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)