Indonesian courts scaring investors away, IFC warns
The Jakarta Post, Jakarta
The International Financial Corporation (IFC), the investment arm of the World Bank, warned on Friday that the country's weak legal system was scaring away badly needed foreign investors, after the Central Jakarta Commercial Court declared Canada's Manulife Financial Corp's local insurance unit bankrupt.
IFC regional representative Amitava Banerjee said he was "extremely concerned" at the effect on potential and existing investors.
It showed that, "a well-capitalized and professionally run company can be brought down by the machinations of malicious interested parties and there is no protection under a court of law".
"Indonesia has to be a nation based on law," Banerjee was quoted by AFP as saying.
He said the unpredictable legal system was holding the IFC back from extending a greater level of support to Indonesia.
The IFC, a World Bank subsidiary, lends to and invests in private companies in developing countries.
The Commercial Court on Thursday ruled PT Asuransi Jiwa Manulife Indonesia (AJMI) bankrupt after a receiver of the now defunct PT Dharmala Sakti Sejahtera (DSS) filed a bankruptcy petition over an unpaid dividend in 1999.
DSS, which was owned by the Dharmala Group, was a one-time partner of Manulife in AJMI.
The court ruling was the latest round in a two-year legal battle between Manulife and Dharmala.
Manulife Indonesia, which has temporarily suspended business following the judgment, reacted angrily to what it called an "outrageous" ruling.
AJMI said only the shareholders and not the company had the right to declare or withhold dividends and the annual shareholders meeting in 2002 decided not to declare dividends for 1999.
"In our view this is a completely absurd and ridiculous decision," Philip Hampden-Smith, president of AJMI told AFP.
"We firmly believe this court decision ... is tied to our legal struggle with our ex-partner the Dharmala organization and the Gondokusumo family (which controlled Dharmala before the 1997/98 financial crisis)."
Meanwhile, Manulife was quoted by Dow Jones as saying Jakarta Commercial Court judge Hasan Basri, "received significant financial enticement to make this ruling". It said the DSS receiver, Paul Sukran, was closely associated with the Gondokusumo family.
Manulife said AJMI "is not insolvent". It noted that it has more than a 10 percent share of Indonesia's life insurance market, with over Rp 3.1 trillion in assets.
"Manulife remains proud and committed to our business in Indonesia," it said. "We are doing everything we can to ensure that our 320,000 customers and 3,500 employees in Indonesia will not be negatively impacted by these criminal acts."
It added that, "Manulife has no intention of leaving Indonesia now or in the future".
The life insurance company said it will protest the ruling, "to the highest levels available".