Salim's move is purely business

By Aleksius Jemadu

BANDUNG (JP): The Salim Group's move to sell Indocement's 50.1 percent stake in the world's largest noodle-maker to a Singapore based bread-maker, QAF Ltd, has come under fire recently.

While the government has no objection to such a move, many condemned the Salim Group for being unpatriotic. Tycoon Probosutedjo, for example, likened the move to "a capital flight and an act of tax evasion" (The Jakarta Post, July 25, 1997).

At the heart of the matter is whether or not, in the context of a global economy, the nation-state can be viewed as a relevant place for business decision-making, especially with regard to the location of the investment.

Can we insist our businesspeople invest their capital at home when there are a lot of profitable business opportunities abroad? Wouldn't it be an anachronism to limit their investment activities for the sake of nationalism?

In his book The End of the Nation-state, Kenichi Ohmae questioned the relevance and effectiveness of the nation-state as an organizational unit for so-called postindustrial business activities. Ohmae argued that the flow and mobility of investments, industry, information technology and individual consumers (the 4 "I's") are no longer constrained by national or political boundaries.

Most of the investments moving across national borders today are private, and governments do not have to be involved at either end. The nation-state has come to a point where it is under increasing pressure to share its "sovereignty" with global market forces.

According to Ohmae the role of the nation-state will be taken over by what he calls "the region-state". It consists of "networks of interdependent private enterprises and regional entities".

He defined the region-state as "an area (often cross-border) developed around a regional economic center with a population of a few million to 10 million to 20 million".

In fact the Indonesian government has been involved in promoting the emergence of such growth centers. The Indonesia- Malaysia-Singapore Growth Triangle (IMS-GT) and the Australia- Indonesia Development Area (AIDA) are two examples.

Mathew Horsman and Andrew Marshall who wrote After the Nation- state (1994) argued that changes in the global economic structure, technological advances and the end of the Cold War have carried new threats to the nation-state as a traditional space of investment decisions.

The three factors have led to the emergence of two contradictory trends in global politics.

First, countries in several regions tend to integrate their economies by establishing free trade areas. Economic regionalism has turned out to be the only way to maximize economic and investment opportunities and minimize the negative consequences of unavoidable competition.

Second, the supremacy of the nation-state is increasingly confronted by tribalism, "the retreat by individuals into communities defined not by political association or by the state borders that enclose a political nation but similarities of religion, culture, ethnicity or some other shared experience".

It should be noted that the acceptance of economic liberalization at a global level has necessitated the primacy of individuals as economic actors who are free to make their investment decisions.

The fact that Salim Group has divested its 50.1 percent stake in Indofood and injected it into QAF Ltd should indicate that the group has changed its orientation in doing business from a heavy reliance on political connections to pure business professionalism.

It might be the case that Salim Group wants to strengthen its market competitiveness in preparation for the ASEAN Free Trade Area in 2003. Therefore, we have to be willing to face a situation in which the nation-state may no longer become a relevant space for investment decision.

What then is the role of governments in the midst of the primacy of liberalist perspective which seems to dominate courses of events in the global economy?

According to the liberalists, the role of government in international trade is limited in the sense that it may not create barriers to the free flow of goods and services.

A government's excessive intervention in international trade would be a disturbing variable in the formation of fair prices. The promotion of free trade may not necessarily mean that a government should withdraw from the scene. It has a legitimate and even necessary role to ensure the operation of a free and competitive market, the establishment of national security, the protection of copyrights and the promotion of social justice.

The government has to provide a good education for its citizens and establish modern infrastructure in order to facilitate business activities. By doing so the government would enable its citizens to compete in international trade.

It might be interesting to learn that more and more Chinese- Indonesian business tycoons have established corporate beachheads in Singapore. This is widely regarded as one of the most important "business capitals" for the Chinese.

Former prime minister of Singapore, Lee Kuan Yew, is the strongest proponent of the establishment of business networks among overseas Chinese. Their role in the global economy, especially in Asia Pacific, cannot be underestimated.

It is no exaggeration to suggest that the accumulative economic power of the Chinese in the Asia Pacific could dictate courses of events in stock markets (John Naisbitt, 1996). There is no doubt that they are the engine of growth in this region.

Given the extent of their assets and the indispensability of their role in this region, it would be unwise if we did not engage the Chinese in promoting Indonesia's interests abroad. Unfortunately, any discussion about the role of the Chinese in Indonesia always emphasizes the negative aspects of their economic dominance.

Rarely, if ever, is their tenacity in doing business regarded as a national asset. It may be high time to develop a more "constructive engagement" instead of letting Chinese businesspeople find their own way in making business ventures in the global market. Wouldn't it be wise if the government used their networks to promote Indonesian interests abroad?

The writer is the director of the Center for International Studies (PACIS) at the Catholic University of Parahyangan, Bandung.

Window: The fact that Salim Group has divested its 50.1 percent stake in Indofood and injected it into QAF Ltd should indicate that the group has changed its orientation in doing business from a heavy reliance on political connections to pure business professionalism.