Foreign investors continue to ignore RI
Foreign investors continue to ignore RI
JAKARTA (JP): Indonesia's risk premium has changed
significantly over the past two years but the country has yet to
regain the interests of large international investment houses, a
senior official from the Hongkong and Shanghai Banking
Corporation (HSBC) Ltd. observed here.
HSBC's chief regional economist for the Asia Pacific region
John Woods said big investment houses from the United States and
Europe had ignored Indonesia and let it fall off their investment
radar screens.
"Because it has slipped from the radar screen, there is no
aggressive research as such and accordingly opinions are
typically being formed at the investment level by the flow of
news as generated by the media," he said.
Woods said that news carried by the media had served as an
deterrent to the country's investment image as it unfairly
presented negative information about the country's investment
profile by reporting one-sidedly.
The media had not always taken the view of both sides, and it
was so often that the voice of the Indonesian government about
the country's investment situation was not well represented in
the media, he added.
"It is (the view of) the man on the street that he is
typically more interested in sensational views of the world that
of investment opportunities," he told an economic seminar
sponsored by HSBC.
Consequently, Woods added, investors' decisions were being
overly influenced by the angle of news-flow. And this had
deprived investors of a chance of booking good investment yields,
he added.
The real fact was that Indonesia's risk profile was a lot
better than many investors believed, he said.
The premiums in terms of the country's interest rates and
fixed income spreads -- on a relative and absolute basis -- have
shown a significant improvement and a stable trend, particularly
in the last six months, according to Woods.
But this condition is not necessarily what the Indonesian
government is communicating aggressively to investors.
"We are looking for Indonesia to take an initiative to more
proactively communicate the country's stabilizing story," he
said.
The government should undertake regular road shows to
communicate their side of the story to investors, he added.
State Minister of Investment and State Enterprises Development
Laksamana Sukardi, another speaker at the seminar, called on
investors to positively judge the general condition of Indonesia
where a freely-elected government and legislature was in place.
He admitted, however, that the country was still learning and
adjusting to the new circumstances.
So if there was "noise" please understand that it was the
consequence of the democratization process, he said.
Laksamana added that the media should learn that as well as
using their freedom they should see things more objectively and
optimistically.
"To be optimistic is to see as an opportunity in a problem,
not a problem in an opportunity," he said.
Laksamana was optimistic about an improvement in the
investment climate in Indonesia where a level playing field would
be available for both local and foreign investors.
He said the government was now drafting a bill on investment
which would totally remove discriminatory treatment on foreign
investors.
Laksamana said the bill would amend the 1968 domestic
investment law and the 1967 foreign investment law.
As there would be no discrimination against foreign investors,
Laksamana said they would also be required to bear social
responsibility just like their local counterparts did.
"The bill will ask one thing from investors, both local and
foreign: To be socially responsible investors," he said.
The bill, Laksamana said, would also require both local and
foreign investors to protect the environment in their operations,
so that they would not create problems for the country.
It will also require local and foreign investors to respect
human and labor rights.
And lastly, Laksamana said, the bill would require investors
to uphold good corporate governance in their operations.
Woods hailed the government's effort to provide equal
treatment to domestic and foreign investors.
"If you have a price for one part of the investment community
and a different price for another part of investment community,
it leads to market inefficiency," he said.
He said the country needed a single piece of regulatory
architecture that was transparent in its disclosure and fair in
such a way that it would impact on market players.
HSBC's Head of Asian Debt Product Sales Sharad Desai said
domestic investors played a more important role now as local
companies, hurt by the steep depreciation of the rupiah,
preferred local funding.
He said overseas borrowing would provide a funding mismatch
for local companies which relied mostly on the domestic market as
they received revenues in rupiah. (udi)