Nationalist’ politicians jump on Indosat sale

Observers warn investment climate being contaminated by politicians seeking support in run-up to the 2004 elections

Indonesian politicians, under the cover of nationalist rhetoric, are seeking to derail the recent sale of a major stake in telecoms operator PT Indosat to a Singapore company after a rival consortium they backed lost out on the bid.

But Jakarta is holding firm on the sale of a 42 per cent stake in the state-owned telecommunications company to Singapore Technologies Telemedia (STT) despite threats by legislators to grill President Megawati Sukarnoputri.

Observers said the incident once again highlighted the risks involved in doing business in Indonesia given that the investment climate was being ‘contaminated’ increasingly by political bickering ahead of the 2004 election.

Well-placed sources told The Sunday Times that several of the politicians now raising objections on nationalist grounds had backed the privatisation of state-owned firms at a parliamentary hearing in late November.

But support from legislators like Mr A.M. Fatwa and Mr Fuad Bawazier from National Assembly chairman Amien Rais’ Reform Party (PAN) came with an implicit proviso: That the tender be awarded to Malaysia Telkom.

Sources said the PAN MPs had prodded Dr Amien to lobby on behalf of Malaysia Telkom as early as October.

He broached the idea with Minister for State Owned Enterprises Laksamana Sukardi. But Mr Laksamana, who is also a senior member in Ms Megawati’s Indonesia Democratic Party-Struggle (PDI-P), turned down the Malaysian offer as its bid was below what STT had offered.

A source close to Mr Laksamana said: ‘It was financially not feasible at all. STT gave us a better deal. Now these politicians are turning the whole thing around by accusing the minister and his party of seeking to profit from the deal.’

In an interview with the Indonesian weekly magazine Forum Keadilan, Dr Amien accused Mr Laksamana of being a foreign agent and said the government had made a mistake of selling state assets ‘cheaply and arbitrarily’.

Dr Amien, who is being threatened with a lawsuit by the minister, is a likely contender in the 2004 presidential race, and could gain political mileage from waving the nationalist banner.

Underlying the political dynamics at play is resentment that a Singapore investor could monopolise Indonesia’s cellular market. That concern and fears of being laid off prompted hundreds of Indosat workers to demonstrate against the sale on Friday.

STT says there is no cause for worry as Jakarta would still retain the power to regulate domestic phone tariffs. It was also the controlling shareholder in the country’s No 1 telecom firm, PT Telkom, which owns a 65 per cent stake in leading mobile company PT Telkomsel. PT Indosat is the second largest phone operator after PT Telkom.

Some analysts fear attempts to derail the deal could damage Indonesia’s already fragile investment climate.

Mr Umar Juoro, a commissioner of a leading national bank here, said: ‘The Indosat sale was done transparently. It is one deal that could have been the benchmark of how future deals are carried out in Indonesia. Unfortunately, people with vested interests don’t see it that way.’

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