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Indonesia: A Cautionary Tale


I read "Indonesia" (Asian Edition Cover Story, May 20) with great interest. Yes, the currency and the stock markets have performed well of late, but as your article makes clear, devolving power to the regions has probably made a bad mess worse. Anyone who thinks that things will improve quickly and that the rupiah is now a screaming buy should consider the following cautionary tale:

An associate and I recently tried to pitch a consulting project to the Indonesia Tourism Promotion Board and the Ministry of Tourism. The project was aimed at helping Indonesia attract more tourists from China, Asia's fastest-growing tourism market. We found out from sources in China that Indonesia, unlike aggressive competitors Malaysia and Thailand, has virtually no visibility in China, no targeted marketing to speak of, and hardly any packages available through Chinese travel agencies.

The ministry welcomed us warmly and seemed excited by our idea. However, as we found out from ministry staff, the central government has virtually no budget: The money is now being controlled by the various regions. We received assurances that the ministry would rush around and gain support from the regions for our project. However, absolutely nothing happened.

It pains me greatly to see a beautiful country such as Indonesia filled with genuinely nice people fall further behind in an obvious job-generating industry. I look at Thailand's and Malaysia's success in bringing in Chinese visitors and think that Indonesia deserves at least as much success.

John Banwell

Singapore I am mystified that a story such as "They're ringing off" (Asian Business, Apr. 29) could be printed at a time when the Jakarta Composite Index is growing at 38.5% this year, the fastest in the world and still rising. The dominant mobile-phone company, PT Telekomunikasi Selular, recently transacted Indonesia's largest dollar bond issue since the crisis of 1997-98 and, to meet the strong demand from overseas investors, subsequently increased the size of its five-year bond issue to $150 million from $100 million.

Now, the factual errors: 1) Thirty-five percent of AriaWest will not be sold for $300 million. The report suggests an enterprise value (debt plus equity) of the entire 100% stake of AriaWest. 2) Cable & Wireless owned only a 25% stake in KSO VI Daya Mitra. 3) Since Mar. 1, 1999, the Indonesian government raised telephone rates once (on Feb. 1, 2002) and plans to raise tariffs two more times, for an accumulated increase of 45%. 4) Singtel wants to keep its ownership structure of KSO VII because it does make money.

Investors are now eyeing Indonesia as the next economic powerhouse in the region. As far as reforms are concerned, even as the government struggles to usher Indonesia into the global marketplace, it is simultaneously tackling political, economic, bureaucratic, and legal reforms. Few countries have faced a challenge of this magnitude.

Finally, since your writer failed to contact the government of Indonesia for comment on this story, it is only fair to demand equal space with which to respond. Certainly you must be aware that it is Journalism 101 to obtain both sides of the story.

Mahendra Siregar

Ministry Coordinator for

Economic Affairs

Republic of Indonesia

Jakarta

Editor's note: BusinessWeek requested interviews with a number of Indonesian government ministers, including Mr. Siregar. They were not granted. On May 11, AT&T announced that 100% of AriaWest had been valued at $484.5 million and that the company was selling its 35% stake. So that stake is worth $170 million--not $300 million as reported in the Indonesian press. BusinessWeek stands by the other facts in the story. In hindsight, it is obvious to most investors that during the peak of Internet hype, a large number of "buy" recommendations were of dubious value ("How corrupt is Wall Street?" Special Report, May 13). What is more alarming was the lack of risk warnings about speculative investments. Having a certain portion of one's portfolio in speculative investments is fine, as long as the investor is aware of the risks. Your story featured two old BusinessWeek covers, "Who can you trust?" (Oct. 5, 1998) and "The hype machine" (Apr. 3, 2000)--indicating that warning flags had gone up.

This is a false perception. Cover stories implying the coming of a new era were abundant, while reports that questioned the incredible rise in risk were scarce. Your story ends on the low note that "...for Wall Street, just saying sorry at this stage may prove to be too little, too late." Given the lack of warning signals, should BusinessWeek not also be asking its subscribers for some kind of forgiveness?

Mar Wolfgang Mixa

Reykjavik, Iceland In "Japan can't get school reform right, either" (Asian Business, Apr. 29), Brian Bremner implies that the Ministry of Education should concentrate its efforts on universities. That would merely serve to deprive the Japanese people of their one window of reprieve in a lifetime of nonstop sweat and toil. The typical "successful" Japanese pattern begins with striving to enter a good nursery school and continues all the way to the brutal cramming required to enter prestigious universities. After that? Straight into the salaryman rat race and raising kids who are destined to repeat the cycle. Japanese high school graduates represent one of the best-educated groups on the planet, and they desperately need their four-year "moratorium" during university to learn how to enjoy life.

Erik R. Gain

Tokyo


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