Ban on foreign investment in dot-com firms upheld

Ban on foreign investment in dot-com firms upheld

JAKARTA (JP): The government defended here on Saturday its
latest move banning foreign investors from entering multimedia
businesses such as Internet Service Provider (ISPs), portals, e-
commerce services and dotcom companies.

Riza Primadi, senior assistant on communications and media to
the Minister of Investment and State Enterprises, said that the
ban was needed to protect existing companies.

"We just want to give local players more space to develop
their businesses. We hope to create a more level playing field
for them by slowing down the arrival of foreign players," he told
The Jakarta Post.

He said the measure was not really new because such businesses
had been on the negative investment list for years.

The restrictions imposed on foreign investment in multimedia
information services are contained in the new negative investment
list issued by the government last week. Several other business
sectors such the print industry, radio and television
broadcasting, cable television as well as public transportation
are also on the list.

The government has yet to formally announce the new regulation
but a leak caused confusion among the country's mushrooming
dotcom companies which mostly rely on foreign funds for
continuing operations.

The dotcom companies are puzzled whether the new ruling
affects their businesses because it only mentions "multimedia
information services" on the negative investment list. There is
not single word in the ruling which specifically mentions
internet or dotcom businesses.

"All multimedia, including internet services are now banned to
new direct foreign investment," he told the Post. He emphasized
that the multimedia information services as contained in the
ruling included ISP, portals, e-commerce and all dotcom
companies.

However, Riza said he was not certain whether services like
web site development and e-business incubator were also
prohibited to foreign investors.

"The ban is not meant to discourage foreign investors as they
can still participate, but through portfolio investment on the
stock markets," he said.

Existing foreign investors should not be worried because the
new ruling on foreign investment does not affect them, he said.

He said the ban only affects new foreign direct investment
proposals submitted to the government after July 20, when
Presidential Decree No. 96/2000 on lists of various industries
closed for foreign investments was signed by President
Abdurrahman Wahid.

It meant that the existing dotcom companies could not receive
new funds from new foreign investors, he said. But it is not
clear weather foreign investors of unlisted dotcom companies
could increase their equity.

Major existing internet-based companies are mostly operated by
joint ventures of local and foreign firms, including news portal
www.detik.com, which is jointly owned by local firm Agrakom and
Hong Kong-based venture capital firm techpacific.com; consumer-
based portal www.kemana.com, which is owned by the international
business information firm Castle Group and India-based Internet
application developer Edge NetVentures; search engine portal
www.catcha.co.id, which is jointly owned by Singapore's Arboc
Investments Pte Ltd., Hong Kong's Axiom Funds Management and
Geneva-based Alternative Investment Management Group; and
www.astaga.com, in which foreign partners own up to 90 percent.

Even the country's first on-line credit card authorization
dedicated to e-commerce service, Cipas Indonesia, was set up by
Malaysia-based Cipas.com Sdn Bhd with its local partner PT
Rajawali Tri Manunggal.

Sachin Gopalan, chief executive officer of the India-based
Edge NetVentures that partly owns www.kemana.com, said he hoped
the decree would not affect internet business because "it did not
mention anything about internet".

"But, if it did, the government is definitely taking a step
backward... For the sake of the country's economy, I think you
better allow foreign investment to come here," he said.

Eddie Darajat, director of financial news portal
www.indoexchange.com, in which up to 90 percent is owned by
foreign investors, said the government must clarify its new
ruling to avoid confusion among foreign investors.

"It's unreasonable to ban foreign investors from entering the
internet business while the President himself has been begging
for foreign investors to come here," he said.

Gopalan said Indonesia's prospective internet industry was one
of the main attractions for foreign investors to come here.

"And it will remain the same in the next five years. But, the
decree will likely change that trend," he said.

Indonesia is considered as a highly potential market for
internet and e-business due to its huge population of around 210
million and predicted five million Internet users by 2002.

While Ai Mulyadi Mamoer, chairman of the information
technology and multimedia division at the Indonesian Chamber of
Commerce and Industry, said the decree would definitely
discourage foreign investment.

He said it was feared that the banning of foreign investment
would hamper not only the development of the country's internet
industry, but also telecommunications because the government was
expecting the rapid growth of internet use to help accelerate the
growth of telephone use, especially mobile telephones. (cst)