The operation of foreign banks Indonesia was again highlighted. Foreign
domination in the national banking sector had awakened our spirit of
nationalism. Although Indonesia’s banking sector was now by far healthier and
beneficial to consumers and banks, the question of who is the ruler remained
not to be ignorable.
Nearly half of the total assets of the national banking sector were
dominated by foreign banks, so at a certain point of development it might pose
as serious threat, as foreign bank might control national economy. Admittedly
foreign domination was gradually grabbing shares of national banks; unless
controlled from now on, it was only a matter of time that all national banks
would be dominated by foreign banks.
Beside national banks. Local private banks and company [Persero] BUMN
banks were also gradually becoming the prey of foreign banks. Therefore this
momentum should motivate the government and parliament to do something about it.
To be honest we could not put the blame on the owners of those foreign
banks, as the existing regulation was still permissive to foreign ownership of
banks. In that case it was the regulation hat need to be revised, whereby it
could be more protective to national banks.
Many circles were hoping that national banks should resist external
temptations to collaborate and finally dominated by foreign banks. The
government with other banking regulators must strive hard in May respects to
reform the national economy which was more and more ruled by foreigners in many
respects including banking.
The roles of foreign banks were needed in this country. Indonesia was
not unhospitable to external collaboration. The undesirable thing was that if
foreign ownership continued to expand so the intention of becoming intermediary
between fund possessors and fund seekers was never fulfilled. In other words,
now was the time for Indonesia to restrict majority ownership of foreign banks
in local banks. Consequently the governments must make strict regulation by
restricting entry of foreign banks in
the national banking sector thereby it was not always imperative for local
banks to strengthen their capital structure by engaging foreign banks.
The government was advised to make restriction in foreign ownership in
the national banking sector. The same applied to other business lines where
foreigners might enter; for example prohibition for foreign banks to serve
micro business; they should rather be driven to serve big corporations and
infra structure projects which were so far being less attended to.
Not less important was to accelerate amended to banking regulations. The
existing regulations still permit foreign banks to dominate national banks. The
Government Regulation [PP] no 29/1999 on buying shares of general banks for
example, was still permissive to foreign investors to possess shares in
Indonesia banks up to 99 percent. Clearly this Regulation allowed foreign banks
to freely make business expansion, although BI had restricted foreign ownership
to maximum 40 percent.
Why was this so? Because by hierarchy the BI regulation was weak or
legally less powerful compared to PP 29 year 1999 or the Law of banking. As
long as a regulation of foreign ownership was not revised, never be shocked if
someday foreign ownership would be prevalent. Evidently even today there were
12 private banks in Indonesia which were dominated by foreign banks by 50 to 90
percent.
In regard to the above, supposedly the government and the parliament jointly
dissect the amendment to Law on Banking. The review of the Law on Banking
between the government and House must be prioritized to put brakes on expansion
of foreign banks in Indonesia. Now the nation pin hope on the government and
House to initiate restriction on foreign domination in national banks.
Not just in terms of ownership restriction, supposedly the government
also restricted maneuverability of foreign banks in operations, such as in
opening branch offices in Indonesia. If national banks were being restricted in
opening branch offices or had their operations restricted abroad such as in
Singapore and Malaysia, the same preconditions should be applicable to foreign
banks in Indonesia. Without applying the principle of reciprocal and amendment of
the law on Banking, foreign banks would claw in into national interest not just
in the banking sector but also in other strategic sectors.
Apparently there was not a single country in the world which was a
liberal as Indonesia in giving privileges to foreign investors to possess
shares up to 99 percent. Developed countries had restricted foreign ownership
up to maximum 25 percent. Some Asian countries were doing the same by
restricting ownership to around 35 percent. It was most advisable and
justifiable indeed to restrict foreign ownership in national banks, which had
come to 99 percent.
Many discourses that surfaced could be used as reference by the
government and house in determining maximum percentage of ownership by
foreigners. Generally the recommended percentage was 40-49 percent. Advisably
before the executive and legislative office was over by 2014 next, the big
homework be accomplished so as not to burden the next administration and house.
As soon as the percentage of ownership was decided, before the new
regulation was put in effect, it would be necessary to publicize the plan to
illuminate the public. Naturally the percentage of ownership by foreign banks, who
already had shares of high percentage be reduced of their ownership by stages.
The gradual reduction was necessary to prevent tremor in the market and
national banking sector including the stock market, to consider that some banks
had the status of public banks.
The situation might be described as follows: it was near impossible
mission for foreign investors who already commanded over 99 of shares to
release their share ownership to the extend of stipulated limit. To seek for
share buyers was not easy, especially in regard to price of share. This was not
to mention the size of shares to be released to prospect buyers. There were
still many technical considerations before foreign investors release their
shares to prospect buyers.
With limited foreign ownership and control being in the hands of local
banks, national interest in regard to the role and function of banks as
intermediary services would be realized. Financing for the economic sector
which were avoided by foreign banks or foreign majority owned banks could be
maximized. Eventually economic developments could be energized resulting in all
of the positive impacts. (SS)
Business News - June 07,2013
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