RI needs creative strategy to draw investors: Miranda

RI needs creative strategy to draw investors: Miranda

JAKARTA (JP): Innovative breakthroughs are needed to attract
badly needed capital to right the floundering economy, Bank
Indonesia director Miranda S. Gultom said yesterday.

Mergers, acquisitions and consolidations of private businesses
and privatization of state firms should also be encouraged to
lift the country out of its economic woes, she said.

"Indonesia currently needs a huge amount of capital to finance
various programs like banking restructuring with its guarantee
scheme and a huge amount of foreign exchange to tackle corporate
and bank offshore debts," she told a luncheon hosted by the
Capital Market Society.

"In this context, we need innovative breakthroughs to attract
a significant amount of capital inflows to Indonesia."

She advised the government to revise capital market
regulations, offer tax incentives and create banking flexibility
to facilitate corporate restructuring.

The Capital Market Supervisory Agency should consider allowing
companies conducting prospective infrastructure projects to raise
funds through local stock markets, Miranda said, even when they
had not booked profits in the last consecutive three years, which
is required by existing rules.

She listed these infrastructure projects as toll roads,
commercial ports and telecommunications.

"The government could also offer tax incentives as a sweetener
to attract foreign capital to reenter Indonesia."

Miranda added the government was currently preparing the
issuance of government bonds and the privatization of state firms
to raise more foreign exchange.

"Privatization of state firms could attract more inflow of
foreign capital, which is so scarce now due to the remaining low
confidence from the international community on Indonesia's
economy, especially on companies' health."

Miranda warned the privatization of state firms would not
benefit the country much unless their finance, management and
organization were restructured in a transparent manner and
according to international standards.

She urged private businesses to pursue corporate restructuring
to weather the crisis.

"In the current crisis, national corporate restructuring
through mergers, acquisitions and consolidations should be
encouraged as it is one good alternative to create a strong
national industrial structure for the 21st century."

She said the measures were not new to local firms. In the last
two years alone, she recorded 33 acquisition deals by Indonesian
enterprises of Singaporean firms.

In the banking sector, 36 banks had undergone mergers,
acquisitions and consolidations prior to the 1988 banking
deregulation. In the past 10 years, 16 banks have undergone this
restructuring.

Miranda said the process would allow companies to create good
conditioning for its strategic business maneuvers in the future
and pool resources to increase their leverage and improve
competitiveness.

Negative implications of corporate restructuring could
surface, she warned, such as layoffs, hostile takeovers, the
creation of monopolies and speculation by corporate raiders.

These should be anticipated beforehand to allow for
preparation for if and when they emerged, she added.

Miranda said the central bank had been working hard to
stabilize the rupiah's exchange rate and restructure the banking
system to facilitate corporate restructuring.

In the near future, she said, the Indonesian Bank
Restructuring Agency (IBRA) would announce the results of its
works in restructuring troubled banks.

"With this IBRA, we want to show that we mean business. We
don't want to talk only or just show our good intentions because
in this situation of diminishing public confidence, people need
real action." (aly/rid)