Government to ease foreign investment restriction
JAKARTA (JP): The government, trying to grapple with the drop in foreign capital inflows, plans to ease restrictions on foreign portfolio and direct investment.
Ginandjar Kartasasmita, the state minister for development planning, told around 200 businessmen from the six members of the Association of Southeast Asian Nations (ASEAN) in a meeting yesterday that deregulation will be necessary if Indonesia is to continue to compete with the rest of Asia.
He said Indonesia needs to review its existing policies, which restrict foreign participation on the capital market to 49 percent of listed shares. The regulation was designed to prevent foreign takeovers of domestic companies.
"To the extent that domestic companies are better corporate citizens and have the interests of their own nation at heart more than a multinational corporation would, the ceiling is justified," he said.
Ginandjar, also the chairman of the National Development Planning Board (Bappenas), however added that in today's increasingly global economy, it is no longer certain if domestic companies are any better for the nation than foreign firms.
Being a guest can induce a level of social responsibility equal to that of many domestic companies, he said, adding that as more domestic companies move overseas the distinction between foreign and local firms will be blurred.
The two-day meeting, held by the ASEAN Business Forum, is discussing business opportunities, global trade and infrastructure development.
Deregulation
Ginandjar said that reviewing the foreign ownership restrictions on direct investment, especially in areas like commodities, will be part of the government's next deregulation step.
The measures will also include decentralizing the decision making process to reduce costs, minimize red tape and end delays, he said.
"In particular, it is expected that these reforms should attract more small-scale foreign investors," he said. "In the past, our policy favored large investors over small investors to prevent small foreign companies from hurting small domestic firms."
In fact, the experience has shown that small-scale foreign investors can stimulate the growth of small-scale domestic companies by opening up new markets to them, showing them new skills and designing new high-quality products which appeal to overseas consumers, said Ginandjar, who is a former chairman of the Investment Coordinating Board.
Last October foreign ownership restrictions on direct investment were revised to allow foreign investors to own 100 percent of a company if it operates in isolated areas, in industrial bonded zones, in intermediary manufacturing or has a paid-up capital of at least $50 million. Full ownership, though, is allowed for 10 years of commercial production at most, with the exception of industry in isolated areas.
Business analysts say that the October policy is not attractive enough, because it does not really open the door for small-scale investors or abolish mandatory divestment.(hen)