CIVETS Watch: Culture Clash Between US Firms and Indonesia

By Carol Kopp  APR 06, 2011 11:00 AM

American companies want to do business in Indonesia, but its reputation for corruption gives them pause.


Indonesia’s government is about to offer foreign investors $32 billion worth of much-needed infrastructure projects, and some major U.S. companies are interested—if the country addresses a few big problems in the way business gets done there.

That was the blunt message that a U.S. Commerce Department official brought to Jakarta this week, according to Reuters. The problems concern Indonesia’s reputation for official corruption, neglect of intellectual property rights, and policy flip-flops on key issues like foreign ownership.

Francisco Sanchez, U.S. Under Secretary for Commerce, would not identify specific U.S. companies that are interested in the projects.

The projects include a railway, toll road and a power plant, all part of an effort to upgrade Indonesia’s infrastructure in order to support its economic growth.

Public and private groups from Korea, China and Japan have already expressed interest in developing two of the major railway projects, according to The Jakarta Globe.

Last year, the U.S. was the third-largest investor in Indonesia, after Singapore and Britain, spending $930.8 billion there. The U.S. also was the third-largest importer, buying $13.3 billion in Indonesian goods, and it exported $9.2 billion in goods to Indonesia.

In Brief:

Colombians Want Their Pay TV: The world’s richest man is in a race against U.S.-based DIRECTV (DTV) to sign up Latin American customers for pay television. America Movil (AMX), the mobile phone provider owned by Mexican gazillionaire Carlos Slim, expects to double its pay television customers in Latin America to 22 million by the end of 2013, a company source told Reuters.

Brazil and Colombia are expected to be the top growth countries. Only 17% of Brazilians and 26% of Colombians currently have pay TV.

America Movil’s closest competitor in the region is a wholly-owned subsidiary of satellite provider DIRECTV. In 2010, DIRECTV Latin America added a record 1.2 million net new subscribers, or 76% more than the year before, for a subscriber total of 5.8 million, according to company statements. The U.S. arm of DIRECTV, by contrast, added 663,000 new subscribers, to about 19.2 million total.

Opening Day For Mila: The first trading day for the new stock market that combines the exchanges of Colombia, Chile and Peru has been set for May 30. Called Mila, the exchange will kick off as the second biggest in Latin America by market capitalization, after Brazil’s but ahead of Mexico’s.

ExxonMobil To Drill Off Vietnam: American oil giant ExxonMobil (XOM) is expected to begin exploratory drilling off the coast of Danang City in central Vietnam, according to state-run Vietnamese media. The project may anger China, which has opposed similar plans in the past. It is not clear if the proposed drilling site is within a disputed area claimed by both nations. Danang City officials approved the plan, according to Bloomberg news.

Egyptian Rulers Say ‘No’ To Militants:
The military officers acting as Egypt’s temporary government said this week that they will not permit extremist Islamic groups to take over the country. According to The Associated Press, the published remarks were interpreted as a warning to militant groups that they should not try to exploit the nation’s precarious state, or the individual freedoms permitted since the ouster of President Hosni Mubarak. The ruling Supreme Council of the Armed Forces said they prefer to see a moderate religious ideology prevail in Egypt after the September elections.

Turkey Puts Brakes On Economy:
The Turkish economy’s fast pace of growth is getting to be too much of a good thing. The nation’s gross domestic product accelerated its growth rate to 9.2% in the fourth quarter, from a revised 5.2% in the previous quarter, Reuters reported.

That is the highest growth rate in Europe, and the second highest among the Group of 20 major economies. Only China reported faster growth than Turkey in the fourth quarter. China’s economy grew by 9.8%.

The Turkish economy’s performance took most economists by surprise. According to Reuters, growth of 7.4% for the quarter had been expected. For all of 2010, GDP grew 8.9%.

A central bank spokesman said its priority will be to restrict bank lending to slow expansion closer to the government target of 4.5% for the current year.

BRICS Or BRIC? Goldman’s View:
The Goldman Sachs executive who created the term BRIC to describe the fast-growing economies of Brazil, Russia, Indonesia and China still doesn’t think South Africa belongs in the club.

Jim O’Neill, chairman of Goldman Sachs Asset Management, told CNN International that South Africa’s admission into the group, by invitation of the leaders of the BRIC nations, turns it into a political club, rather than the investing concept he invented. South Africa’s economy, at about $350 billion a year, “is nowhere near constituting a BRIC,” he said. The BRIC nations currently account for about half of global growth.

Four other nations, though, might be potential BRIC additions, according to O’Neill: Korea, Turkey, Indonesia and Mexico.

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