Texmaco, what price?

Feb 20, investors should submit final bid for Texmaco assets (Rp29 trillion or around USD3.3 billion) currently controlled by PT Perusahaan Pengelola Aset (PPA)---successor of IBRA. Three investors are reportedly expressed their interests to acquire the assets. The problem, how much of these assets could be recovered by the state?

Detik.com reported VP Jusuf Kalla visited Texmaco's main site in Purwakarta today. There, he met Texmaco management. Texmaco's facilities are running at a very low rate at 20% of installed capacity. Kalla, unusually, said only few words during the visit. Kalla's visit was no coincidence as he knew for sure the bidding will be conducted next week.
"But before we let someone takeover the company, we have to see first what's the company all about. We clearly need investor who could revive Texmaco," Kalla said as quoted by Detik.com.
Kalla is not the first high level officer to visit the plant site. President Soeharto was there to officially inaugurate some facilities, BJ Habibie promised to revive the company, Wahid even asked everybody not to 'touch' Texmaco for the sake of exports, and Megawati's husband Taufik Kiemas visited the factory many times with the same promises.
As for Marimutu Sinivasan, the former controlling owner, he is currently on the police wanted list. Rumors said last week that the businessman had been caught in India and on his way back home to stand the trial on corruption allegation, but no follow up of the story.
Sinivasan's relatives urged government to restructure Texmaco, and that's probably why Kalla visited the plant site today.
Should PPA proceed with the bidding next week, whoever wins would have access to control 70% of PT Bina Prima Perdana (BPP), a holding company established by IBRA pursuant to debt restructuring of Texmaco. BPP has controlling stakes in some of Texmaco's key assets such as PT Polysindo Eka Perkasa (PTA, chips & staple fiber), PT Texmaco Jaya (garment), etc.
At what price?
Well, the previous bids were range between Rp90 billion to Rp290 billion or less than 1% of recovery or 99% haircut. I imagine the next administration might launch an investigation toward this administration if haircut is still considered a 'corruption' like what this administration has done to some haircuts given by the previous administrations.

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Sinivasan captured in India?

Marimutu Sinivasan, one of the largest debtor with around Rp27 trillion unpaid loans to the state, has reportedly been captured in India and now on his way home.

Sinivasan fled the country in March 15 last year, two days before Police asked immigration office to impose overseas travel ban on him. That time, his lawyer claimed Sinivasan fled the country for medical treatment. Police put Sinivasan in the wanted list to stand trial in a banking loan scam. In June, police claimed a cooperation with Interpol and Indian police to hunt down Sinivasan.
Prosecutors then promised to proceed the in absentia trial but no information since then.
(I remember back in Dec 2001 when AGO issued red notice to 184 countries and asked Interpol to have tycoon Sjamsul Nursalim stand trial back home. He fled the country, reportedly for medical treatment. Some reports said Nursalim, the owner of Gajah Tunggal group & Giti Tire (the largest tire manufacturer in China), lives in Singapore.)
In July, Rakyat Merdeka reported Sinivasan gave the power of attorney to lawyer Hery Suryadi to settle the debts, again no follow ups.
VP Jusuf Kalla was in India last week and met some businessmen, but no reports if he ever met Sinivasan there. Sinivasan's late brother Marimutu Manimaren was Golkar Party's treasurer.
I just can't imagine how difficult for the police to catch someone hiding in India. Is is possible that Sinivasan met the Vice President in private but failed to convince Mr Kalla to pay the debts as promised and then asked the police to lock the businessman in?
In the last two days, media run the conflicting statements from government officers regarding Sinivasan's Texmaco Group. While Secretary to the Minister of SOEs Said Didu said that government would takeover the company and make it a new SOE, Minister of Industry Fahmi Idris strongly rejected the idea arguing 'that's not in line with government's overall privatization strategy."

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Tax incentive & efficacy

In a bid to boost investment, government launched a new tax incentive where certain projects and/or in certain areas will enjoy tax income break. But based on various surveys by different organizations, income tax is not an issue. Investors are willing to pay tax, but all they need is certainty and eradication of under the table payments.

This is not the first time government offers tax incentive. Back in 90s, Soeharto administration once offered tax holiday to certain projects. Kiani Kertas (that time controlled by Soeharto's golf buddy Bob Hasan), Tuban Petrochemical (controlled by Hashim Djoyohadikoesoemo, younger brother of Soeharto's son-in-law Prabowo Subianto), and Texmaco Perkasa Engineering (owned by Marimutu Sinivasan, one of Soeharto's favourite businessman) were among the receipients of tax holiday. But all of these projects almost bankrupt and even until now are struggling after almost 10 years. And most important, the facilicy failed to attract significant FDI.
Antara reported that nine types of investment would be eligible for tax income incentive. Investment in palm oil/cooking oil in Sulawesi, corn mills in Sulawesi, fish processing in Sulawesi, Maluku, and Papua, sugar plants outside Java, and cement in Papua are among them.
I'm not saying this is a kind of wrong medicine. I just sense the reemerging of cronyism in selecting companies which eligible to get.

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Srinivashan to hit Indonesia roads

One of the most interesting results of president Susilo Bambang Yudhoyono’s visit to India is the commitment from the country’s investor to build a motorcycle manufacturing plant in Indonesia.

The anonymous investor would invest US$80 million in Indonesia, the fastest growing motorcycle consumer in the world. The investor would name the motorcycle Srinivashan. Sounds familiar, right?

Well, I guess everybody’s guessing whether the name has something to do with Marimutu Sinivasan, once one of the most powerful businessmen in Indonesia with Indian roots. But, Sinivasan’s diversified group of Texmaco, is in limbo due to huge debt to the state (US$3 billion).

I tried to google the name of Srinivashan, big zero! Then I tried to find out all the motorcycle producers in India. It is TVS Motor Company, formerly known as TVS Suzuki Limited. The Group's principal activity is to manufacture and sell automotive two-wheelers and automotive components. Its Chairman & Managing Director is Venu Srinivasan. That's the name come from.

Data shows that Honda is the largest manufacturer in India with 2.6 million units per year. Honda is also the largest manufacturer in Indonesia.

Last year, total motorcycles sold in Indonesian market almost reached 4 million units and is expected to grow 20% this year to around 5 million units, ranked third in the world after China (12 million units) and India (6 million). With average selling price of US$1,000, we are talking about US$5 billion market.

As gasoline price increasingly expensive amid poor public transportation, motorcycle is the most efficient mode of transportation in Indonesia.

Key players in the industry are trying to keep up the demand with new capacities. Honda, for example, has just opened its new US$100 million manufacturing line in Cikarang, West Java to bring the total capacity to 2.6 million units per year.

The second largest player, Yamaha, operates plants with combined capacity of 2 million units and followed by Suzuki at 1.5 million units per year. Kawasaki is ranked four.

Newcomers in the market are Lippo Group, Bosowa Motor (owned by Aksa Mahmud, brother-in-law of Vice President Jusuf Kalla), and some joint ventures between local and China motorcycle producers. The later produce what the local popularly called Mocin (motorcycle from China) to differentiate with the heavily dominating Japanese brands.

Should Srinivashan hit Indonesian roads, people might call it Moin (Motor India). With US$80 million investment, Srinivashan might perform better than Mocin and bite the market away, little bit from Japan brands.

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