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Indonesian selloff: Singapore scores
again
By Tony Sitathan
JAKARTA - Singapore has made headlines in
Indonesia by managing to top bids by local Indonesian
investment companies and banks for a 51 percent stake in
Bank Danamon worth an estimated US$400 million. Asia
Finance Indonesia, a consortium made up of Singapore's
state investment arm, Temasek Holdings, and Germany's
Deutsche Bank came out the winner in a closely fought
three-way battle.
The other consortium was made
up of Bank Mega and Bhakti Investama. The third major
contender, Bank Artha Graha, failed to make an offer
before the closure of bidding on Monday.
This is
the first time for Temasek Holdings directly to make a
bid to acquire a controlling stake in a foreign-owned
bank. It has previously used the Development Bank of
Singapore as its acquisition vehicle for making inroads
into banks in Thailand and Hong Kong.
The sale
of Bank Danamon is a move by the Indonesian Bank
Restructuring Agency (IBRA) to raise close to Rp26
trillion (about US$3 billion) as part of its divestment
plans for 2003 and plug some of its budget deficit. This
year's deficit is officially estimated at Rp34.4
trillion or 1.8 percent of the country's gross domestic
product. IBRA formerly held a 99 percent stake in
Danamon, considered Indonesia's fifth-largest bank in
terms of market capitalization of about $575 million.
Bank Danamon is considered as one of the
better-run and -managed bank after the recapitalization
exercise by the central bank and its acquisition of nine
troubled banks under the Danamon umbrella. Last year
Bank Danamon posted profits of $105 million - not bad
considering the fact that it had previously been
mismanaged and inherited some of the bad banking
practices of the mid-1990s.
This is not
Singapore's first attempt at bidding for state-owned
enterprises in Indonesia. Singapore Telecoms pumped in
close to $1.05 billion for a 35 percent stake in PT
Telekomunikasi Selular last July, and Singapore
Technologies Telemedia (STT) paid $631 million for a 42
percent stake in PT Indonesian Satellite Corp (Indosat)
in December.
This last venture by STT created a
political storm in Indonesia. Several prominent
Indonesians, including former president Abdurrahman
Wahid and several parliamentarians, were against the
decision by STT to acquire a company that was deemed
sensitive and strategic to the interest of Indonesians.
They threatened to get a court injunction to overthrow
the decision by IBRA to sell Indosat to a rival country.
However, President Megawati Sukarnoputri, with backroom
maneuverings and acts of appeasement to those
disfranchised by the sale of Indosat, has helped prevent
escalation of opposition to the transaction.
"It's left to be seen if parliament would not
again be embroiled in a similar act of justifying a
foreign government's stake in a local banking
institution," said Andrew S Hunt, a political-risk
consultant for an economic advisory company based in
Hong Kong. "But this time acts of patriotism may have to
give way to conventional wisdom while arresting the
slide of foreign investors' confidence that is needed to
rebuild Indonesia."
Meanwhile, certain factions
in the government have indicated strongly that Indonesia
might pull away from the grip of the International
Monetary Fund - seen as the driver of Indonesia's
controversial privatization program - and not renew its
contract with the IMF beyond 2003. "On the front it
seems it be an option for the Indonesian government, but
the international community would look at it differently
and say that the Indonesian government is not serious
about economic reforms, and there would be no one
outside the Indonesian government capable of leading the
pace of structural reforms that are needed in
micro-managing the Indonesian economy," said Hunt. He
also suggested that political rather than socio-economic
factors are to be blamed for the move to quit the IMF.
A policy review team headed by State Minister of
State Enterprises Laksamana Sukardi has already been set
up for the smooth transition away from the IMF. And
efforts are under way to court Japanese economic
advisors to discuss economic recommendations after the
split from the Fund. An Indonesian-Japanese think-tank
called the Joint Indonesian-Japanese Cooperation Team
has already been established. The latest advocate for a
split with the IMF came from Vice President Hamzah Haz,
who said he is confident that without the IMF
Indonesia's fiscal status and balance of payments would
remain stable and safe given that the domestic security
situation remained stable and exports increased.
Indonesia currently has an outstanding debt of $7
billion with the IMF, while its domestic debt stands at
$72 billion.
For Indonesia to deal with debts of
that magnitude would mean putting many more state-owned
enterprises (SOEs) on the selling block. And without
using a proper benchmark such as the IMF, it would be
difficult to gauge the creditworthiness of national
projects, remarked Jason Tanudjaja, a retired banker
from a privately run bank in Indonesia. "Indonesia has
not come of age like Malaysia or Singapore to manage its
own micro-economy. So far it has an excess layer of
bureaucrats and civil servants that are not prone to
good governance practices. Although it's not fair to add
that there is a shortage of talented people - on the
contrary, there seems to be a shortage of good examples
of well-run companies and government-run departments.
That is the greater worry," he said.
The ink on
the deal for Temasek to acquire Bank Danamon is still
wet. It will take about two weeks for a proper
due-diligence test by the central bank before Temasek
Holdings is officially announced as the new majority
owner of publicly listed Bank Danamon. Until then it
would be wise to hold off the celebrations until the
final verdict is passed by the central bank and approved
by the president and parliament. It is to be hoped that
there won't be any fresh surprises. Even then, given the
political undercurrents in Indonesia, considered more
choppy than placid for foreign investors, it would be
wise to take some motion-sickness pills just in case of
a stubborn wave.
(©2003 Asia Times Online Co,
Ltd. All rights reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
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