New policy on foreign investment gets mixed reactions<\/p>\n
JAKARTA (JP): The opening of a variety of strategic industries
\nto foreign investment has met with overall approval from
\nobservers, but many remain skeptical about the government's
\ncommitment to making deregulation work.<\/p>\n
They said yesterday that the new regulations, permitting
\nforeign firms to run seaports, telecommunications, power,
\nrailways, civil aviation, nuclear power and the mass media,
\nhowever, should be followed by adjustments of other rulings.<\/p>\n
The government announced the measure in Government Regulation
\nNo. 20\/1994 on Thursday in a bid to prevent foreign capital from
\nturning to more attractive countries in Asia.<\/p>\n
\"It would be nice work if you can get it,\" said the director
\nof the Indonesian Business Data Center, Christianto Wibisono.<\/p>\n
Christianto said that red tape and protectionism will surely
\nsoon hamper the deregulation.<\/p>\n
Economist Rizal Ramli also stressed that the new regulation
\nwill not be effective if red tape still discourages foreign
\ninvestors to put their capital in Indonesia.<\/p>\n
Government officials said that Indonesia needs US$305 billion
\nin investment during the current Five Year Development Plan
\n(Repelita VI), 73 percent of which is expected to come from
\nprivate sector companies, both foreign and domestic.<\/p>\n
The new regulation also reduces the minimum equity holdings
\nfor the Indonesian partner in a foreign joint venture from 20 to
\nfive percent.<\/p>\n
Encouraging<\/p>\n
\"It is very encouraging,\" said the manager of HongkongBank,
\nPeter Atkins.<\/p>\n
Bernd Gottschalk of Mercedes-Benz and Alexander Chen, the
\nchief Taiwanese representative in Indonesia, also hailed the new
\nregulation.<\/p>\n
They were quoted by Antara as saying yesterday that the new
\nrules will make Indonesia more attractive to foreign investors.<\/p>\n
According to Christianto, the government cannot avoid
\nliberalizing the economy as the enforcement of the General
\nAgreement of Tariffs and Trade (GATT) is just around the corner.<\/p>\n
He said without these sorts of measures Indonesia will be
\noutpaced by other growing economies like China, Vietnam and India
\nin attracting capital.<\/p>\n
Atkins said, \"The regulation makes it easier for investors to
\ncome to Indonesia.\"<\/p>\n
Meanwhile, Chen noted that \"Taiwanese firms will surely feel
\nmore safe to invest in Indonesia.\"<\/p>\n
Atkins, however, added that the definition of divestment needs
\nto be clarified.<\/p>\n
The regulation requires foreign companies to reduce their
\nequity starting in the 15th year of commercial operation, but
\nsets no specific figures on the amount of divestment required.<\/p>\n
The State Minister for Investment said Thursday that one
\npercentage point will be enough Indonesian ownership after 15
\nyears.<\/p>\n
Competition<\/p>\n
Legislator Thomas Suyatno said that the new regulations will
\nmake the economy more efficient.<\/p>\n
Suyatno, also the vice chairman of the Association of Private
\nDomestic Banks (Perbanas), commented that the regulation will
\nfight the high-cost economy and will spur more business
\ncompetition.<\/p>\n
Christianto, who is a former journalist, also hailed the
\ngovernment's decision to allow foreign investors to get involved
\nin the press business.<\/p>\n
\"Theoretically, it means that in the morning we can have
\nJakarta editions of The New York Times, The Wall Street Journal
\nand Yomiuri Shimbun,\" he said.<\/p>\n
He added that the regulation will surely benefit Indonesian
\nreaders and create a competitive atmosphere among the media.<\/p>\n
\"It will be more difficult for the government to close down a
\nnewspaper or to revoke a press license. Foreign companies will
\nsurely file a law suit against such a practice,\" he said.<\/p>\n
Impact<\/p>\n
Hendrawan Supratikno, the dean of the school of economics at
\nthe Salatiga-based Satya Wacana Christian University in Central
\nJava, however, stressed that the regulation is like a double-
\nedged sword.<\/p>\n
Hendrawan said it will cut inefficiency and create
\ncompetition, but on the other hand, as it permits foreign
\ncorporations to enter certain sectors dealing with public
\nutilities, it may kill small and middle scale businesses.<\/p>\n
Ramli also stressed that the regulation may attract small
\nJapanese companies to come to Indonesia to avoid the depreciation
\nof the Japanese yen. \"It will create a fierce battle,\" he said.<\/p>\n
According to Hendrawan, foreign corporations are not only
\nequipped with better technology and management but also powerful
\npersonalities.<\/p>\n
Citing an example, Christianto pointed out the popularity of
\nSingapore-made cellular telephones among Batam Island residents.<\/p>\n
The new ruling will allow not only Batam residents but also
\npeople throughout Indonesia to buy the Singaporean telephones.<\/p>\n
Christianto doubted whether the state-owned PT Telkom is
\nprepared to compete with its Singaporean counterpart.<\/p>\n
\"Telkom sells cellular telephones at Rp 20 million ($9,280)
\neach while the Singaporean company only Rp 2 million,\"
\nChristianto said. (09)<\/p>",
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