Mon, 22 Mar 2010

From: The Jakarta Post

By Riyadi Suparno, The Jakarta Post, Jakarta
After a few months of uncertainty, the government finally indicated Thursday that investment in telecommunication towers would remain closed to foreign investors.

Investment Coordinating Board (BKPM) chairman Gita Wirjawan, who initially floated the government’s initial plan to open the sector to foreign investors, threw in the towel and announced that his office would abide by the 2008 and 2009 ministerial decrees that effectively closed the telecom towers from foreign investment.

“BKPM respects the decrees and will use them as a reference in issuing investment licenses on telecommunication towers,” Gita told a press briefing at his office.

Gita made the statement supporting the closure of foreign telecom tower investment after Coordinating Economic Minister Hatta Rajasa made similar remarks on Wednesday.

Hatta went out to defend Communications and Information Technology Minister Tifatul Sembiring, saying that the government would enforce the ministerial decrees on telecom towers.

Hatta’s and Gita’s statements ended months of uncertainty following differences in opinion between Gita and Tifatul over the issue.

Tifatul maintained that telecommunication towers must remain closed to foreign investors, arguing that telecommunications towers needed to be protected because foreign participation in the sector was so deep that the country needed to protect what was left.

The country’s biggest cellular companies - Telkomsel, Indosat and Excelcomindo - are all controlled by foreign investors.

Gita, however, argued that the telecommunication sector needed a huge investment of around US$7 billion to $8 billion, including towers, that domestic investors would not be able to meet.

“Well, I’m not the expert on telecommunications. Our friends at the telecommunications office know more,” Gita said Thursday.

“What concerns me is how to establish certainty for investors and create a conducive environment for investment.”

The telecommunication tower sector is actually absent from the existing negative list, which was signed by President Susilo Bambang Yudhoyono during his first term and highlights sectors that restrict foreign investment.

However, the then telecommunication and information minister issued a decree in 2008, closing the sector to foreign investors. In 2009, a joint ministerial decree issued by the communications and IT minister, home affairs minister, public works minister and BKPM chairman reinforced the 2008 decree.

An informed source close to the issue said many vested interests were at play to keep the telecommunication tower sector closed to foreign capital. Some of them were brokers who had no capital to invest.

The biggest investors remain telecom companies, such as state-owned PT Telkom. The company is currently consolidating its telecom towers under one business unit, that could later be floated on the capital market.

Gita, however, maintained that telecom towers would not be included in the upcoming revised negative list, which should be ready by the end of this month or early next month.

Gita said the new negative list would open up more sectors to foreign investors, including in the creative industry, agriculture and healthcare.

In the creative industry and agriculture, Gita explained, foreign equity would be limited to 49 percent.
Meanwhile, for the healthcare sector, foreign investors could take a majority ownership of up to 67 percent.

“By opening these sectors to foreign participation, we hope that we not only could attract more investment but also improve the performance of those sectors.”