Antigraft drive could 'degenerate into witch-hunt'

JAKARTA (JP): A noted American business consultant and analyst warned Indonesia's anticorruption drive could deteriorate into a witch-hunt at the expense of new investment if the drive was pursued without the guidance of clearly established rules.

Harvest International Indonesia president Harvey Goldstein said on Friday a number of foreign investors were worried about the manner in which the drive against corruption, collusion and nepotism was launched after the fall of former president Soeharto in May 1998.

"You have every right to clean up your house," said Goldstein, who has been doing business in Indonesia since the 1970s, in reference to the nationwide campaign against corruption, collusion and nepotism, known by the acronym KKN.

Foreign businesspeople, however, are apprehensive that there is some sort of fever for emotional retribution out there, said Goldstein at a seminar hosted by the National Development Information Office at the Jakarta Media Center.

The government has canceled many business deals and is reviewing or renegotiating a number of other contracts, including almost 160 deals at state oil and gas company Pertamina, because of their involvement in KKN.

Goldstein said the majority of foreign investors, particularly publicly listed multinational companies and those from the United States, did not involve themselves in KKN.

"American businesspeople should especially be very careful because of the long-arm of the U.S. Foreign Corrupt Practices Act of 1977," he said.

Goldstein conceded, however, that during Soeharto's rule, notably after 1983, there were many cases when foreign investors were forced to take on local partners who were involved in KKN.

"Foreign investors really want to buy out their local partners suspected of KKN, but there is no guarantee that the government would not sooner or later put claims on their businesses anyway," he said.

He said the sanctity of contracts and a reliable and fair legal system were vital for maintaining investor confidence.

The persecution and prosecution of KKN has sometimes been conducted in such ways that even many high-ranking government officials now are afraid to act or make decisions, Goldstein said.

"A lot of power holders now are concerned about their future and that of their families."

However, the problem is that most foreign businesspeople do not see less corruption within the bureaucracy, he said.

Goldstein said this had further discouraged investment, especially because most foreign business executives now suffered from a "negative bias" built into their mind-set after the economic crisis befell the country in late 1997.

He said before the crisis, almost all foreign business managers in Indonesia sent positive reports and bullish projections on Indonesia to their head offices.

"But since they were caught so off-guard by the crisis that they now tend to see things in negative terms and worry too much."

Asked bout the November presidential election, Goldstein said foreign businesspeople did not care who would be elected the next president as long as the election was perceived as fair and democratic.

"They would be greatly concerned and apprehensive of instability if the election was seen as being manipulated."

Addressing a concern raised by a foreign businessman at the seminar over the decentralization of power, Goldstein said decentralization could be conducive for investment as the chain of decision-making would be streamlined.

"But without proper management and control, the decentralization could create 27 Soehartos in the provinces," he said.

Several other business executives at the meeting seemed to be worried about the majority victories gained by the Golkar Party -- formerly the electoral machine of Soeharto -- in a number of provinces in eastern Indonesia, notably Sulawesi, Nusa Tenggara and Irian Jaya, in the general election.

"This will mean that the administrations and legislatures in these provinces will be controlled by the KKN-infested Golkar Party," a business executive said.

Goldstein said foreign investors, who currently are only required to obtain a country-risk analysis, might in the future need provincial-risk assessments as well.(vin)