Liberalize all the media

Liberalize all the media

Kudos to the government for coming to its senses in allowing
foreign investment into the robust multimedia services.
Presidential Decree No. 118/2000, signed by President Abdurrahman
Wahid this week, removed the multimedia services from the list of
economic sectors where foreign investment is not permitted. The
earlier decree, No. 96/2000, for whatever reasons it was issued
for, was a farce and reflected the government's shortsightedness
and ignorance of the dynamic nature of the information
technology.

The issuance of the new decree shows that the government is
responsive to the mass criticism which followed last month's
ruling. But formal liberalization of the multimedia services
sector -- it was never really banned until the emergence of
Presidential Decree No. 96/2000 -- is not far-reaching enough. It
is discriminatory against the "traditional" media -- print and
TV/radio broadcasting -- where foreign investment is barred on
the pretext of protecting the "strategic industry" from the
preying hands of foreign nationals.

By depriving established newspapers, magazines, radio and
television companies of access to global capital, these companies
will find it increasingly difficult to compete against Internet
companies, which are already encroaching on the turf of
Indonesia's media industry. The "protected" companies in the
traditional media will find the playing field far from level with
Internet companies, which have unlimited access to global
capital.

The advent of information technology has virtually redrawn the
boundaries of the media industry as it combines the rapidly
changing communications technology with information services.
Internet portal companies, for example, give everything that
newspapers/magazines, radio and TV stations offer, plus much
more. It is also revolutionizing the way that people obtain their
information and run their lives and businesses, hence the term
"traditional media" for the old ways of disseminating
information.

Typically, government regulators are always falling behind
technological changes. Until the issuance of Decree No. 96/2000
last month, there was not a single regulation dealing with the
Internet. The industry could not wait until the government got
its act together. The Internet industry in Indonesia grew
robustly in spite of the economic crisis from 1997 to 1999.

The growth of the Internet industry was largely fueled by
foreign capital at a time when local companies were struggling
with mountains of unpaid debt. Foreign investors were also
quicker in identifying the business potentials Indonesia offers
through the multimedia services, from the Internet to e-commerce.
The as yet unregulated industry has become the only sector that
has seen significant foreign investment these last three years.

The government's first attempt to regulate the nascent
industry through Presidential Decree No. 96/2000 last month was
embarrassing to say the least. It was essentially based on poor
advice, and in all likelihood, on the same reasoning that led to
the decision to bar foreign investment in the print and
broadcasting industry, which is to protect "national interests".

This obsession with national interests is actually harming the
nation's long-term interests, especially in a global economic era
where state boundaries are becoming less clear. The foreign-
funded Internet portal companies, for example, could easily set
up offshore operations if the government went ahead with the ban
against foreign investment. The nation would become the real
losers in the end if they were deprived of foreign investment
and, most importantly, the benefit of the new technology that is
revolutionizing the way people live in other parts of the world.

Now that everyone seems to have accepted the inevitable --
that banning foreign investment in the multimedia services sector
is detrimental to national interests -- the government should
turn its attention to liberalizing all the other sectors of the
media, particularly the "traditional media". The House of
Representatives should also play its part because the
restrictions on foreign investment in the media are actually
stipulated in the Press Law and the Broadcast Law.

If their concern is to protect the local industry, then they
would be doing a great service by allowing these companies to tap
the global capital market, instead of preventing them. The best
protection that they can give to Indonesian companies in the
the traditional media in competing against the multimedia
services is to level the playing field.