Actions speak louder than words
Actions speak louder than words
Ong Hock Chuan, Jakarta
The Susilo Bambang Yudhoyono Government has an excellent
opportunity to convince the international financial community
that it means business in the two-day Infrastructure Summit that
begun yesterday. Virtually the Who's Who of the financial world
are in town and there is no better audience to propagate the news
that Indonesia is back in business.
Some of them have even been persuaded before hand to commit
millions of dollars to invest in infrastructure projects here.
Their investments will definitely be showcased during the summit
as an example of returning confidence.
That is good theatre.
It will, however, take more than just theatre to convince
investors to put their money here in the long run. The
participants at the Infrastructure Summit may make token
commitments, sign MoUs and make some pledges but rest assured
that behind it all is a shrewd business mind adopting a wait-and-
see attitude.
The skepticism is justified because past administrations have
made them grandiose promises that fell flat as soon as the
talkfest was over. The trouble with skeptical audiences is that
the not only scrutinize everything you say; they also pay the
same level of attention to your every action as well.
While there is little to fault in the promises of a young
government, the actions it has taken -- or not taken -- since it
came to power becomes an indicator of its ability to follow
through. Understandably, foreign investors pay most attention
when other foreign investors are involved.
Although Indonesia has had many controversial cases over the
past year, such as Manulife and Prudential, most of them peaked
and were resolved by the time the Susilo government came to
power.
There are, however, three high profile cases involving foreign
investors that the Susilo government has been in a position to
resolve since it came to power. How the government has handled
them can tell us a lot about whether this government is different
from the others in its ability to deliver the goods to foreign
investors.
The first case involves Mexican cement giant Cemex which
wanted to buy up PT Semen Gresik. The central government is the
controlling shareholder of Semen Gresik and had agreed to sell it
to Cemex when it backed down on opposition from local
politicians. Cemex is now preparing to take the Indonesian
Government to international arbitration.
But even if it wins in an international court it has no
guarantee that the government or its institutions would honor
that decision, as Karaha Bodas found out the hard way.
Karaha Bodas took the state-run Pertamina to international
arbitration for breached of contract. The court ordered Pertamina
to pay US$299 million to Karaha Bodas.
The victory was pyrrhic because the Indonesian Police started
investigating the company for alleged corruption. The government
is using this as an excuse for not honoring the international
court's decision and refusing to pay the $299 million.
The third case, involving gold company Newmont, is even more
bizarre. It is, for starters, the first case in Indonesia where
executives are liable for criminal prosecution for something the
company is alleged to have done. Newmont's executives took the
police to a Jakarta court that declared the police investigations
and their detention of 32 days illegal. Nonetheless, the police
are still trying to arrest these employees so that they could be
indicted on the findings of the court-declared illegal
investigation.
The government is also divided on whether Newmont's mine in
Minahasa is guilty of polluting Buyat Bay. The Minister of Mines
and Energy has come out saying that there is definitely no
pollution but the Minister for the Environment maintains
otherwise and is threatening to take the company to court. And to
top it off the Ministry of Environment release two findings about
pollution in Buyat Bay from the same set of data. One said there
was pollution while the other said there wasn't.
Taken together these three cases raise serious questions about
the seriousness or the ability of the government to create an
environment that provides legal certainty to investors.
The Justice Minister is scheduled to speak on Legal Certainty
and Predictability at the Infrastructure Summit today. Let's hope
he provides a compelling explanation for the government's
handling of these cases and follows up on them with concrete
actions.
Anything less and the skeptics will have their day and, for
the rest of us, five more years of the same old, same old.
The writer is a Partner at PT Maverick Solusi Komunikasi, a PR
consultancy specializing in crisis/issue management as well as
brand communications. He can be reached at ong@maverick.co.id