INVESTMENTS IN BINTAN AND OTHER RIAU ISLANDS

The following Question stood in the name of Mr Chiam See Tong -

Mr Chiam See Tong: To ask the Minister for Trade and Industry whether the recent riots in Bintan Island have affected Singapore's investments in that and the other Riau islands and what steps will the Singapore Government take to prevent or lessen the chances of further riots taking place as Singaporeans have their investments there.

Mr Tay Beng Chuan asked the Minister for Trade and Industry what is his Ministry's assessment on the current political and economic situation in Indonesia, and how his Ministry will continue to encourage Singapore businessmen to invest in Indonesia.

Mr Leong Horn Kee (Bishan-Toa Payoh): Sir, Question No. 4.

The Minister for Trade and Industry (BG George Yong-Boon Yeo): Mr Speaker, can I have your permission to answer Question Nos 4 and 5 at the same time, please?

Mr Speaker: Yes.

BG George Yong-Boon Yeo: Thank you. The political situation in Indonesia has improved since the presidential election in October last year. President Abdurrahman Wahid enjoys domestic political legitimacy and wide international support. The present Indonesian leadership is possibly the best combination under the circumstances.

However, the present government inherited multi-faceted problems when it assumed power last year. The security situation has not fully stabilised. There are still many social problems. Racial and religious violence continues to break out from time to time. These problems faced by the government are complex and cannot be resolved in a short time. The President is trying to address and resolve the many challenges it now faces.

As for the Indonesian economy, it is showing a tentative recovery. Real GDP is expected to register a flat or slightly positive growth in 1999, after contracting nearly 14% the previous year. The consensus forecast for GDP growth for Indonesia this year is about 3-5%.

In January this year, the Prime Minister led an international business delegation to Jakarta as a demonstration of our confidence in Indonesia. PM Goh also announced a package of economic assistance measures to help catalyse Indonesia's economic recovery. For Singapore businessmen, there is the $400 million loan financing scheme administered by the EDB through participating Singapore-based banks. This scheme is to encourage Singapore companies to look for commercially viable opportunities in Indonesia. When these are identified, these companies can seek loan financing at competitive interest rates from the participating Singapore-based banks. The risk of the loans will be shared between the Singapore Government and the participating banks. A seminar was just held on 18th February to elaborate on the details of the scheme. The response was very good.

Other elements of the assistance package include a US$500 million Singapore Co-Investment Fund for the major Singapore Government-linked companies to support other foreign investors who may be interested in acquiring IBRA-held assets and other financially viable investments. Our Tourism Board will also implement a $2 million Tourism and Marketing Package to help Indonesia restart its tourism promotion activities. At the same time, we will continue to work with the Indonesian authorities to enhance the investment climate in the Riaus.

By our investments and efforts, we hope to create a positive catalytic effect that will help to attract additional investment funds from other foreign investors. However, ultimately, whether the businessmen will decide to invest in Indonesia depends on their assessment of the prospects. They will choose to invest in places where they and their investments are safe and their operations can carry on uninterrupted. They will be monitoring if the current Indonesian leadership pursues sound economic policies and if there is political and social stability within Indonesia.

In this regard, it is unfortunate that the issue of land compensation at the Bintan Industrial Estate has resurfaced. When development works by the Indonesia-Singapore joint venture company on the Bintan Industrial Estate began more than five years ago, compensation for the land was fully settled and the land was free of encumbrances.

The recent demonstrations at the Bintan Industrial Estate have resulted in losses for the companies operating there as work had to be stopped. They have also affected tourist arrivals, and undoubtedly, the livelihood of the people in Bintan as well. The disturbances, if unchecked, would not only affect investors in the Estate, but more seriously, it would dampen foreign investor confidence in Indonesia. Singapore's ability to act as a catalyst to enhance investor confidence in Indonesia and help bring back foreign investment there would be curtailed.

The Singapore Government has conveyed to the Indonesian authorities, at various levels, the importance for Indonesia to resolve the problems. However, the disturbances in Bintan should be seen in the context of the other incidents of social unrest elsewhere in Indonesia. President Wahid himself has said that the recent outbreaks of unrest in Indonesia were the product of a conspiracy against his government. The Indonesian authorities have indicated that disruptive elements from other parts of Indonesia had been involved in Bintan. They recognise the nature and potential impact of the problems and have taken swift action to end the disturbances. We will continue to closely monitor the situation in Bintan.

Mr Chiam See Tong (Potong Pasir): Sir, I have three supplementary questions. Firstly, has the land compensation issue been resolved there? Secondly, what is the population of Bintan and what percentage of the population has been given jobs by the investments there? Thirdly, has the Singapore Government or its linked companies helped or assisted the private investors to provide social needs such as medical clinics and schools for the population there?

BG George Yong-Boon Yeo: Mr Speaker, Sir, as far as we are concerned, the issue of land compensation was settled when the land was acquired before the industrial estate was established. The land, as I had said earlier, was free of encumbrances. Whether the money in fact went to the people from whom the land was taken, that is something for the Indonesian side to resolve, and I believe that they are taking actions in that direction. But as I also mentioned earlier, Jakarta suspects that there were political elements involved in the disturbances.

As to the population of Bintan, I do not have it with me now.

Mr Chng Hee Kok: It is 600,000.

BG George Yong-Boon Yeo: 600,000 according to Mr Chng Hee Kok. We provide employment in the Bintan Industrial Estate and in the tourism area for some thousands, maybe at the most ten plus thousands. Do we provide facilities there? Where we are located, we do provide some facilities to the workers and to the surrounding areas.

Mr Tay Beng Chuan: In respect of the $40 million regionalisation finance scheme for Indonesia, the rules are quite rigid and I would like to know whether they can be relaxed somewhat to include the purchase of existing Indonesian under-capacity companies so that the Singapore businessmen do not need to use new funds to build a new factory or to purchase new equipment because there are quite a lot of under-capacity companies. I would like to ask the Minister whether this could be considered in this scheme.

BG George Yong-Boon Yeo: Mr Speaker, Sir, we had a seminar with many Singapore businessmen last week. It was so heavily subscribed that we had to reduce the number of executives which each company was allowed to send for the seminar. Comments had been made. Their feedback is now being analysed and we will liberalise the rules as much as we can, but without losing sight of prudential considerations. We must be aware of the unstructured investment environment in Indonesia, the difficulty of enforcing contracts, and we must not forget that public monies are involved here. But where we can be liberal, we shall try to be.