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