Government blasted over Internet restriction

Government blasted over Internet restriction

JAKARTA (JP): Foreign investors and local Internet companies
blasted the government on Monday over its controversial policy to
ban foreign investors from entering the country's Internet-
related businesses, calling it unrealistic.

Patrick Alexander, managing partner of global venture capital
firm, Batavia Investment Management Limited, which currently owns
the majority interest in local Internet company Astaga Group,
said the ban was a blunder.

"It's a big mistake. I don't understand why they're doing it.
I hope they will reconsider... because it'll only create a bad
image of Indonesia," he told The Jakarta Post.

He said local Internet companies needed foreign investment
because there were not many local investors who had interest in
the sector and available funds.

Andrew Hayek, president of Internet company Astaga Group,
warned that the ban would upset foreign investors, causing some
of them to pull out of the country.

"The nature of Internet business is that you can do it from
anywhere. So if they can't make it here, they will find better
places to invest their money," he said.

He said his company was involved in discussions with several
potential new investors right before the decree was issued.

"They are quite discouraged now, but they still want to know
more about it... We'll keep trying to bring in more investors,"
he added.

Riris Irawati, chief editor of news portal www.satunet.com,
said the ban posed no immediate impact to the company, but would
put it in a difficult situation in the future when it wanted to
secure foreign investment.

"We're OK now. But, from the industry point of view, the ban
is really deplorable because it will definitely slow down the
growth of Internet business here," she said, adding that the
portal is now totally owned by local investors.

Leon Tan, executive director of search engine portal
www.catcha.co.id, shares of which are mostly controlled by
Singapore, Geneva and Hong Kong-based venture capitals, called on
the government not to consider foreign investors as a threat to
local companies.

"Don't look at our presence here as a threat. It's not about
domination, we're here to build the huge, potential market that
you have here," he said.

Tan said the government must clarify the details of the decree
to avoid further confusion among local and foreign players.

In a bid to protect local industries and particular national
interests, the government issued on July 20 Presidential Decree
No. 96/2000, which declares some business sectors, including
multimedia information services, restricted to direct foreign
investment.

Riza Primadi, senior communications and media assistant to the
Minister of Investment and State Enterprises, acknowledged that
the decree lacked details.

"It's only the Presidential Decree. We're currently working to
finalize a ministerial decree that will provide detailed
guidelines on the subject," he said.

However, he confirmed the decree intended to restrict all
businesses related to Internet -- Internet Service Providers,
Internet portals and all other e-commerce businesses.

He assured the ban would not effect existing foreign
investment contracts, but new deals made after July 20 would be
restricted.

Foreign investors, who own shares in existing Internet
companies, could increase their position in the firms, he said.
"What is prohibited now is for local Internet companies to obtain
foreign investment from totally new players," he said.

Batavia's Alexander said that the decree would not only
discourage new investors, but also would restrict existing
investors from investing in other local companies needing fresh
funds.

He said his company was undertaking talks with local Internet
firms other than Astaga.

But it is feared the ban would make it difficult for Batavia
to materialize its future investment plan, he said. (cst)