Crank call
Indonesian anti-graft zeal sours business climate
Indonesia's anti-corruption drive in recent years is supposed to improve the nation's investment climate, which ranks at a lowly 128 among 185 economies surveyed by the World Bank - just behind Ethiopia. But by focusing on wrong targets, the campaign is threatening to produce the exact opposite outcome, and at a vulnerable time for Indonesia's finances.
Mobile licensing is a case in point. A corruption court in Jakarta will on July 8 decide whether Indar Atmanto, a former top official at PT Indosat Mega Media (IM2), deprived the exchequer of 1.3 trillion rupiah ($130 million) by renting the network of its parent Indosat, the country's second-largest mobile phone operator, and not paying a separate fee.
A guilty verdict will have consequences. Indonesia has more than 200 Internet providers. Some, such as IM2, are units of cellular companies, but most are small enterprises that use the networks to connect a population of 248 million scattered over a vast archipelago. A majority of those ISPs won't have viable businesses if they have to pay the government the same rate for 3G frequency as the telcos.
Nor do the telcos themselves stand to gain. Web providers help them use their spare capacity. The government will struggle to turn every network user who isn't the final consumer into a fee-paying licensee. Many banks, for instance, currently run their ATM services on telecoms companies' infrastructure, but would baulk at having to pay a licence fee.
The most troubling aspect of the case is the signal it sends. Indonesia needs foreign investment to plug its current account deficit and prevent the 6 percent drop in the currency in the past year from turning into a rout. If locals feel that the regulatory regime is too unstable and unpredictable for them to invest, foreigners almost certainly will too.
The timing is particularly poor because a slowing Chinese economy is crimping demand for Indonesian coal, while global investors who fear rising interest rates are losing their appetite for risky emerging markets. To use the anti-graft stick against small businesses that keep the consumer economy humming is painfully misdirected.
Mobile licensing is a case in point. A corruption court in Jakarta will on July 8 decide whether Indar Atmanto, a former top official at PT Indosat Mega Media (IM2), deprived the exchequer of 1.3 trillion rupiah ($130 million) by renting the network of its parent Indosat, the country's second-largest mobile phone operator, and not paying a separate fee.
A guilty verdict will have consequences. Indonesia has more than 200 Internet providers. Some, such as IM2, are units of cellular companies, but most are small enterprises that use the networks to connect a population of 248 million scattered over a vast archipelago. A majority of those ISPs won't have viable businesses if they have to pay the government the same rate for 3G frequency as the telcos.
Nor do the telcos themselves stand to gain. Web providers help them use their spare capacity. The government will struggle to turn every network user who isn't the final consumer into a fee-paying licensee. Many banks, for instance, currently run their ATM services on telecoms companies' infrastructure, but would baulk at having to pay a licence fee.
The most troubling aspect of the case is the signal it sends. Indonesia needs foreign investment to plug its current account deficit and prevent the 6 percent drop in the currency in the past year from turning into a rout. If locals feel that the regulatory regime is too unstable and unpredictable for them to invest, foreigners almost certainly will too.
The timing is particularly poor because a slowing Chinese economy is crimping demand for Indonesian coal, while global investors who fear rising interest rates are losing their appetite for risky emerging markets. To use the anti-graft stick against small businesses that keep the consumer economy humming is painfully misdirected.