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)