Procedural problem may affect APP's subsidiary<\/p>\n
JAKARTA (JP): Indonesia's 1994 foreign investment deregulation
\npackage has been praised as the most liberal in the country's
\nhistory.<\/p>\n
However, the implementation of the new policy measures
\ncontinues to be hindered by misinterpretation and, sometimes,
\ninadequate knowledge on the part of government officials.<\/p>\n
The procedural problems recently encountered by Singapore-
\nbased Asia Pulp & Paper (APP), which plans to float shares on the
\nNew York Stock Exchange, provide one example.<\/p>\n
One of APP's subsidiaries, PT Purinusa Eka Persada, is
\nreported to have run up against legal problems in connection with
\nchanges to its equity capital and the entry of foreign
\nshareholders.<\/p>\n
However, Indra Widjaya, one of PT Purinusa's commissioners,
\nsaid yesterday that PT Purinusa had satisfied all the legal
\nrequirements for the changes, including the entry of APP as the
\ncontrolling shareholders.<\/p>\n
\"Both the ministry of justice and the Investment Coordinating
\nBoard (BKPM) have approved the amendments to PT Purinusa's
\nstatute regarding the equity increase and the entry of the
\nforeign shareholders,\" Indra asserted.<\/p>\n
At the same time legal consultants expressed bewilderment that
\nthe ministry of justice had ratified the amendments prior to the
\nchanges being approved by the BKPM.<\/p>\n
Asia Pulp & Paper and PT Purinusa, which are members of the
\nSinar Mas Group, are controlled by Eka Tjipta Widjaya and his
\nfamily as the majority shareholders.<\/p>\n
\"We just got a letter from Wardidjasa today stating that the
\namendments to Purinusa's statute have been recorded by the BKPM,\"
\nsaid Indra, who is also president of Bank International
\nIndonesia, yesterday.<\/p>\n
Wardidjasa is a deputy to the BKPM chairman in charge of
\nevaluation and industrial licensing.<\/p>\n
One legal consultant argued that in order to amend the statute
\nof a domestic investment company to allow the entry of foreign
\ninvestors as new shareholders, the existing regulations require
\nprior approval from the BKPM, and not mere \"notification of
\nrecording.\"<\/p>\n
Under the correct procedure, the legal consultant said,
\namendments to a company's statute could be ratified by the
\nministry of justice only after the BKPM had approved the changes.<\/p>\n
Foreign investors<\/p>\n
PT Purinusa obtained its domestic investment license from the
\nBKPM last September. The license allowed the company to operate
\nin the manufacture of tissue paper, corrugated sheet box and
\nnapkins, with a planned investment of Rp 16.3 billion (US$7.4
\nmillion) to be financed wholly with equity capital.<\/p>\n
In October, the shareholders changed the statute of the
\ncompany to increase its equity capital and to bring in the
\nSingapore-based company, Asia Pulp & Paper, as a new controlling
\nshareholder with 80 percent equity, valued at Rp 868 billion.<\/p>\n
The amendments increased PT Purinusa's equity capital more
\nthan 66 fold, from Rp 16.35 billion to Rp 1,085 billion.<\/p>\n
The capital increase, according to records at the BKPM, was in
\norder to finance Purinusa's acquisition of a 54.4 percent stake
\nin PT Indah Kiat Pulp and Paper, all of the equity shares in PT
\nPabrik Kertas Tjiwi Kimia and a 20 percent equity in PT Lontar
\nPapyrus.<\/p>\n
PT Indah Kiat and PT Lontar Papyrus are both foreign
\ninvestment ventures. Both PT Indah Kiat and PT Tjiwi Kimia are
\nlisted on the Jakarta stock exchange.<\/p>\n
The records show that PT Purinusa applied for the BKPM's
\napproval of the amendments in early November but that the
\napplication was rejected in mid-November.<\/p>\n
\"The proposed amendments were not in line with the regulations
\nbecause the changes increased the equity capital way above the
\nplanned investment,\" Richard P. Napitupulu of the BKPM's planning
\ndepartment said.<\/p>\n
Napitupulu said foreign investors who had not operated in
\nIndonesia were allowed to buy into functioning domestic companies
\nonly for the purpose of rescue.<\/p>\n
\"But PT Purinusa has withdrawn its application from the BKPM
\nand, to my knowledge, the company has not submitted any further
\napplication,\" Napitupulu added.<\/p>\n
Director for civil law affairs at the ministry of justice,
\nRatnawati Widjaya, acknowledged, in a letter dated March 23, 1995
\nto the BKPM chairman, that the ministry had made an
\nadministrative mistake when it ratified the notary deed amending
\nPT Purinusa's statute, prior to the amendments' being endorsed by
\nthe BKPM.<\/p>\n
Government Regulation No.20\/1994, which extensively
\nliberalizes foreign investment in Indonesia, does allow a
\ndomestic investment company to admit foreign shareholders without
\nchanging its status to that of a foreign investment company.<\/p>\n
\"But the entry of foreign shareholders should be based on
\nprior consent from the BKPM,\" Ratnawati noted in her letter, a
\ncopy of which was obtained by The Jakarta Post.<\/p>\n
Indra disagreed, contending that PT Purinusa was not required
\nto obtain approval from the BKPM for the amendments to its
\nstatute, despite the entry of foreign shareholders.<\/p>\n
\"We are required only to report such changes to the BKPM and
\nto obtain ratification from the ministry of justice,\" Indra said.<\/p>\n
Approval<\/p>\n
Indra said that in the case of investment expansion, BKPM
\napproval is necessary.<\/p>\n
\" We have not officially submitted such an application to BKPM
\neven though PT Purinusa does plan an investment expansion to
\nincrease the capacity of its paper industry,\" he added.<\/p>\n
He said the difficulties might have been caused by
\nmisunderstanding or confusion regarding the amendments to PT
\nPurinusa's statute, on one hand, and its planned investment
\nexpansion, on the other.<\/p>\n
Indra said PT Purinusa was still preparing an official
\napplication to the BKPM regarding its investment expansion.<\/p>\n
Meanwhile, informed sources said PT Purinusa's business
\nexpansion programs had been included in the prospectus of APP's
\ninitial public offering in New York.<\/p>\n
The legal consultants seemed worried that the problems faced
\nby PT Purinusa might affect the credibility of other Indonesian
\ncompanies, such as PT Telkom and Asia Pacific Resources
\nInternational Holdings Ltd., which also plan to list their shares
\non the New York Stock Exchange. (vin)<\/p>",
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