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)