Foreigners can acquire, establish holding firms

Foreigners can acquire, establish holding firms

JAKARTA (JP): The government issued new decree on Wednesday
allowing foreign investors to establish a holding company or
acquire stake up to 100 percent in existing ones.

State Minister of Investment Marzuki Usman said that the new
measure was introduced to help speed up the debt restructuring of
the local business groups.

Under the new decree, foreign investors would have a clearer
legal framework in converting bonds issued by local business
groups into equity stake, he said.

"Previously, there was no ruling on the matter. So we set up
the rule to accommodated such interest in order to attract
foreign investors and speeding up the revitalization of the
country's real sector," said Marzuki, who is also the chairman of
the Investment Coordinating Board (BKPM) and Minister of Culture,
Arts and Tourism.

Restructuring foreign debts through debt-to-equity-swap scheme
is currently a popular alternative to the country's debt-ridden
business group.

Several giant business groups, including the widely-
diversified Bakrie & Brothers have adopted the scheme for
resolving its debts.

The debt-to-equity swap deals, however, could not be
implemented because foreign investors were still barred from
owning stake in a local holding company,

Despite the fact that they were controlling the holding
companies, Marzuki said, foreign investors were still restricted
to control the subsidiaries which operating in closed sectors for
foreign investment.

Those business sectors include ports, airlines, shipping,
public railways, drinking water supply, telecommunication, mass
media, atomic energy reactors, explosives and others.

BKPM's vice-chairman Andung A. Nitimihardja said that the
decree provided a strong legal basis for several Indonesian
business groups which had to swap their larger part of their
stake into the debts to foreign creditors.

Marzuki said the new decree is part of a series of policies
the government would introduce to lure back foreign investors to
the country.

"We will issue other new regulations to assign BKPMDs
(investment coordinating board's provincial offices) to approve
new domestic investment and to assign Indonesian embassies
overseas to provide preliminary approvals for foreign investment
later this month," he said.

Marzuki said at the first stages of the new service,
Indonesian embassies in Tokyo, Seoul and consulate general in
Hong Kong would be assigned to receive investment applications
and give preliminary approvals for foreign investors.

Marzuki said the peaceful general elections Monday, were
expected to improve the investment climate in the country.

He also said that foreign direct investment approval in
Indonesia plunged 89 percent to a mere $935 million for the
period from Jan. 1 to April 15, from the same period last year as
foreign investors continued to avoid the country on social and
political uncertainties.

Foreign direct investment fell by 60.7 percent last year to
$13.3 billion, while domestic investment approvals shrank to Rp
59.4 trillion ($7.42 billion) from Rp 199.9 trillion in 1997.
(gis)