Takeovers in Singapore<\/p>\n
It is perhaps too early to view the flurry of company
\nacquisitions by Indonesian businessmen in Singapore over the last
\nfew months as a major trend which may lead to significant capital
\nflight. The number of corporate takeovers has been relatively
\nsmall so far (only five), and the value of the acquisitions also
\nhas been rather small in terms if international transactions.<\/p>\n
The moves may have become an issue more because the targets of
\ntakeovers, or takeover bids, were companies listed on the
\nSingapore stock exchange and the transactions were subject to
\nfull disclosures. That, we think, is partly responsible for
\ngenerating the keen mass media attention to the transactions.<\/p>\n
The latest trend nonetheless requires a closer watch,
\nespecially because it is happening amid the rising criticism by
\nthe public in Indonesia of the steadily high pace of business
\nconglomeration by a few groups of businessmen. As it happens,
\nmost of the acquisitions were made by businessmen, or
\nsubsidiaries, of the largest business groups in Indonesia.<\/p>\n
Moreover, most of the acquisitions are not related to what the
\ngovernment has encouraged Indonesian companies to undertake --
\nforming strategic marketing alliances to tap the international
\nmarket.<\/p>\n
The higher pace of takeover transactions in the island
\nrepublic also is raising eyebrows because it is occurring amid
\nthe controversy over the business expansions by conglomerates
\nwhich command more than 50 percent of the domestic market for
\nparticular products.<\/p>\n
Even though the controversy over the 50 percent market
\ndominance has provisionally been cleared away by some ministers,
\nresolution of the issue is pending clear-cut rulings. Minister of
\nIndustry Tunky Ariwibowo said a government regulation on market
\ndominance and business expansion would be issued before the end
\nof this month.<\/p>\n
Despite all the apparent coincidences, we tend to reckon that
\nthe recent series of business acquisitions is part of normal
\nbusiness expansion meant to take advantages of Singapore's well-
\nmanaged, strategic position as a regional base of operations.
\nAfter all, Singapore's financial and capital market is far more
\nadvanced than Indonesia's and its bank interest rates are way
\nbelow those charged by banks in Indonesia.<\/p>\n
Though, as we noted earlier, the higher pace of Indonesian
\nexpansion in Singapore has not yet reached the point of worrisome
\ncapital flight, the trend makes it most imperative for the
\ngovernment to deliver on its promise of a clear-cut regulation on
\nbusiness expansion. Further delays may cause doubt, or even a
\nhigh degree of uncertainty, among businessmen intending to
\nimplement new investment projects in the country.<\/p>\n
The regulation, we think, should clearly define the parameters
\nto determining market dominance. Market dominance itself is not
\nbad as long as such a position is gained under fair, open market
\ncompetition. It is the possible abuse of market dominance that
\nshould be addressed by the regulation.<\/p>",
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