Salim's move is purely business

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.