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Will Indonesia Wreck a Part of Its Economy?

Screen Test: Will Indonesia's Government Wreck A Rare Thriving Part Of Its Economy?

JAKARTA (The Economist/Pacific Media Watch): One of the few things to go right in Indonesia in recent years was media reform. Soon after the ouster in 1998 of President Suharto, the country's strongman of 30 years, the new government abolished the reviled Ministry of Information, freed anybody to set up a newspaper or magazine and added four more nationwide television broadcasting licences to the existing seven. About a dozen local TV stations sprang up, and the number of radio stations doubled. The world's fourth-largest population, fascinated by the sudden free flow of information, read, watched and listened in droves, fuelling a media boom when most of the economy was bust.

The boom may now be ending. In late November, Parliament passed a new broadcasting law to increase regional programming and diversify ownership beyond Jakarta's business elite. In so doing, it revoked the national licences on which broadcasters had built their business, hurting both banks that had lent to them and investors who bought their shares, and further denting Indonesia's image as a place to do business.

Almost all of the national broadcasters are Jakarta firms with close connections to friends or family of Mr Suharto. The new law attempts to break their influence by restricting licences to a single province (Indonesia has 26), and forbidding cross-ownership of newspapers, and radio and TV stations. (A local body in each province will also set guidelines about content, so that the hedonists of Bali could permit racier shows than the relative zealots of Aceh.) The share prices of listed broadcasters with costly but now redundant nationwide networks, such as Indosiar and Surya Citra Media, have plunged.

Perhaps foreign firms will venture into the breach. The new law will allow them to invest in Indonesian media companies for the first time. But their stake will be limited to 10%, and given Indonesia's instability and corruption, that will probably not be enough to tempt them.

More likely, the existing broadcasters will wriggle off the hook. They are threatening to challenge the law in the Supreme Court. Influential companies may be able to persuade Indonesia's pliable courts to ignore the law altogether.

If anything, the new law might actually reduce regional programming, as media firms are likely to invest only in expensive infrastructure in the wealthy, more populous provinces. Indeed, the only firms rich enough to make such investments are the very ones that the law seeks to restrain. Indonesia's bank restructuring agency is grappling with a similar problem: it has taken over ill-gotten assets from some of Mr Suharto's cronies only to find that nobody except the original owners wants to buy them. In a country where the capitalists were all cronies, business and politics are not so easy to disentangle.



PACIFIC MEDIA WATCH is an independent, non-profit, non-government
organisation comprising journalists, lawyers, editors and other media
workers, dedicated to examining issues of ethics, accountability,
censorship, media freedom and media ownership in the Pacific region.
Launched in October 1996, it has links with the Journalism Program at the University of the South Pacific, Bushfire Media based in Sydney, Journalism Studies at the University of PNG (UPNG), the Australian Centre for Independent Journalism (ACIJ), Auckland University of Technology in New Zealand, and Community Communications Online (c2o).

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