Djamaloedin shocks investors

We have often highly commended Minister of Forestry Djamaloedin Soeryohadikoesoemo in this column for his strong determination to enforce the principle of sustainable management among forest concessionaires.

Immediately after his appointment to the cabinet in the middle of March, 1993, he began cracking down on reckless loggers. He has revoked the permits for a number of poorly-managed forest concessions and put them under the management of state forestry companies. He has fined many others.

He also has earned great praise for his courage in dealing indiscriminately and firmly with errant forest concessionaires, including those whom many previously saw as the "untouchables" due to their strong political connections.

He refused to give a recommendation for the Djajanti Group's planned share offering. His intervention last year delayed Barito Pacific's primary share offering in August, 1993, for a few months.

He buckled only when he received a Presidential instruction in June to set aside an equivalent of around US$185 million of the reforestation funds collected from forest concessionaires for a loan to the state- owned IPTN aerospace company in Bandung.

However, his threat not to renew the licenses for the forest concessions of PT Barito Pacific Timber unless the publicly listed company transfers 49 percent of its shares to a state-owned company seems to be not only out of proportion and based on an inaccurate assessment, but also in danger of doing damage to investor confidence in the Indonesian stock exchange.

We reckon that, as a career civil servant, Djamaloedin should have been aware that such a threat could cause the price of Barito's shares on the stock market to collapse at the expense of hundreds of thousands of investors, including the Civil Servant Pension Fund which owns 17.85 percent of Barito. Djamaloedin surely must know that information is vital for price formation on the stock exchange.

Yet he made the remarks before the opening of the monthly limited cabinet meeting on Wednesday, which caused confusion rather than shedding light on the rumors about Barito that have been circulating since early this week.

His statement did not explicitly mention which of Barito's 22 forest concessions are so damaged they must be denied extensions. This question was answered only yesterday when the forestry ministry issued a press release apparently meant to clarify Djamaloedin's remarks. The press statement by the ministry's acting secretary general states that Barito's own concessions are not at issue, but rather two concessions owned by PT Aya Timber and PT Yayang Indonesia, whose relations with Barito are based only on log- supply contracts.

As it turned out, it was the information from Barito, contained in its press release of Wednesday evening, that was accurate.

But the damage has been done.

We wonder why a minister could be so careless about such information, which is quite vital for publicly-traded companies. Moreover, Barito and its 22 concessions, totaling 2.2 million hectares, had been subjected to thorough examinations only last year in connection with its planned share offering.

Even assuming that two of Barito's concessions would not be extended, we think that could not be used as a legitimate reason for the government to take over 49 percent of Barito's shares. Moreover, the government has ruled that forest-based companies cannot count their forest concessions in their fixed assets because they are owned by the government.

Still more confusing has been the fact that Djamaloedin did not explain the procedures through which the government would take over the 49 percent equity holding it demanded. We think acquiring a company already listed on the stock exchange must be subject to clear-cut procedures. We also should take notice of the fact that Barito, with total assets of Rp 3 trillion (US$1.4 billion), is the largest single company listed on the Jakarta exchange, with 49 percent of its listed shares (representing 12.2 percent of its total common stock) owned by foreign portfolio investors.

Djamaloedin's argument that a 49 percent share holding in Barito would entitle the government to appoint its own man to the management to ensure sustainable forest management seems to be weak. The government at present already has a high level official (Secretary General of the Ministry of Finance Jusuf Anwar) on the company's board of supervisors and Dadang Munandar Sadikin, an official of the Civil Servant Pension Fund, on the board of directors.

We do not mean to say that Barito Pacific is a "lily white" company regarding its forest concession management. We think nonetheless that the way the government settles its dispute with Barito has the potential to influence the confidence of domestic and foreign investors in the Indonesian stock exchange and the economy in general.