Jakarta will not restrict firms moving assets out

THE Indonesian government, responding to widespread concern of “capital flight” from the country, has said that it will not restrict local companies from investing or shifting their assets overseas.

Investment Minister Sanyoto Sastrowardoyo said the government was “not worried about the share exodus abroad” and stressed that there were no regulations against such practice.

“We have a free foreign exchange regime. There is no control for whatever amount of funds that come and go,” The Indonesia Times yesterday (Friday) quoted him as saying.

Mr Sanyoto, who also heads the Investment Coordinating Board, said that capital investment abroad by major businesses could benefit the country in the long-run.

“Such investment can drive exports,” he noted, reflecting the government’s call to boost exports amid a slowing down of Indonesia’s year-on-year export growth.

Mr Sanyoto’s comments came against a backdrop of growing concern over plans by Indonesia’s largest conglomerate, the Salim Group, to sell shares of its subsidiary, PT Indofood Sukses Makmur, to Singapore-listed QAF Ltd.

QAF, 70 per cent owned by the Salim Group, had proposed to acquire 50.1 per cent of Indofood.

The Salim Group said its main objective was to give Indofood more exposure to international players.

Joining a chorus of opposition to the plan, prominent businessman Probosutedjo, President Suharto’s half-brother, said the plan ran counter to national interests.

“I say this because Sudomo Salim is known by foreign and local businessmen as being very close to the President,” the national Antara news agency quoted him as saying. Mr Sudomo Salim heads the Salim Group.

Mr Probosutedjo, who is chairman of the Mercu Buana Group, said the move smacked of capital flight and tax evasion.

Others pointed to the “psychological impact” it could have on foreign and local companies.

Economist Arif Arryman of the independent Econit advisory group, said that such a move could make the “already fragile climate in the country’s investments more jittery”.

He said: “Salim Group, as the largest business group in the country, has been a model for other conglomerates.”

“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.”

The Coordinating Minister for Production and Distribution, Mr Hartarto, has described the matter as “a sensitive one”.

“I will explain to everyone at the right time,” he said earlier this week.

Senior government officials, however, have maintained that the government would not lose out in the Salim Group restructuring.

“The government foresees an added shareholder value from the proposed divestment,” said Mr Barcelius Ruru of the Finance Ministry.

The Bisnis Indonesia daily yesterday quoted him as saying that the government could own 10.2 per cent of Indofood’s shares.

He said the transaction would be proposed at a shareholders’ meeting next month.

Indonesian economist Sjahrir noted that the move by the Salim Group was based purely on business considerations. Indonesia’s capital market, he said, was not competitive compared to Singapore.

“It is not against the law,” he said.

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