Sampoerna's takeover highlights RI's potential: King<\/p>\n
The government's efforts to put Indonesia back onto the radars of
\ninvestors received a boost when U.S. tobacco giant Philip Morris
\nInternational acquired PT HM Sampoerna in March for some US$5
\nbillion. Louis Camilleri, CEO of Altria Group -- Philip Morris'
\nparent company -- will on Sept. 15 deliver a speech at the
\nEuromoney Global Conference in New York, to explain the group's
\nexperience in investing in Indonesia to other investors. The
\nevent will also be attended by President Susilo Bambang Yudhoyono
\nand Sampoerna's new president director, Martin King, who will
\ntake part in the conference's panel discussion. In light of the
\noccasion, The Jakarta Post's Urip Hudiono recently talked to King
\non the topic. Following are excerpts from the interview:<\/p>\n
Question: Philip Morris' decision to invest in Sampoerna came
\nsomewhat as a surprise to many considering how many investors
\nstill question Indonesia's investment climate. Can you explain
\nthis?
\nAnswer: That commitment had to do with a number of different
\nareas.<\/p>\n
One thing, is the size and importance of the Indonesian market
\nin the world economy. Indonesia has over 210 million people and
\nis the fifth largest tobacco market in the world, so this makes it
\na very large and important market. We feel that any large
\ninvestor has to pay attention to this, and to consider Indonesia
\nbecause of its size and importance in the world.<\/p>\n
The second thing that we looked at was the overall business
\nclimate, and we felt -- and still feel -- that Indonesia is on a
\ngood track of improving its investment climate.<\/p>\n
Certainly, the administration of the President has made some
\ndifficult decisions, and has been very transparent about
\nattacking the challenges in Indonesia.<\/p>\n
And then the third reason for our willingness to invest is the
\nquality of Sampoerna -- the quality of the brand, the quality of
\nthe people, and the great momentum and success of this company
\nover its 92-year history.<\/p>\n
So those three things together, when we looked at it, justify
\nthe very significant investment. And we will tell that and
\ncommunicate that to other investors so that they can decide if
\nIndonesia is the right place for them to make an investment as
\nwell.<\/p>\n
Indonesia's economy has recently been under pressure from soaring
\noil prices, a weakening rupiah, rising inflation and another
\npossible fuel price hike, besides such problems of corruption and
\nlack of legal certainty. What effect do you think this will have
\non Indonesia's investment climate?<\/p>\n
Certainly the economic challenges are very real, and it's very
\nimportant that they be resolved. And I think that the steps that
\nare being taken to attack these problems are having some effects,
\nand we're very positive about in moving forward.<\/p>\n
And keep in mind also that we looked at this investment from a
\nvery long-term perspective, so don't look at the currency market
\nor the situation over a short period as the only thing we're
\nconsidering -- we're considering an investment that goes out for
\nyears and years in perpetuity.<\/p>\n
You previously mentioned the government's transparency in taking
\naction in improving the economic situation. Can you elaborate
\nmore on this?<\/p>\n
I think one of the most encouraging aspects of this
\nadministration is that it is willing to talk about the challenges
\nvery openly and transparently. In fact, I recently attended a
\nspeech by the President at an investor forum here in Jakarta and
\nI found it very encouraging that he spoke quite frankly and
\nopenly about the challenges.<\/p>\n
And I think that this is the first step towards solving any
\nproblem -- to be able to look at it in the eye and understand the
\nproblem and formulate the plans to attack it.<\/p>\n
Can you comment more on the issue of lack of legal certainty and
\nthe government's progress in addressing it?<\/p>\n
Any investor in any country wants to have a legal framework and a
\nregulatory framework that offers a couple of aspects. One aspect
\nis that it be a level playing field, in other words, that
\ndifferent companies and different competitors, whether their
\nforeign or domestic, play by the same rules that doesn't favor
\nover one group or another.<\/p>\n
So that's important for us -- that we be dealt with fairly in
\nterms with our competitors -- not any better but no worse than
\nthe competition. I also think that investors look for a certain
\nlevel of predictability. If the laws and regulations are going to
\nchange, that's OK, and certainly within the rights of the
\ngovernment and laws need to be improved over time anyway.<\/p>\n
But to know what's coming and to be able to predict and plan
\nand have a voice or at least a chance to talk it out before
\nthings change, is important to investors.<\/p>\n
Did you consider the government's recent decision to raise
\ncigarette retail prices by 15 percent in July as among such
\nuncertainties?<\/p>\n
I think the recent increase in cigarette bandroll prices is a
\ngood example of where there was in fact clear communication.<\/p>\n
I think that the process that was used was appropriate. We
\ncertainly had a chance to voice our opinions, as did our other
\ncompetitors in the industry.<\/p>\n
How is Sampoerna's business going after the acquisition?<\/p>\n
It's going very well. Our market share is increasing, we've
\nmaintained the momentum that Sampoerna had in the early part of
\nthe year. Our brands are doing well, our three main brands are
\ngaining market share: A Mild is gaining at a rate of one share
\npoint a year, Hijau about half a share point, and Dji Sam Soe is
\nalso up between 0.1 and 0.2 percent over the previous years.<\/p>",
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