\ncommitted to long-term investment in Indonesia.<\/p>\n
The business outlook for Guthrie, which is a large palm oil
\ncompany in Malaysia, is similar to that of Singapore's automobile
\ndistributor Cycle and Carriage Ltd., the company that acquired
\nfor $560 million IBRA's shares in Astra International,
\nIndonesia's largest automobile company. The Singapore company
\npurchased these shares in March, when the domestic car market had
\njust begun to recover from its 1998 slump.<\/p>\n
Needless to say, Guthrie's investment in Indonesia, the
\nworld's second largest palm oil producer after Malaysia, is a
\nstrategic move to capitalize on low-cost labor and sidestep the
\nbiggest barrier to plantation expansion in Malaysia -- a lack of
\nsuitable land. But for Indonesia, Guthrie's entry is a synergic
\ntie-up with local plantations, which can benefit from the
\ntransfer of managerial expertise and planting technology from
\nMalaysia.<\/p>\n
The spate of asset sales by IBRA over the past month clearly
\nproves that transparency, clear bidding rules and well-arranged
\npackages of assets are the keys to asset disposal, which is
\ncrucial to pushing economic recovery.<\/p>\n
The faster the approximately Rp 600 trillion worth of assets
\ncurrently managed or controlled by IBRA are sold to private
\ninvestors, the better the business prospects of these assets.
\nCertainly, IBRA may not always get the highest price for these
\nassets, especially given the current situation in the country,
\nwhich continues to be plagued by a high degree of political
\nuncertainty.<\/p>\n
IBRA should, however, realize that the quality of the assets
\nsold this year will improve markedly next year as a result of
\nbetter management and restructuring by the new owners or
\ninvestors. This improved business performance will contribute to
\nstrengthening the country's economic recovery, which in turn will
\nincrease the value of the assets that have not yet been sold.<\/p>\n
The most important thing for the government to do, especially
\nin so far as the 24 plantations sold to Kumpulan Guthrie are
\nconcerned, is to protect the estates from arbitrary claims by
\nlocal residents. Legal certainty in property ownership is surely
\nthe most important factor for businesspeople in determining where
\nthey will invest.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/important-asset-sale-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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