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)