Investors huddle with 'powerful partners'

Investors huddle with 'powerful partners'

JAKARTA (JP): Investors cling to politically well-connected
partners to safeguard against upheaval, despite the fact that
political risks are highly unpredictable, an observer says.

Economist Sri Mulyani Indrawati of the University of Indonesia
said yesterday at a discussion on investment and political risks
that the magnitude of investment was a key factor in why
investors attach to powerful partners.

"This is what investors do to reduce political risks," she
said at the discussion held by the Center for Information and
Development Studies (CIDES), a think tank of the Association of
Indonesian Moslem Intellectuals (ICMI).

She cited the planned construction of a 95-kilometer bridge,
connecting the Malaysian peninsula and Indonesia, by a private
consortium of companies from both countries, as proof of major
investors choosing only politically well-connected partners.

The Indonesian consortium, PT Malindo Transmadu, is headed by
Siti Hediati Heriyadi Prabowo, President Soeharto's second
daughter. Malaysia is represented by Renong Sdn. Bhd.

There has been no information yet as to how much the project
will cost.

The other speakers at the discussion were Indria Samego and
Didin S. Damanhuri of CIDES. The discussion was held to mark the
launching of the third volume of the annual Journal of Indonesian
Profiles, which consists of writings on domestic politics and the
economy.

Sri said no one could ever exactly calculate political risk,
which was highly uncontrollable, unmanageable and unpredictable.

She noted that other than from domestic politics, investment
risks could also result from globalization -- meaning that a
situation of a particular country could cause a situation in
another country.

Sri cited the recent fall of some ASEAN currencies as an
example of the interconnectedness of countries when it comes to
business and political risk.

Indria and Didin shared Sri's view and agreed that no country
was free from another country's influence. Domestic, political
and economic matters have been globalized, Didin said.

International exposure -- in the form of research by
international institutions, for instance -- would affect the
level of investment in a particular country, Didin said.

He cited the Hong Kong-based Political and Economic Risk
Consultancy (PERC) survey, disclosed in March, that rated
Indonesia as the most corrupt nation in ASEAN.

He noted how monopolies and nepotism were growing to such an
extent in Indonesia that they might hamper foreign investment.

However, he expressed optimism that international pressure and
mass media control would eventually help usher in political and
economic reforms in Indonesia.

Indria pointed out that the market economy was behind the
drive for reform in many countries.

In this interdependent world, reform would sooner or later
take place in market economy-oriented countries, he said.

"They need to open up in order to take advantage of the world
economy," Indria said, citing some Eastern European countries who
had to adjust and open up in order to "integrate" with the world
market economy.

He also said the only way to achieve political and economic
reforms was through democratization.

"Democratization is the word, whether you like it or not,
whether you are ready or not, it will come," Indria said. (10)