TEMASEK CASE NOT TO UNDERMINE INVESTMENT IN INDONESIA

By Andi Abdussalam

Jakarta, Nov 21 (ANTARA) - Monday's verdict by the Business Competition Supervisory Commission (KPPU) against Singaporean firm Temasek Holding has raised concerns that it would undermine the investment climate in Indonesia.

        Lee Theng Kiat, chief Executive of ST Telemdia, which is wholly owned by Temasek, said the KPPU's ruling had raised a serious question on the implementation of the law and had at the same time also triggered the question whether foreign investors could feel secure about their investment in Indonesia.

        In response to the concerns, President Susilo Bambang Yudhoyono said the KPPU's decision would not undermine the investment climate in Indonesia.

        "The KPPU's ruling will not affect investment as the government has continued to improve the country's investment climate from year to year," he was quoted as saying by his Spokesman Andi Malarangeng in Singapore on Wednesday.

        According to the president, the government respected the KPPU's decision as the business competition supervisory commission was only carrying out its duties.

        The aim of the commission is to guarantee sound business competition. Vice President Jusuf Kalla therefore called on Temasek to abide by the law so that business competition would remain sound.

        "So, it's not a question whether the government supports the decision of the KPPU or not. It's more a question of law enforcement, so that business competition in Indonesia remains sound and proper," Vice President Kalla said.

        The KPPU on Monday found Singapore's Temasek Holdings guilty of cross-ownership in domestic mobile telecommunication companies PT Telkomsel and PT Indosat leading it to abuse its dominant position in the marketplace and to pratice monopoly.

        The business competition law bars a company from having a controlling stake in another company in the same business sector with a market share of 50 percent or more.

        Temasek will now be forced to either let go of all indirect shares in PT Telkomsel or in PT Indosat, and to pay a fine of Rp25 billion for breaching the anti-monopoly law, the KPPU said.

        Temasek owns a 54.15 percent stake in SingTel Group which holds a 35 percent stake in Telkomsel, while Singapore Technologies Telemedia (STT) -wholy owned by Temasek- owns 75 percent of Asia Mobile Holdings which owns 41.9 percent of Indosat.

        The largest market share holder Telkomsel was found guilty of violating article 17 of the law, particularly for abusing its dominant power to determine the interconnection tariffs among operators.

        Telkomsel said it would obey KPPU's order to lower its average tariffs of mobile communication services by up to 15 percent. "In line with our policy of obeying regulations in operating the company, PT Telkomsel will respect whatever decision is made in a legal process in Indonesia, including the decision of KPPU," PT Telkomsel Prsident Director Kiskenda Suriahardja said here on Tuesday.

        He said Telkomsel whose majority stake (65 percent) was owned by the government through state telecommunication company PT Telkom would always run its business based on regulations in force.

        "Basically, Telkomsel will always abide by existing regulations and law-based decisions but for the sake of clarity Telkomsel will appeal the KPPU decision," he said.

        He said Telkomsel would appeal the KPPU decision because it felt that so far it had always abided by the regulations and had never quoted excessive prices.

        In the meantime, Singapore Technologies Telemedia (ST Telemedia) objected to and expressed deep disappointment about the KPPU's ruling over its investment in Indosat.

        Theng Kiat said that his company and its subsidiaries denied the KPPU's accusation, rejecting its findings and conclusion. The company would take appropriate steps through legal channels to protect its shares in Indosat.

        Like ST Telemdia, Temasek Holdings which owns 100 percent stake in ST Telemedia, said it would also challenge the KPPU's ruling which said that Temasek had violated article 27 of Law No.5/1999 on Anti-monopoly.

        "What I want to emphasize is the common sense that the Indonesian government controls 65 percent of Telkomsel in an industry where regulators set prices," Temasek Executive Director Simon Israel said.

        "So, it is absolutely inconceivable that the Indonesian government would standby and allow the Indonesian consumers to suffer the consequences," he added.

        Simon said that Telkomsel was under the control of the Indonesian government which also owned a golden share in Indosat.

        On the objection of Temasek over the KPPU's ruling, President Susilo Bambang Yudhoyono asked the Singaporean company to appeal to the higher court.

        "Based on the legal provision, Temasek can appeal to (the higher court) if it objected to the KPPU's ruling ," the president said.

        According to Vice President Jusuf Kalla, the law must be upheld. "Whoever wants to do business in Indonesia, she or he must abide by Indonesia's laws. They often ask us to abide by their laws, and so they must also abide by our laws. They should not get angry when they are given sanctions, and then they say the investment climate in Indonesia is bad," Kalla said.

        The Vice President said every country, including Indonesia, had laws on business competition or monopolistic practices to ensure sound business competition.

        "So, it's not a question whether the government supports the decision of the Business Competition Supervisory Commission (KPPU) or not. It's more a question of law enforcement, so that business competition in Indonesia remains sound and proper," Vice President Kalla said. (T.A014/A/HAJM/B003) 2. 20:45. (T.A014/A/A014/B003) 21-11-2007 22:03:46