FINANCIAL ASSISTANCE TO INDONESIA (Status)

Mr Zulkifli Bin Baharudin asked the Prime Minister what is the status of the various financial assistance offered to Indonesia in terms of trade financing facilities and loans to assist Singapore companies to purchase or invest in Indonesian Bank Restructuring Agency (IBRA) assets.

BG George Yong-Boon Yeo (for the Prime Minister): Sir, in January this year, Prime Minister Goh led an international business delegation to Jakarta and announced a package of economic measures to help catalyse Indonesia's economic recovery. The principal elements that Mr Zukifli referred to are:

(1) A US$500 million Singapore Co-Investment Fund for the major Singapore Government-linked companies (GLCs) to co-invest with other foreign investors in assets which IBRA wishes to dispose, and in other financially-viable investments. We hope that our co-investment can help to enhance international confidence in Indonesia. To avoid creating the wrong perception that the Singapore Government was profiting from such sales, the GLCs will only take a small stake in these assets.

(2) A S$400 million loan financing scheme to encourage Singapore companies to look for commercially viable opportunities in Indonesia. The scheme is administered by the Economic Development Board through participating Singapore-based banks.

In March this year, IBRA successfully disposed its stake in Astra - an Indonesian car maker, through an open tender. The winning consortium, led by Singapore's Cycle and Carriage, included the Government of Singapore Investment Cooperation (GIC) which invested US$76 million for about a 6% stake in the company. The GIC's role in the transaction was in line with PM's pledge that Singapore would act as a catalyst to enhance investor interest and encourage the flow of investments into Indonesia. The sale was reported favourably by the international media and both IBRA and the Indonesian Government have noted the positive role played by the Singapore Government.

More recently, Temasek Holdings teamed up with two leading palm oil companies - Golden Agri-Resources and Cargill - to own, develop and operate oil palm plantations in Indonesia. Cargill and Golden Agri-Resources will have equal share in the joint venture while Temasek Holdings will take only a minority stake.

For the loan financing scheme, a seminar was held in February to elaborate on the details. It generated a lot of investor interest at the start. Participating banks received many queries. However, to date, the actual take-up rate has been low. About S$14 million have been committed in four projects. Participating banks have received feedback that investors are adopting a "wait-and-see" attitude, citing the country risk involved.

Our private sector has taken the initiative to conduct business missions to Indonesia to assess the situation. Early this month, the Singapore Confederation of Industries (SCI) organised a mission to Indonesia. I understand that there was a fruitful business-matching session with the Indonesian Chambers of Commerce and Industry. A Business Action Plan was also signed between the Confederation and the Chambers, calling for closer cooperation between the two associations.

As for the other elements of our assistance package to Indonesia, STB will continue to implement the S$2 million tourism and marketing package to help Indonesia restart its tourism promotion activities. Singapore sponsored Indonesia's participation in the PATA (Pacific Asia Travel Association) Travel Mart 2000 in April earlier this year with 17 booths, showcasing the best in Indonesian travel products. STB is currently working on an advertising campaign to promote Singapore and Indonesia as complementary destinations. This campaign is scheduled to start in the last quarter of this year. We will also continue to work with the Indonesian authorities to enhance the investment possibilities in the Riaus.

Singapore will continue our efforts to play a catalytic role to help Indonesia recover economically. We will continue to encourage our private sector to look for suitable investment opportunities that could also help in Indonesia's recovery. However, their investment decisions will depend on the availability of commercially viable deals, and the perception of political risk.

Mr Zulkifli Bin Baharudin: Indonesia is a strategic partner. In view of the low take-up rate, would the Minister think it necessary now to consider reviewing this scheme to improve the take-up rate? And secondly, have there been other requests also because of the low take-up rate by the Indonesian government to come out with new schemes to review or refine existing schemes available?

BG George Yong-Boon Yeo: Mr Speaker, Sir, I do not think we should rush because private monies are involved here and they have got to make realistic assessments of the situation in Indonesia in all its aspects - economic, political, social. And while the Government can be helpful, the Government should not be pushing such investments. Our role is a catalytic one, but in the end, it is for private investors to make their own decisions.

Mr Zulkifli Bin Baharudin: I would just like to ask the Minister whether he could give us the number in the investment made, in the case of acquisition of Astra and the one did by Temasek Holdings. How much of these facilities are used by Temasek Holdings and the other company that is making the investment?

BG George Yong-Boon Yeo: Mr Speaker, Sir, as I mentioned earlier, GIC's investment in Astra was US$76 million for about a 6% stake in the company. As to the investment by Temasek in the oil palm plantations in Indonesia, I do not have the number here.

Mr Zulkifli Bin Baharudin: How much of the estate comes from the package as offered to the companies investing? That means, how much of the money has GIC used in this package?

BG George Yong-Boon Yeo: I thought I have already given the number.

Mr Zulkifli Bin Baharudin: The entire US$76 million.

BG George Yong-Boon Yeo: Yes, for Astra.