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)