Nationalism 'must not restrict' foreign investors
By Riyadi
NUSA DUA, Bali (JP): The recent rise in nationalistic sentiment would not drive the government to impose a restrictive foreign investment policy, economist Mari E. Pangestu said yesterday.
At the 24th Indonesia-Australia conference here, Mari said the rising sentiment was more of an anti-big domestic conglomerate sentiment than anti-foreign investment.
But she said that nationalistic sentiment had affected the mining sector especially since the Busang gold mine debacle in East Kalimantan a few months ago.
"But I don't think the government will impose restrictive measures on foreign investment in general," Mari told the conference's luncheon.
She said policy direction remained the same and would remain so in the short to medium term.
Steve Sondakh, a Hero Group director, agreed, saying Indonesia would continue to open its doors to foreign investment.
While foreign equity investment in the retail industry was still closed, it was equally well known that through franchises, technical advice and other joint venture operations with domestic companies, there was still ample scope for entry by foreign retailers, Sondakh said.
"And given our market potential the trickle of foreign retailers offering 100 percent franchises in Indonesia has grown stronger in recent years," he said.
The expansion by chainstores like Hero, Ramayana and Matahari has been accompanied by the entry of foreign franchisers such as Japanese Sogo, Dutch Makro and Singapore's Metro.
The same pattern would also apply to the current ban on large retailers entering regency towns outside provincial capitals, Sondakh said.
There would remain ample room to play for large retailers in regency towns through partnerships with small and medium enterprises, he said.
Mari, executive director of the Center for Strategic and International Studies, said that policy inconsistencies in the retail, mining, automotive and petrochemical sectors reflected more about the government's ambivalence than changes in policy direction.
Mari predicted that Indonesia would see no major policy changes until a few months after March 1998 when the People's Consultative Assembly convenes to chose the next President and vice president.
But investors would have to wait and see what measures the new cabinet would take to improve the declining competitiveness of the country's exports, she said.
Some things worth noticing include matters related to whether the government will reduce monopolies in agriculture; export restrictions and protections in some sectors; whether the government will open the distribution sector to foreign investment; and whether it will raise fuel prices.
On macroeconomic policy, Mari predicted the government would maintain current policy and continue to pursue conservative fiscal and monetary policies.
The combination of a more flexible exchange rate policy and tight money policy enabled control of liquidity without undue rise in interest rates, Mari said.
She predicted that interest rates, which decreased slightly recently, would not drop much more in the short term because of increased uncertainty and the rising international interest rates trend.
As the country had practically floated the exchange rate of rupiah against major currencies since 1993/1994, it would be able to avoid any possible systemic effects from Thailand's recent financial crisis, Mari said. (rid)