Govt okays Salim's maneuvers
Govt okays Salim's maneuvers
JAKARTA (JP): The government has welcomed Sudono Salim's
proposals to restructure the Indocement and Indofood companies as
a strategic step towards strengthening Indonesia's export base,
Minister/State Secretary Moerdiono said here yesterday.
The government has also pledged support for similar actions by
other businesses, he said.
Moerdiono and Coordinating Minister for Production and
Distribution Hartarto announced the official government position
on the widely-criticized corporate plans after a meeting with
President Soeharto yesterday.
Moerdiono said President Soeharto, concerned about the
controversy sparked by Salim's plans, had assigned him, Hartarto
and Finance Minister Mar'ie Muhammad to study the proposals.
"The government concludes that there will not be any capital
flight resulting from the restructuring. Instead the move will
generate a capital flow of Rp 1.7 trillion (US$655 million),"
Hartarto said in reference to the study.
The restructuring will also generate Rp 122 billion in income
tax for the government, Hartarto said.
"Moreover, the government will not only retain its 25.73
percent stake in PT Indocement Tunggal Prakarsa, valued at Rp 2.4
trillion, but will also own 10.18 percent of PT Indofood Sukses
Makmur worth Rp 1 trillion," Hartarto added.
Under a complex set of proposals, which have yet to be
approved at a shareholder's meeting next month, Indocement will
"spin-off" its 50.1 percent stake in Indofood to the Singapore-
listed QAF Ltd.
"But the bottom line is that even though Indofood will be
majority owned by QAF, this Singapore company will still be
controlled by Salim's companies (Mekar Perkasa, Citrabuana
Dirgapuri and Kaolin Indah Utama) as the majority owners,"
Hartarto said.
He said this meant Indofood's shareholders would continue to
pay income tax to the government of Indonesia rather than
Singapore as there is a double-taxation agreement between the two
countries.
He also denied the claim that QAF's majority ownership of
Indofood violated Indonesia's foreign ownership laws.
"Government Regulation No.20/1994 allows 95 percent foreign
ownership of enterprises in Indonesia," Hartarto said.
"The management of the Salim Group has also assured the
government that the net revenues from the restructuring would be
reinvested in Indonesia," Hartarto added.
The government, he said, also keeps records of the Salim
Group's commitments to several investment projects under
implementation in Indonesia, including those in oil palm
plantations, sugar mill, rice estates, tourism development in
Bintan island and an olefins industry.
A senior government official who preferred anonymity also
reckoned yesterday that President Soeharto firmly believed that
Salim, his long-time business confidant, would not betray him.
"Soeharto is fully convinced that Salim will not have the
courage to betray his trust," the official said.
He appealed to the public, notably analysts, to consider the
Indocement-Indofood restructuring as preparation for the ASEAN
Free Trade Area in 2003 and Asia Pacific free trade area in 2020.
Moerdiono rejected the criticism that Salim's maneuvers are
not nationalistic.
"What do you mean by nationalism? Nationalism means doing the
best for the national economy and for greatest benefits of the
people," Moerdiono said.
Moerdiono said the public debate over the Indocement-Indofood
restructuring represented progress in enhancing business
transparency.
"This should set a good example for other business groups," he
said, adding that Soeharto himself was aware that other companies
have conducted similar actions without fuss.
He added that even though the government owns 25.73 percent of
Indocement, a final decision on the restructuring proposals would
still depend on the shareholder's meeting.
The Salim Group argued two weeks ago on announcing the
proposals that the move would strengthen Indocement's
competitiveness, establish a strategic base for Indofood's
international marketing efforts and generate new funds for
further business expansion in Indonesia. (prb/vin)