Foreign holdings in indirect investment might be raised
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)