Indosat leads the way<\/p>\n
Many people might have laughed at State Minister for Research
\nand Development B.J. Habibie's remarks in early May, 1993, that
\n50 Indonesian state companies would be offered to the investing
\npublic through the domestic and international stock exchanges.
\nAfter all, it is sometimes difficult to follow the way of
\nthinking of Habibie, who is perhaps the country's most notable
\nfuturologist and visionary.<\/p>\n
Such a cynical reaction was caused not by any sense of
\nopposition to that idea itself but more by its seeming
\nimpossibility at least within the foreseeable future. First of
\nall, even the domestic investing public does not consider most
\nstate companies investment-grade corporations.<\/p>\n
President Soeharto himself took a cautionary stance when he
\ninstructed late in May, 1993, that the finance minister see to it
\nthat state companies fully met all the listing requirements
\nbefore any public offerings were made on the international
\nexchanges.<\/p>\n
But thorough preparations, combined with the careful selection
\nof the right state company to be floated and of the lead
\nunderwriter, prove that international privatization is not
\nimpossible at all. In fact, the reaction to the initial public
\noffering by PT Indosat on the New York stock exchange in the
\nmiddle of this month proves that such a move can be highly
\nsuccessful.<\/p>\n
The great success of Indosat's IPO in New York is quite
\nsignificant in many respects. The waters have been tested.
\nIndosat's issue, as the first step in the international
\nprivatization of state companies, not only is raising the overall
\ninvestment profile of Indonesia, whose own capital market is
\nstill in the early stages of development, but also is paving the
\nway for similar listings by other top-notch state enterprises.<\/p>\n
The selection of Indosat as the first state company to be
\nfloated overseas is quite apt indeed. A former unit of American
\nInternational Telephone & Telegraph, which was acquired by the
\ngovernment in 1980, Indosat has from the outset established an
\nexcellent management system. Even though Indosat was the monopoly
\nof Indonesia's telecommunication services up to this year, the
\nnature of its operations has always exposed it to stringent
\nrequirements for international customer satisfaction.<\/p>\n
But of most importance to investors who have bought Indosat's
\nshares is that the company operates in one of the fastest growing
\nindustries in Indonesia. Even though its monopoly was broken this
\nyear by a rival company -- PT Satelit Palapa Indonesia, which is
\ncontrolled by private investors -- the rapidly growing market
\nwill still be large enough for the two companies to generate
\nhandsome return on investments for shareholders. The export-led
\ngrowth strategy of Indonesia's economic development will generate
\nhigh increases in the demand for international phone calls, so
\nfar the largest source of its incomes. The installation of more
\nthan five million new phone lines within the next five years will
\nsignificantly expand the market.<\/p>\n
Indosat, besides pioneering the going international move for
\nother state companies, has created a new alternative for the
\ngovernment in raising foreign capital either for repaying its
\nforeign debts or for financing infrastructure development. It is
\nimperative, though, for the finance minister, as the nominee
\nshareholder for the government in all state companies, to
\nmaintain the trust of international investors by ensuring that
\nthe next listings will also be investment-grade enterprises.<\/p>\n
We see another great benefit from the privatization. State
\ncompanies which go public either through the domestic or
\ninternational stock exchanges will have to meet full disclosure
\nrequirements and will therefore become much more transparent.<\/p>",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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