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22 February 2010

Indonesia considers limiting shares purchased via rights issue

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Foreign investors may be limited in purchasing shares offered through a rights issue, as part of the revision of a presidential regulation on the so-called negative investment list, says a minister, the Jakarta Post reported.

"Companies in which foreign ownership is limited should be regulated in case a rights issue opens up the possibility of an increase in foreign shares through a rights issue in the stock market. This should refer to the negative investment list," Coordinating Economic Minister Hatta Rajasa was quoted as saying Friday.

The list regulates the percentage of foreign ownership in certain business sectors, including telecommunications, health, education and agriculture.

"If there is a proposal for a company to grow, we should not limit foreign ownership, but give local partners the first preference," he said.

"It should be arranged whether shares of a rights issue, in a certain time period, can be bought back by the company," he added.

Hatta said the proposal would still be discussed with the Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK). A rights issue is a way in which a company can sell new shares to raise capital.

The government is revising the 2007 presidential regulation on the negative investment list to ensure a more competitive investment climate, seeing the need to attract more investment to Indonesia's consumption-driven economy.

Indonesia needs a total investment of nearly 2,000 trillion rupiah ($214 billion) in the 2010-2014 period to accelerate infrastructure projects, the backbone of the economy, according to the National Development Planning Agency (Bappenas).

Of that amount, the government can provide only about 900 billion rupiah, Bappenas said.

Investment Coordinating Board head Gita Wirjawan, said the revision would be more accommodating to businesses and would be comprehensive rather than regressive. He said earlier the revision would be finished by March.


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