Greg Earl – If there was a silver lining to be found in the large Busang cloud that descended on Indonesia this week, Bob Hasan was probably always one of the most likely people to find it.
President Soeharto's chief business fixer adopted a relaxed air on Monday night as he announced he was withdrawing from what had just officially become the world's biggest mining fraud, saying: "That's business. Sometimes you make money sometimes you don't."
And then with a disarming frankness Hasan noted that the company he manages for Soeharto, Nusantara Ampera Bhakti, hadn't lost anything on the project (in which it was given a 20 percent stake once valued at $1 billion) because it hadn't spent anything.
It was an illustrative comment on the low risk of doing business in Indonesia for some people at a time when the much higher risks for foreign companies of policy changes and arbitrary meddling in ownership is receiving more attention than ever before.
The Indonesian Government can quite rightly point to Canadian financial regulators and analysts for allowing a carefully planned financial scam to continue for so long, but Soeharto's Government will inevitably be blamed around the world for fuelling the fire by allowing a highly public fight over the once fabled Busang spoils.
The Busang scandal comes immediately after the struggle over the controversial national car has entered a new stage, with Japan pushing ahead with its World Trade Organisation challenge and US car manufacturers reiterating their halt on new investment in Indonesia.
The byzantine car policy has taken its latest unpredictable twist this week with a Government request for banks to provide finance and a proposal that the Timor car controlled by Soeharto's son could be merged with another car being developed by the Research and Technology Minister, B. J. Habibie.
While Indonesian ministers angrily reject regular international finger pointing at the country over corruption, many long-standing business observers believe it has become much worse in recent times. This caused widespread concern about the Government decision last month to put the once notoriously corrupt customs service fully back in charge of import inspection.
Most observers attribute the increased use of the so-called "other road" to process business transactions to the demonstration effect of the Soeharto family involvement in deals like Busang and the looming end of the five-yearly political cycle next year, which will see major changes in the Cabinet and senior Government ranks.
But while some companies like Ford have voted with their feet against the Indonesian way of doing business, the overwhelming weight of foreign investor interest in Indonesia remains strong as companies look to long-term prospects of a country with more than 200 million people.
From a purely macro-economic management perspective some economists even argue that a slowdown in investiment would have advantages, with capital inflow running at double that needed to finance the country's current account deficit last year.
The speed and strong flow of capital during a period of unpredictable economic policy decisions like the national car and Busang has, in the short term at least, been more of an economic management problem for Indonesia than those flowing from the more notorious policy decisions. Efforts to rein-in the strong rupiah have created excess liquidity and there is concern the central bank could move back to old fashioned credit controls to restrain the lending caused by the lowering of interest rates.
Long time Indonesia watcher Ross McLeod puts the recent business decisions in context in the latest "Bulletin of Indonesian Economic Studies", in which he argues that the conduct of micro-economic policy is less encouraging than the much more positive macro-economic picture suggests.
"There is still a stubborn tendency to override markets and to rely on state, rather than private, enterprise; and economic nationalism is often more influential than rational economic analysis," he says.
"But these complaints are nothing new, and the individual points of concern collectively have a small enough detrimental impact that a high level of macro-economic performance has been able to be sustained for many years."
While mining industry sources say that the Busang saga has already persuaded some foreign investors to turn away from Indonesia just as Detroit may be doing in the car industry, there is plenty of evidence of an ongoing struggle to maintain coherent economic policies.
The move to change the ownership arrangements for the Newmont mine prompted a very strong attack on the Government from the respected former mines minister, Mohamad Sadli, this week - which was tougher than his previous comments during the Busang debate.
And the Government may already be back-pedalling on its unprecedented bid to overturn the ownership of the mine while at the same time introducing some clarity into the push to increase Indonesian ownership of mining projects.
Economic policy appears to be moving ahead in its traditional pattern of two steps forward and one step back, but foreign investors unnerved by the Busang scandal could usefully direct some greater attention to the national election, which is also under way.
There amid a morass of regulations that would put an old fashioned Indonesian customs officer to shame, the Government appears intent on ensuring that the country's political evolution makes considerably less progress forward. (dated 5.5.97)