JAKARTA court's astonishing ruling on business behaviour that went against Temasek Holdings will have investors wondering anew how welcome they can be in Indonesia. Straight off the bat is the question of legal clarity, and not only about what anti-competitive behaviour is. There is too much opacity and a wilful denial of the facts. Like the sanctity of contracts and private ownership rights, a society could just as well give itself up to a state of free-for-all if these principles are bent at will to suit prevailing political winds or to satisfy a whim. Temasek had argued cogently against the conclusion of the anti-trust watchdog, KPPU, that its indirect stakes in two Indonesian telcos (Telkomsel and Indosat) amounted to dominant control and that this facilitated predatory pricing in mobile phone services. In finding for the regulator in defiance of the facts on management control and shareholdings, the court system is undermining the government's efforts to make Indonesia a dependable destination for foreign funds.
Memories are short in Jakarta's halls of power. In 2002 the successful sale of telcos to offshore interests was to be a test of whether state assets, which were being prepared for privatisation, commanded value following the devastation of the 1997 Asian currency crisis. Besides Singapore interests, companies from Britain, France, Hong Kong, Malaysia and Australia had expressed interest in acquiring a stake in Indosat. Then came the Bali bombing in October that year, confidence in Indonesia crashed and would-be investors scattered. Only two firms eventually made formal bids. The Singapore company ST Telemedia kept faith, and won the Indosat stake. It is reasonable to inquire what has changed in Indonesia's political and investment conditions in the intervening years. If the courts have a habit of interpreting statutes in a manner that will cause befuddlement to outside parties accustomed to logic and good sense, what could be the nett effect? The executive branch will have to take a hand with administrative measures to show investors that their funds are safe and businesses built up painstakingly are not disrupted or stripped for no just cause. The legislature must make its concern known if the laws it writes are being trifled with.
Temasek's management is well aware that the group's business thinking stands little chance of prevailing when it runs into the politics of patronage in the South-east Asian countries it invests in. This is the baseline issue. Vested interests make powerful enemies if they are determined to move in on performing assets. We are confident Temasek can hold its own in a fair business contest. If politics intrudes habitually, it will have to smarten its game.
