Indonesia Today by Yosef Ardi: June 2007

Ray Zage duped, sues 'bystanders'

I knew the story few months ago, but only recently that investment banker George Raymond Zage III (Noonday Asset/Farallon) made the headlines in Singapore when court starts the hearing of Zage's lawsuit against a jewelry store for accepting payment from rogue lawyer who walked away with Zage's S$10.7 million in a property deal. In Indonesia, Zage is famous for BCA deal with Djarum or the most recent deals, including Semen Gresik, Berau Coal, and BTPN.

Todayonline.com published the story in Tuesday's edition under the title...Couple sue jeweller for Rasif's S$2 m spree. (David Rasif is Zage's lawyer in the property deal).
Their lawyer, Senior Counsel Harry Elias accused the store of giving Rasif "dishonest assistance" and receiving money "rightfully belonging (to the Zages) under suspicious circumstances".
The Straits Times published the story under the title...US couple suing jeweller to recover part of money from fugitive lawyer..
Lawyers for the couple argued that the jeweller should have been alerted by the fact that the personal purchases of jewellery and precious stones were funded from an account labelled 'David Rasif & Partners - Client's Accounts'.
The jeweller should have checked the source and legitimacy of Rasif's funds.
The defence, represented in court by Drew & Napier, said the store did not understand the term 'Client's Accounts'.
Well, Farallon bought BCA shares for US$650 million in 2001, quadrupled to US$2.5 billion five years later, plus hundreds of million dollars of dividends. Well...you may wonder how come an investment banker lost such huge sum of money simply because of minimum check and cross-check. In Indonesia we would say...banker juga manusia!

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When the president cries

Little child,
Dry your crying eyes,
How can I explain,
The fear you feel inside, ....
What have we become,
Just look what we have done,
All that we destroyed,
You must build again,....WHITE LION Lyric...

Newspapers reported that president SBY cries and angry when the victims of Lapindo mudflow in Sidoarjo complained about the slow pace of compensation settlement. No details of whom the president angry to. He promised to settle the issue in one or two days. He would visit the area today.
The real problem lies in the gap between what Lapindo and the victims really wanted. Lapindo and its owners tend to see the issue is legal problem where the displaced people should come up with legal title of lands and buildings to get compensation, while most of them probably don't have, simply because they never had plans to move from the area and that they were forced to leave the area.I don't think the victims' miseries could be settled that way because this is a social problem.

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Austindo, Halim Family, Benny Subianto, & Saptaindra IPO

New topics at yosefardi.com:
1) People behind Austindo
2) Halim family's expansion
3) Benny Subianto's business empire
4) Saptaindra IPO
5) Rajawali's next plans
6) Berau Coal updates
7) Pondok Tengah block divestment

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Why we care more on Iran than Lapindo?

The war between president SBY and DPR on Iran issue is continued. More and more parliament members talk about that, demanding the president to explain at the DPR's plenary session. It's just sad that way too many people care about Iran than seriously handle Lapindo mudflow before our very eyes.

A simple research on newspapers articles, we'll find out that very few parliament members, including those from political parties that claimed themselves as opposition, address seriously the disaster in Sidoarjo. They never raised critical questions on this issue. Some reports today even mentioned about the break-up at PDI-P on Lapindo issue.

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Chaotic settlement of Lapindo mudflow

It's pretty much like the hot mud flow itself. Various teams have been established, regulations have been deliberated, studies have been conducted, audits have been done, but still the victims of the mud flow in Porong, East Java can't see the light. It's the owner of the block that had been shown the lights.

The Supreme Audit Agency (BPK) has just disclosed its audit report on the mud flow. BPK asked government to immediately declare (formally) that the mud flow is a disaster (but not a natural disaster as suggested by a group of scientists few months ago).
The conclusion: The state should bear the costs first to be reimbursed later on if the state could prove that someone should be responsible for that. To prevent future legal problems, the agency proposed to government to have written commitment from Lapindo owners. While this is a dangerous game, considering our history in making such deals with big business groups, I suggest government to do the following:
1) Identify the assets, as many as possible, more than enough to cover the estimated cost of the mud flow settlement.
2) Make sure that the owner of those pledged assets should not change hands.
These steps would be better than government's decision to simply ask all of us to share the burden of the disaster. Why? Because the burden on our shoulders apparently will be 95% and the Lapindo owners for only a small fraction under the existing presidential decree. BPK said the cost of the mud flow would be more than US$3 billion, while the responsibility dictated by the president decree on Lapindo owners is well below US$200 million.

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Sampoerna Agro, too expensive?

PT Sampoerna Agro Tbk has listed 461 million shares at JSX on Monday with initial price of Rp2,340/share. While the share jumped Rp360 shortly after the trading kick-off, the share price was closed with only 8% gain. Some says the valuation was too high, approximately at US$10,000/hectare of Sampoerna Agro's palm oil plantation.

Valuation of PT Astra Agro Lestari Tbk, for comparison, is around US$12,000. "Most of Sampoerna Agro's assets have lower quality than Astra Agro," other investment banker argued.
Acquisition of new plantations in Riau, for example, is around US$4,000 to US$5,000 per hectare.

