Indonesia – A commercial basketcase?

Well Indonesia’s much hyped and nonsensical PR as a future ASEAN economic powerhouse got a fair shellacking on a highly respected business programme last Sunday. Described as in such terms as Commercial Basket Case, a Soap Opera complete with Indonesian Billionaires and endemic corruption.  Viewers were left in no doubt of the reality of commercial business risks in Indonesia.

Not like Business Risks have changed much

Not like Business Risks have changed much

Not that anyone with the slightest contact would be surprised by the comments. Investment in Indonesia is simply viewed by the vast majority Government officials and their funding Robber Barons as a means to thieve with no recourse.

A brief section of the transcript is below, for full transcript and video just go to:

Business Insiders Sunday

Intrepid Mines. Tell us about that one too.

DEAN PAATSCH: Oh, this is like a soap opera, really, where an Australian company, Intrepid Mines, spent $100 million in Indonesia developing both a gold and copper deposit. However, they did so with basically an Indonesian shelf company, who was their partner because they couldn’t own that asset directly.

ALAN KOHLER: The shelf company owned the asset.

DEAN PAATSCH: This shelf company owned the asset that they’d spent years and $100 million drilling holes to work out that it was a massive deposit and worth potentially billions of dollars. However, in the dead of night their Indonesian partner transferred their so-called ownership and left them with a bit of paper to an Indonesian billionaire, so left them with absolutely nothing. So the story looks absolutely terrible for the existing board. They then threatened to sue a few people, including the Indonesian billionaire who has control of the asset. Enter a Hong Kong-based hedge fund who’s now trying to tip out the existing board and really at stake is control of $100 million in cash that Intrepid Mines has on its balance sheet. It’s a fantastic story of really an Australian company adventure gone disastrously wrong. It’s likely that the incumbent board will actually retain their position, amazingly, because I think there’s a degree of sentiment in the market that better the devil you know, even though as one pundit put it during the week: it’s choice of the better of two weevils.

ALAN KOHLER: What an extraordinary stuff up, really.

DEAN PAATSCH: Oh, it is, it’s extraordinary. But, look, I mean, Indonesia, really, is a basketcase commercially. The degree of corruption is endemic. I mean, the Rothschilds got ripped off enormously there last year with almost $1 billion. Again, coal mining assets, even if you’ve got the paper they aren’t worth the paper (inaudible).

ALAN KOHLER: Can the shareholders of this company, Intrepid, get anything out of it apart from a lesson?

DEAN PAATSCH: Well, the market’s valuing them at something like $167 million, so the way I look at it’s …

ALAN KOHLER: So they’ve got $100 million cash.

DEAN PAATSCH: $100 million for cash and $67 million worth of potential legal action, so, good luck with that.

ALAN KOHLER: Right. The cash is real though. ‘Cause they didn’t spent it yet.

DEAN PAATSCH: The cash is real.

ALAN KOHLER: That’s cash they haven’t yet spent.

JACQUELINE FERNLEY: But they can’t access it.

DEAN PAATSCH: It’s a great story.

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