Tuesday, August 4, 2009

Foreign groups prepared to ride out Indonesia uncertainty

Most analysts believe last month’s double hotel bombing in Jakarta is unlikely to have much permanent impact on Indonesia’s economy, provided it was not the start of a wider destabilisation campaign.

But even before the attacks, the investment climate was far from ideal, as many high-profile foreign investors in south-east Asia’s largest economy have learnt for themselves.

When international bondholders tried to seize 70 per cent of Central Proteina Prima after a default, they did not expect a controversial rights issue that diluted their holding in the Indonesian aquaculture company to 40 per cent and, last month, a $4bn lawsuit.

Separately, Research In Motion, the Canadian manufacturer of Blackberry smart phones, recently found itself within a whisker of having imports of new devices banned until it set up an in-country service centre.

International companies such as Mars, the confectioner, and Intel, the computer chip maker, and McDonald’s have also found themselves fighting various legal actions.

In spite of the numerous areas of concern, analysts say there are signs for hope.

The time it takes to start a new business has almost halved, Indonesia’s fight against corruption does appear to be bearing fruit and, as the Research In Motion spat shows, many disputes can be resolved in the end.

International investors do not appear to be put off. Volkswagen recently announced it would set up an assembly plant in Indonesia, while British American Tobacco in June paid $494m for 85 per cent of Bentoel, an Indonesian cigarette company.

“Unless the president acts decisively in his next term, the cautious will remain cautious and on the sidelines, while bolder entrepreneurs will continue to come in and be well rewarded,” Mr Fanning said.

FT.com has the complete story..