Capital shifting may not profit

Capital shifting may not profit

JAKARTA (JP): Shifting corporate assets overseas causes more
harm than good to the country's economy, an economist said.

Faisal Basri, an economist at the University of Indonesia,
said here yesterday that Indonesian companies which have so far
operated overseas, had not yet brought much capital inflows to
the country.

"The activities of Indonesian companies which operate abroad
or shift their assets to a foreign subsidiary, does not usually
result in significant capital inflows," he said at a seminar on
assets shifting.

He said the current trend of shifting assets of some
Indonesian companies overseas was unique because it was against
the practices of other countries.

Capital outflows such as shifting operations overseas, he
said, usually occurred when a country's current account was
surplus. Capital inflow, on the other hand, occurs when the
current account is in deficit.

"But in Indonesia capital outflow occurs when our current
account is still deficit," he said.

This highlighted inadequate economic fundamentals in the
country where the inflow of foreign capital was still needed to
stimulate the economy.

"It is as if the economic motor does not run because it does
not have the oil and fuel it needs," he said.

Earlier this year, the country's major food producer PT
Indofood of the Salim Group sparked controversy when it announced
its plan to inject its assets into a small Singapore listed
company, QAF Ltd.

The move was criticized by some people as not being
nationalistic, as the company, owned by noted tycoon Sudono
Salim, had been a recipient of many government favors. Many
people labeled the move capital flight.

Indofood defended the move, saying it would keep its operation
in Indonesia and that the acquisition would in turn deliver
capital inflows to the country.

Indofood is not the first company to transfer its ownership or
assets overseas. Several groups have operated several businesses
in Singapore, Hong Kong and China.

Faisal said the effect of Indofood's move would depend on how
Salim used the money.

"Whether it will raise the company's output and exports or
decrease the current account deficit, we will find out in two or
three years after the acquisition," he said.

Faisal said assets shifting is also encouraged by the fear of
political uncertainties. Many business owners wondered what would
happen to them under the country's future leader, he said.

Shipping company PT Samudra Indonesia announced earlier it
would float its shares on the Singapore stock exchange.
Engineering and design company PT Bukaka Teknik Utama, which is
listed on the Jakarta Stock Exchange, said it would follow suit.

Faisal attributed the recent trend of local companies to list
on the Singapore Stock Exchange to new regulations issued by
Singapore's stock exchange authority.

The new regulation allowed any foreign company to float their
shares on the Singapore Stock Exchange, as long as the company
owned at least 30 percent stocks in a local Singaporean company
and operated in infrastructure, with a minimal concession period
of 10 to 15 years, he said. (das)