Pros and cons linger over govt plan on foreign ownership limit<\/p>\n
By Hendarsyah Tarmizi<\/p>\n
JAKARTA (JP): The government's plan to ease restrictions on
\nforeign share ownership of companies listed on the capital market
\nhas raised questions about the pros and cons.<\/p>\n
Those for easing the limit imposed on foreign investors from
\nthe present 49 percent say it will play an important part in
\nhelping revitalize the sluggish market.<\/p>\n
On the other hand, those against the easement place a number
\nof reasons for opposing the government's plan.<\/p>\n
Easing the foreign limit could destabilize the monetary system
\nas the massive outflow of foreign investments from the capital
\nmarket could significantly affect the country's foreign exchange
\nreserves, some said.<\/p>\n
Others argue that foreign investors, who are now dominating
\ntrading activities, could take control of the country's major
\ncompanies.<\/p>\n
Achmad Sofjan, an executive of a local securities company,
\nsaid that raising the 49 percent foreign ownership ceiling is not
\nonly a matter of making the business climate more conducive to
\nforeign investors, but it could also become an important step in
\nentering the phase of the globalization era in capital market
\nactivities.<\/p>\n
\"In the globalization era there will be no more domestic
\ncompanies and foreign companies, or foreign and local
\ninvestors... all are global firms or global investors,\" he said.<\/p>\n
He said that Indonesia should be ready to face the swift
\nchange in the trend, in both the direct or indirect sectors in
\nthe world.<\/p>\n
Consistency<\/p>\n
Sjahril, a noted economist, is one of those for the easement.
\nHis argument on the need of easing the foreign ownership
\nrestriction on the capital market is based on the question of how
\nto create consistency in investment rulings.<\/p>\n
The rulings in the direct investment sector, which is directly
\noverseen by the Investment Coordinating Board (BKPM), has
\nundergone several changes in the last two years, especially those
\nrelating to foreign ownership restrictions. The most recent
\nruling in direct investment has allowed foreign investors to have
\nequity holdings of up to 100 percent.<\/p>\n
The reasons behind the introduction of the new investment
\nruling is not only to give more leeway to foreign investors but
\nalso as the initial step in adjusting the country's investment
\npolicies to the principles of the General Agreement on Tariffs
\nand Trade (GATT).<\/p>\n
The ruling on foreign ownership in the portfolio investment,
\nwhich is overseen by the ministry of finance, however, remains
\nunchanged. Foreign investors are still not allowed to hold more
\nthan 49 percent of listed shares on the stock exchange.<\/p>\n
\"If foreigners are allowed to own up to 100 percent in non-
\nlisted companies, why are they not in the listed ones?\" Sjahril
\ntold a seminar held here recently.<\/p>\n
Minister of Finance Mar'ie Muhammad is also of the same view
\non the need of creating more consistent investment regulations.
\nHe said the government is seriously studying the possible
\nincrease in the 49 percent ownership limit imposed on foreign
\ninvestors in a bid to narrow the gap between the portfolio
\ninvestments and the direct investments.<\/p>\n
The government's plan to raise the foreign portion is, in
\nfact, not the first. Mid last year the government also announced
\nthe same move but it was never realized.<\/p>\n
Certainty<\/p>\n
This time, it looks more certain that the government may issue
\nthe ruling in the next couple of months. The optimistic view was
\nexpressed by Bacelius Ruru, the chairman of the Capital Market
\nSupervisory Agency (Bapepam), last week.<\/p>\n
Ruru said he had received an instruction from the minister of
\nfinance to make a concrete proposal on the possible change in the
\nforeign ownership limit.<\/p>\n
\"But I could not tell you amount of increase in the foreign
\nportion to be proposed,\" he told Japanese and Indonesian
\njournalists following a one-day seminar on the Indonesian capital
\nmarket in Tokyo last week.<\/p>\n
Sofjan, also the chairman of the Jakarta Securities Brokers
\nClub, estimated that the planned increase in the foreign portion
\nwill significantly stimulate trading activities.<\/p>\n
\"The increase in the foreign presence will create more active
\ntrading and this will, in turn, attract local investors to enter
\nthe trading floor,\" he told The Jakarta Post.<\/p>\n
He shared the view that the unexpected rush of foreign
\ninvestments from the capital market could destabilize the
\ncountry's monetary system as feared by the skeptics.<\/p>\n
\"The possibility is minimal and I am sure the government will
\nhave an affective measure to curb the feared rush,\" he said.<\/p>\n
Sofjan said the massive withdrawal will not occur as long as
\nthe capital market authorities continue to improve their
\ncredibility and to maintain the trust of the investing public.<\/p>\n
Small impact<\/p>\n
Diana H. Rukmono of PT Redialindo Mandiri, a local brokerage
\nfirm, has a different reason why she is against the government's
\nplan to allow foreign investors to buy more than 49 percent of
\nlisted shares.<\/p>\n
\"The increase in the foreign portion will bring no significant
\nimpact on our business as foreign investors mostly deal only with
\nforeign joint securities ventures,\" she said.<\/p>\n
Diana preferred the government issue incentives to local
\ninvestors rather than to foreign ones.<\/p>\n
Foreign investors dominate trading activities both on the
\nJakarta and Surabaya stock exchanges. Transactions made by
\nforeign investors account for more than 80 percent of total
\ntrading volume.<\/p>\n
On the JSX, the foreign ownership was around 29.53 percent of
\nthe total shares in June.<\/p>\n
In reality, foreign investors have no more room to increase
\norders despite there still being about 19.44 percent of the
\nlisted shares available for them, as more than 70 percent of
\nshares of listed companies are still mostly controlled by their
\nfounders.<\/p>\n
Another executive of a securities company said raising the
\nforeign portion would not immediately increase foreign trading if
\nfounders still maintain the control in listed companies.<\/p>\n
\"The question is not to raise the foreign portion but how to
\nencourage founders to reduce their controlling stake,\" he said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/pros-and-cons-linger-over-govt-plan-on-foreign-ownership-limit-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}