Nationalism 'must not restrict' foreign investors

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)