Foreign holdings in indirect investment might be raised
JAKARTA (JP): The government will likely raise the ownership ceiling imposed on foreign investors in companies listed on the capital market from the present 49 percent to conform to the new foreign investment regulation.
Finance Minister Mar'ie Muhammad said yesterday that the 49 percent ceiling should be adjusted to the new investment ruling.
"The government is seriously considering widening the foreign portion in share trading," he told newsmen after giving an address at an international conference on capital markets.
The government issued a new foreign investment ruling late last month allowing foreign investors to have an equity holding of up to 95 percent in a joint venture with local partners. While the foreign ownership restriction on direct investments has been eased several times to attract foreign investors, the restriction on foreign holdings in the capital market has remained at 49 percent.
Economists suggested that the government also increase the ceiling of the foreign share holding in portfolio investment to revitalize stock trading. It has been on a downward trend over the last two months due to the decline of foreign investors.
Sjahril, a noted economist at the University of Indonesia, questioned the inconsistency of the government's foreign investment policy.
"If foreigners are allowed to own up to 95 percent of shares in non-listed companies, why aren't they allowed on listed ones?" he said.
Support
Hasan Zein Mahmud, the president of the Jakarta Stock Exchange, supported the idea of easing the ownership restriction imposed on foreign investors in the capital market.
The government is believed to have maintained the foreign ceiling in portfolio investment in fear that raising the ceiling more than the 49 percent level could lead to hostile control of important companies by foreign investors.
"If this is the case, the government can enforce a ruling limiting the control of foreign investors in company management," Hasan said, adding that many countries prefer this kind of ruling rather than enforcing a share ownership limit.
Hasan commented that controlling management is not the intention of investors in the capital market.
Basiruddin A. Sarida, the president of the Surabaya Stock Exchange, told The Jakarta Post that the government should be "very careful" if it wanted to increase the foreign ownership ceiling in portfolio investments.
"We are still too dependent on foreign investors and allowing them to buy more than 49 percent could be fatal, both to the stock market and to the monetary system as whole," he said, adding that a massive outflow of foreign investments from the local stock market would damage the country's foreign exchange reserve.
He suggested that the government first issue a ruling limiting the outflow of foreign exchange from the country before allowing foreign investors to buy more than 49 percent of the shares listed on the stock markets.
Transactions carried out by foreign investors in the country's stock exchanges generally account for around 75 to 85 percent of the total trading volume. (hen)