Salim group urged not to shift assets overseas

Salim group urged not to shift assets overseas

JAKARTA (JP): The Econit Advisory Group has appealed to the
Salim Group to cancel its plan to inject its Indofood Sukses
Makmur assets into the group's Singapore-based subsidiary, saying
that the move could harm the investment climate in Indonesia.

On Saturday, the research group's managing director, Arif
Arryman, said the asset injection into the Singaporean company
would give the impression that the business and political climate
in Indonesia was no longer secure and would discourage investors.

"Salim Group, as the largest business group in the country,
has been a model for other local conglomerates. The group's
sudden move to relocate its holding company to Singapore could
make the already fragile climate in the country's investments
more jittery," he said.

"It would encourage other conglomerates to follow the group's
lead to relocate their holding companies overseas, thus further
widening the current account deficit. It would be a serious
threat to the nation's economic stability."

PT Indocement Tunggal Prakarsa, 60 percent owned by the Salim
Group, 25 percent by the government and 15 percent by the public,
is proposing a spin-off and sale of its 50.1 percent share in PT
Indofood.

Indocement, under the proposed spin-off, would give most of
its Indofood shares to the existing shareholders as a special
dividend and sell the remainder to the Sampoerna Family, which at
present, already has a 5.63 percent in the food giant.

The move will be followed with the sale of Indofood's 50.1
percent shares to QAF, a listed company in Singapore.

QAF, 70 percent owned by the Salim Group, has proposed to
acquire 50.1 percent of Indofood through the acquisition of
Indofood shares held by the Sampoerna Family and Indofood shares
presently held by Salim Group and Indofood shares that Salim
Group would receive under the proposed special dividend.

The Singapore firm, which is expected to issue rights shares
to finance the deal worth up to Rp 4.6 trillion (around US$1.9
billion) will become the holding company of Indofood, replacing
Indocement.

Anthony Salim, the chief executive officer of the Salim Group
-- which is also the majority shareholder in Indocement -- said
that the restructuring plan was made partly to give Indofood more
exposure to international players.

Arif said Indofood's acquisition would be a great loss to the
Indonesian government.

The government, with its 25.7 percent stake in Indocement,
indirectly owns 12.89 percent in Indofood at present. But if the
company went ahead with the restructuring plan, it would
automatically lose its stake in the food giant, which last year
contributed 70 percent to Indocement's revenues, he said.

He said the Salim Group's plan to inject Indofood's assets
into the Singaporean firm was regrettable, given the government's
strong support to the business group since its early years.

"Despite the group's highly professional business operation,
they would not have gotten to their position now without the many
facilities and protections given by the government," he said.

PT Bogasari Floor Mill, one of Indofood profitable division,
has, for example, enjoyed exclusive rights from the government to
process wheat imported by the National Logistics Agency, the only
institution allowed to import the wheat.

Arif said that instead of relocating to Singapore, Indofood
could strengthen its capital by listing the company on the stock
market in Singapore.

"The Singaporean company should be part of Indofood, not the
other way around," he said. Indofood, whose market capitalization
reached $6 billion and a net profit of $206 million last year,
could just as easily buy QAF, whose market capitalization only
reached $567.5 million and net profit reached $8.6 million in the
same period.

Kwik supports

Kwik Kian Gie, an outspoken economist, said he saw nothing
wrong with the Salim Group's internal acquisition plan.

"This time, I agree with Anthony Salim, who says that the
restructuring is to expose Indofood to the international market,"
said Kwik, who is often very critical of Indonesia's business
conglomerates.

He said that the injection of Indofood's assets to the
Singaporean company was not a capital flight and was not an
indication of the Salim Group's negative feeling on the country's
business climate.

Kwik said many economists believed that with the shifting of
the holding company to Singapore, the Salim Group would be free
from any risk "if something happens to Indonesia".

"But I don't agree with this ... I think if there is political
change in Indonesia, Indofood can still be rocked because it is
incorporated here," he told The Jakarta Post.

Indonesia had long welcomed foreign direct investments, whose
headquarters are notably located overseas, he said.

Kwik said if multinational companies could invest in Indonesia
and maintained their headquarters and holding companies overseas,
why not the Salim Group.

"The Salim Group's business operations have long been
international in scale. And like other multinational
corporations, I think it is just logical for Salim to choose the
right base for its foodstuff core business, to cover all Asian
markets," he said.

Kwik said that the opposition to the Salim Group's move was a
matter of nationalism. "But is it proper to prioritize
nationalism in business in the current era of globalization?," he
asked. (das/rid)