Ironies of investment in Indonesia
Just when the cabinet announces the new investment policies to lure in investors, politicians mounts pressures on foreign investors. Politicans like Amien Rais condemns Vice President Jusuf Kalla's defense on Freeport and keeps steering nationalism sentiment saying the US company should get out of this country and close down the giant mining in Papua.
Politicians also rejects ExxonMobil's US$2.5 billion investment in Cepu giant oil field yet praised government's 'success' in selling the US$2 billion global bonds as a signal of foreign investor's trust on this country. No nationalism issue raised in the global bond offer.
No regrets on Cemex's plan to exit from its investment in PT Semen Gresik Tbk, the largest cement producer in Indonesia. Politicians even urge government to buyback Cemex's US$400 million shares in Semen Gresik.
With such a level of distrust on foreign investors to put capital here, Indonesian's prefer to pay US$200 million in interest payment for the US$2 billion global bond. So, we trust the bond holders (investors) who actually creditors (not investors), but we don't like guys like Freeport, Exxon, and Cemex.
We tend to believe that the frenzy demand on the global bond send signal of trust on Indonesian economy. At some point, it might be true. But investment in bond or stocks are completely different with the foreign direct investment (FDI) in nature. Bond holders should not have to deal with the crazy bureaucracy and protection money for military or police. They could easily exit from the portfolio.That's not the case with FDI.
If we couldn't trust foreign investors (FDI) and the government who invited them in the first place can't protect their existence, why the cabinet should waste their time to make an investment policy package?
Why not asking Indonesian businessmen instead if that's the nationalism sentiment is all about. Ask Putera Sampoerna why he prefers to put his money in a London Casino, an Internet gambling business (Mansion) in Gibraltar, or invest US$170 million in Manchester United's shirts?
Politicians like Amien should ask Sukanto Tanoto why the owner of Raja Garuda Mas group planned to invest US$6 billion in China until 2010 and that US$2 billion had been invested there until now?
Respected members like Didik Rachbini or Tjahyo Kumolo might have to ask Sinar Mas Group why they invests US$4 billion in China? Ask Salim Group, whol already invested US$1.2 billion in China, why they prefers to put US$240 million in Mongolia to build a dairy farm? Why would Salim want to build a motorcycle plant in India?
If these guys are not Indonesian enough, ask Hashim Djoyohadikusumo and his brother Prabowo Subianto on their US$2.5 billion ventures in Khazakhstan and Azerbaijan.
Labels: CEMENT, FREEPORT, Hashim, Salim, Sampoerna, Sinar Mas, Sukanto Tanoto
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posted by yosef at 11:10 AM
4 Comments:
Pak Yosef, this is a great post. I admire your blog immensely, and you have a wealth of information about Indonesian politics and economy. How I wish someone would ask the same questions of Indian politicians and business as well, and get them off their patriotism high horses.
Pak Mikra,
Thanks for the compliment. I just don't understand an opposition movement for the sake of an opposition while they let people suffer of low income, high costs of living, high unemployment that would jeopardize the social fabric in the long run.
I agree with you 100%.
Bond investors only look at the yield risk profile. If yields are good they will hold on, but they can dump their holdings whenever they choose and move their funds elsewhere.
Ironically, nationalist politicians who say they only concerned about their country, generally cause more harm than good.
A lack of investment means fewer jobs, more poverty, lower economic growth, less skills transfer etc etc.
It is no secret that China is doing well because it is attracting huge foreign investment and using the momentum from such growth to build its economy.
its hot money from IBRA's hair cut of debt using manipulate scheme, the konglo afraid to invest in indonesia... thats whay sampoerna sold the tabbaco to US base ciggarate' maker...
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