THE ROLE OF BANKS IN PROMOTING DIRECT INVESTMENT

As an intermediary institution, i.e. raising fund and pipelining credit to promote economic growth, the banking sector played a strategic role in promoting direct investment.

Direct investment either by domestic investors (PMDN) or by foreign investors (PMA) were manager by the Coordinating Board of Investment (BKPM). What was the relationship between banking institutions with BKPM in energizing investment activities in Indonesia?

It was interesting to observe collaboration between Bank Mandiri and BKPM lately in the effort to promote direct investment. As a destination country for investment amidst unimpressive performance of developed nations, it was indisputable that Indonesia played an important role in the world’s economy which was being promoted by Bank Mandiri by supporting BKPM.

Recently PT Bank Mandiri (Persero) Tbk was engaged with BKPM in a joint promotion effort and enhancement of banking services toward rendering ease and convenience for foreign investors in investing in Indonesia.

Signing of Memorandum of Understanding was done by leaders of both institutions on August 1, 2012 last. Through this collaboration, Bank Mandiri would support BKPM to exchange information on investment projects in Indonesia which were potential and prospective for foreign investors. In addition to that Bank Mandiri would also render banking services needed by investors to maximize their investment in Indonesia including treasury products such as products related to conversion of foreign currency or even hedging.

According to Bank Mandiri, this collaboration ws most beneficial to banks considering that BKPM was a strategic institution which could serve as partner to Bank Mandiri whereby Bank Mandiri could enhance their role in promoting direct investment in Indonesia. With projected economic growth which remained steady at around 6.5% and elevated rating by international rating agency, Indonesia was predictably an attractive invitation destination especially for overseas investors.

Naturally it would be most ideal if the investment were in the real sector which was labor intensive instead of portfolio investment which employed limited manpower.

Meanwhile BKPM who had learned from their experience in collaborating with reliable banks like Bank Mandiri was aware and most obliged to foster collaborations toward enhancing investments. In the process of communication with candidate investors who were interested in investing capital in Indonesia, one of the questions often raised to them was “who is your partner bank”.

To BKPM, a customer-based bank like Bank Mandiri which was also strong in corporate linkages served as selling point in the process of promoting Indonesia to foreign investors. BKPM was expecting there would be a room for bilateral relations overseas investors and local investors where they could meet and negotiate with Bank Mandiri acting as mediator.

As mediator, Bank Mandiri could connect or arrange meetings between their debitor customer and candidate investors of other countries. Relationship between national businesspeople and foreign investors would be an excellent business synergy worth developing.  

One the other hand Bank Mandiri continued to collect funds to be pipelined to the real sector in the form of credit facilities such as productive credit either as working capital or investment.

Bank Mandiri could also render financial services to local and foreign investors listed at BKPM such as cash management, bank guarantee, currency swap, hedging, payroll system, safe deposit box, custody, trade financing, money transfer, pension fund of financial institution (DPLK) etc.

Beside transactional activities, the bank would also earn non-interest income known as Fee Based Income. Somehow interest based income through credit facilities remained to be the bank’s main source of income, which was still strengthened by fee-based income. All in all, bank’s total income would soar up sky high. A brilliant step taken by a bank with the biggest total asset in Indonesia.   

Business News - August 10, 2012