Antigraft drive could 'degenerate into witch-hunt'

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)