Prabowo reignites controversy over sale of telco stake

Prabowo reignites controversy over sale of telco stake
Prabowo Subianto.

The sale of a significant stake in Indonesian telco Indosat in 2002 during the administration of then President Megawati Sukarnoputri has resurfaced after presidential candidate Prabowo Subianto asked his rival Joko Widodo about the issue at Sunday's debate.

It signals the Prabowo campaign's opening of a new front to attack Mr Joko, by portraying his Indonesian Democratic Party - Struggle (PDI-P), which Ms Megawati chairs, as less nationalistic because it sold strategic state assets to foreigners.

In response, Mr Joko defended the sale by saying the Indonesian economy was not in good shape at the time as a result of the 1997/98 financial crisis. "Our budget was in difficulty. We could buy back the stake. It is only that we haven't done so," he said.

The government sold a 41.9 per cent stake in Indosat, the nation's second largest cellular phone operator, to Temasek Holdings subsidiary ST Telemedia after a public bidding process.

But in a politically motivated ruling, Temasek was found guilty by Indonesia's anti-trust agency of engaging in monopolistic practices and anti-competitive behaviour in 2007 and ordered to sell its holdings in either Indosat or Telkomsel, where SingTel had a 35 per cent stake. Temasek never had a controlling role in either firm.

Qatar Telecommunications bought ST Telemedia's entire stake in Indosat in 2008.

The issue of foreign holdings in strategic industries like telcos and banking has become a convenient one for nationalistic politicians in recent years.

State-run Antara News Agency yesterday cited observer Nanat Fatah Natsir as saying the question on Indosat was "representative of the disappointment many Indonesians still feel" about its sale.

"People hope Indosat can be bought back," he added.

Mr Joko said he would buy back Indosat shares, but the economy had to grow by 7 per cent.

But stock analyst Chandra Pasaribu said the government cannot force Qatar Telecom to sell its stake but could make an offer to buy and negotiate a fair price.

Others, like Mr Yunarto Wijaya, executive director of research outfit Charta Politika, felt the issue was not likely to have much traction here.

"The Indosat sale is an elitist issue, something many at the grassroots cannot grasp or understand," he said.

This article was first published on June 24, 2014.
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