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Income tax discount for listed companies: A proposal

Government plans to give discounts on income tax for listed companies. Under the plan, companies with free float shares at 30%-40% will get the discount. The higher the amount of listed shares, the bigger will be the discount. But why the cut-off listed shares is 30%-40%? Why not above 50%? Who will get the benefit?

Director General for Tax Darmin Nasution said government has yet to decide minimum amount of listed shares that eligible for the discount. But the tax incentive will be one of policies to be announced with other policies to boost the economy.
Income tax rate is 30%, no difference between listed and non-listed companies. Association of Issuers proposed income tax rate of 20% for listed companies, and 30% for non-listed. The association argued if government would cut income tax for non-listed companies to 25%, public-listed companies should be charged with 15% income tax only. I'm not sure government would willing to sacrifice that much.
Most companies listed at JSX have listed shares below 20%. The tax discount, if implemented, would encourage more companies to float their shares at JSX while the already listed companies would float more shares. The rationale of the policy is good. But without significant changes in the current practices at stock market, I'm sure the tax discount mechanism would create more manipulators.
There are lots of listed companies with floating shares at 30%-40%, but actually these stocks are in the hands of controlling shareholders through their affiliated stock brokers.
So besides the amount of listed shares, the amount of shareholders should become the basic element of the tax discount scheme. The larger the amount of ultimate shareholders, the bigger would be the discount. I'm sure it can't guarantee the scheme would be manipulation-free, because it's just common to have listed companies manipulating the amount of 'independent'.
So, strong supervision from capital market authority on the above issues is paramount.

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Soeharto Inc reenergized

More than 200 leaders have attended former president Soeharto's 86th birthday celebration on Friday, newspapers reported today. They send messages across of Soeharto's legacies. Nine years ago, they were among the so-called reformists, throwing all accusations toward the Smiling General and condemning his policies as the root of financial collapse and the multi-dimensional crisis.

Tempointeraktif.com reported the former minister for religion affairs Quraish Shihab led the prayer for the celebration, with some ministers singing the happy birthday song with former military, civilian and business leaders such as Robby Sumampouw, Sudwikatmono, etc. Few years ago, these guys tried hard not to be caught when visiting Soeharto's residence. But on Friday afternoon, I saw the picture of Minister for industry affairs Fahmi Idris open the window of his car and 'cheers' to photographers after he congratulated Soeharto.
And for the first time in years since his downfall, about seven foundations established by Soeharto published a half-page full color happy birthday greeting ad at Pelita newspaper along side the financial report of the foundations and Soeharto's smiling postcard size photograph.
The same day, artist Jamal Mirdad led a 50-people rally in Jakarta to celebrate Soeharto's birthday. Mr Mirdad, chairman of Partai Nusa Bangsa, claimed his party would contest in 2009 election. One party has Soeharto name called Partai Karya Pelita Soeharto. Well, not necessarily so, because almost all big parties are big fans and defenders of Soeharto.
On Friday morning, when I passed the campus of Bogor Institute of Agriculture (IPB) in Bogor, West Java, I saw only one banner with the following text...How peaceful Soeharto, and how screw-up his followers. But the banner is the lone ranger.
How about Attorney General's plan to prosecute Soeharto's foundations? Well, the authentic files of the case have been disappeared. Don't expect too much.

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Poor Disclosure of CP Prima-Dipasena transaction

PT Central Proteinaprima (CP Prima) Tbk finally disclosed its acquisition of shrimp farm giant Dipasena Group today. But the quality of the information provided to public is poor, no details of the deal structure, how to finance, financial impacts, details of financial information at targeted companies, and the simple question of how much shares acquired in respective companies.

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One Stop Service, an utopia

When I was young reporter, investment minister under Soeharto administration told the press over and over about how government would simplify licensing and de-bureaucratization of investment process here. It's never a reality. Soeharto's successors---BJ Habibie, Abdurrahman Wahid, and Megawati Soekarnoputri promised the same only to end up as empty promises. Can Susilo Bambang Yudhoyono make it?

In the next few weeks, government would announce a new economic package in order to boost growth, attract more investments, and create more jobs. One of decisions to be announced will be the one stop service mechanism. The idea is the same: investors should come to a certain government institution, stop there and have everything ready for them whether it be investment license, land title, expat permits, import license, permanent business license (IUT), and bunch of licenses. It's not clear which institution, but I guess it should be Investment Coordinating Board (BKPM).
While trying to be positive thinking of the idea, I'm not sure whether the mechanism would really works and investors would only stop once, because licensing has been a lucrative 'business' for government officers in all ranks, be it central or regional administrations. Regional autonomy implemented since 2001 has made things even more complicated because the local 'kings' would simply stubborn in releasing some of their 'licensing' business to the 'one stop service agent'.
SBY would score a huge success if he could implement the 'one stop service' mechanism because even Soeharto's authoritarian regime failed to implement that.

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