Takeovers in Singapore
Takeovers in Singapore
It is perhaps too early to view the flurry of company
acquisitions by Indonesian businessmen in Singapore over the last
few months as a major trend which may lead to significant capital
flight. The number of corporate takeovers has been relatively
small so far (only five), and the value of the acquisitions also
has been rather small in terms if international transactions.
The moves may have become an issue more because the targets of
takeovers, or takeover bids, were companies listed on the
Singapore stock exchange and the transactions were subject to
full disclosures. That, we think, is partly responsible for
generating the keen mass media attention to the transactions.
The latest trend nonetheless requires a closer watch,
especially because it is happening amid the rising criticism by
the public in Indonesia of the steadily high pace of business
conglomeration by a few groups of businessmen. As it happens,
most of the acquisitions were made by businessmen, or
subsidiaries, of the largest business groups in Indonesia.
Moreover, most of the acquisitions are not related to what the
government has encouraged Indonesian companies to undertake --
forming strategic marketing alliances to tap the international
market.
The higher pace of takeover transactions in the island
republic also is raising eyebrows because it is occurring amid
the controversy over the business expansions by conglomerates
which command more than 50 percent of the domestic market for
particular products.
Even though the controversy over the 50 percent market
dominance has provisionally been cleared away by some ministers,
resolution of the issue is pending clear-cut rulings. Minister of
Industry Tunky Ariwibowo said a government regulation on market
dominance and business expansion would be issued before the end
of this month.
Despite all the apparent coincidences, we tend to reckon that
the recent series of business acquisitions is part of normal
business expansion meant to take advantages of Singapore's well-
managed, strategic position as a regional base of operations.
After all, Singapore's financial and capital market is far more
advanced than Indonesia's and its bank interest rates are way
below those charged by banks in Indonesia.
Though, as we noted earlier, the higher pace of Indonesian
expansion in Singapore has not yet reached the point of worrisome
capital flight, the trend makes it most imperative for the
government to deliver on its promise of a clear-cut regulation on
business expansion. Further delays may cause doubt, or even a
high degree of uncertainty, among businessmen intending to
implement new investment projects in the country.
The regulation, we think, should clearly define the parameters
to determining market dominance. Market dominance itself is not
bad as long as such a position is gained under fair, open market
competition. It is the possible abuse of market dominance that
should be addressed by the regulation.