The polemic over classified banks emerged once more. It was the chairman
of Bank Umum Nasional [Perbanas] Sigit Pramono who stated that Indonesia needed
specialized/specific banks.
The specific bank could be defended as a bank which ran business on the
basis of system, line of business, economic sector a certain area or
destination, considering the capital adequacy, readiness of human resources and
mastery of technology. But this had to be strengthened by underlying law so the
specific bank could stand tall on sound legality basis.
Sigit explained that in the law and Bill on Banking, Article 5 it was
stated that the type of banks were among others: general bank and People’s
Credit Bank [BPR] where a general bank could be a specific bank which
specialized in certain activities to give greater attention to certain
activities.
However, a law that deals with certain type of bank was still needed,
for example to differentiate calculation of key performance index with general
bank to banks from entering the universal bank category.
A specific bank must be treated differently, so they should not be
regarded as universal banks because they were not in a position to give the
same margin as general bank. Unless they were differentiated, there would be no
investors who were willing to set up a specific bank.
Perbanas had come with a blue print to propose setting up of specific
banks in Indonesia. So far the structure bank in Indonesia was already specific
banks, for example Bank Syariah, BPR and universal banks which were undertaking
financing in certain sectors like Bank Tabungan Negara [BTN] with their
mortgage service.
However Perbanas proposed that in the future Law of Banking, banks could
be differentiated by type i.e. Universal bank and specific bank. The roles of
specific banks were needed because facts showed that financing of certain
important economic sectors through 2002-2012 was still low.
Take for example the agricultural sector, animal farm, maritime and
fishery financing was constantly low, only 8 percent in 10 years [2002-2012].
On the other hand the main supporting sector of economic growth did not get
bank financing, like construction [only 3%-5%], electricity, gas, and clean water
[1-3%], transportation and communication [4-7%]. Financing was also centered in
the Cities where 72% financing was in Java and Jakarta, 16% in Aceh and
Sumatra; and the rest: 8%; Maluku and Papua only 1%.
Today the tendency among banks in Indonesia today was banks becoming
universal banks where banks were doing other business in the financial sector
like becoming broker of the stockmarket, acting as insurance company etc. banks
feared conglomerations, so they became universal bank.
Formation of special banks could copy the trend in China, where they
succeeded in developing economy by running specific banks. Formation of
specific banks did not always have to start from zero, but it could begin with
an existing bank specializing in certain category.
The urge to set up specific bank was also voiced by the Association of
Indonesian Exporters [GAEKI] who urged the Government to set up specific banks
handling agro-business including plantations. The formation of agro-business
banks was expected to be the starter of revitalization of coffee plantations,
in accordance with Indonesia’s target to be the greatest coffee producer in
Southeast Asia.
Chairman of GAEKI, Hamdani Sugandi stated that the process of making
Indonesia number one coffee producer in the world started with one simultaneous
step in Southeast Asia. The effort must begin from upstream to downstream, from
on-farm to off-farm especially on the industrial side.
Today Indonesia’s national coffee production was posted at 600,000 tons
per year which placed Indonesia as the 3rd biggest coffee producer
in the world. Indonesia’s position was still below Brazil in first place and
Vietnam in second place. This was a challenge for Indonesia to be promoted to
higher class, at least above Vietnam who could produce 1.2 million tons of
coffee per year.
Development of coffee industry by land intensification was not easy to exercise, evidently production never
went up. All in all Indonesia was still way below Vietnam. Promotion of
productivity by technology application should have been included in the
national coffee plantation masterplan, beside effort of coffee plantation
revitalization including people’s coffee plantation based on premium variety
seed so productivity would automatically increase.
Meanwhile efforts in the upstream and downstream sectors in Indonesia
would be accelerated by effective banking system. Admittedly Indonesian banks
were not as generous and hospitable to businesspeople as in Malaysia and
Vietnam in financing the agro-business sector especially plantation and coffee
industry.
The above factors posed as hindrance to the process of revitalization of
the national coffee plantation. GARKI was even highly supportive to the
Government’s intention, if any, to set up a special bank serving the agro-business
sector with the objective of strengthening and revitalizing some agro-industry
sectors especially coffee.
Plantation owners were in fact highly expectation of the emergence of a
classified bank specializing in agro-business. Indonesia, and agricultural
country, had no agro-business bank to serve the industry, had no agro-business
bank to serve the industry. The Government must strive to realize the
proposition because the agro sector, the plantation sector and all the
by-sectors were labor0intensive and capital intensive at the same time and
therefore needed special attention.
Previously the Minister of Trade Gita Wiryawan underscored that he was
highly expectant that the coffee industry in Indonesia could rise and increase
production and be the number one in South-east Asia. Today Indonesia’s position
was still under Vietnam, and further to be the number one in the world.
The Government had also prepared People’s Business Credit [KUR] for
coffee growers to support financing of coffee plantation. Upgrading and
betterment would be exercised from upstream to downstream so the national
coffee industry could have remarkable claim to reputation.
One thing was sure and the proposition to form categorized bank still
triggered controversial. Bank Indonesia rated there were other considerations
to be observed if the Bill of Banking justified such a proposal. So the
problematic thing that must be brought into consideration was when a bank was
focused on one sector, it would build a concentration of risk. Once that one
sector collapse, the bank crumbled accordingly.
For example, one universal bank financed agriculture, housing, minery,
etc. if one sector crumbled, there were other sectors to keep the show go on, a
condition as such could never be if a bank was only based on one sector. To
illustrate, a farmer diversified his products if he only run one product, in
case that one product failed, his entire business would be finished.
To minimize risk, a bank must prepare risk mitigation plan, which must
be thoroughly analyzed. The Financial Service Authority [OJK] would be in
charge of controlling this by next year. However the Banking authority would
certainly not refuse if the proposal were finally passed as law.
One thing was sure to set up a specialize/specific bank was not easy. It
should be borne in mind that the initial capital of Rp3 trillion as pre-requirement
of bank formation was not easy to meet. Beside the initial capital, specialized
banks would also have difficulty in finding specialist-bankers who were experts
in certain fields like agriculture, construction, and infra-structure.
In fact the Government could ask company banks to become special banks;
but such step was not sure either because many company banks had now become
public banks [tbk]. As solution, bank regulators as BI or Financial Service
Authority [OJK] could direct certain banks to allocated part of their credit to
certain banks to allocate part of their credit to certain sectors. This could
serve as alternative step so the said sectors could obtain credit
proportionally.
About Perbanas proposal to set up a special bank for small business
[UMKM], this was not necessary and not urgent. Big banks would gladly serve the
small business sector without being told because this segment offered sizable margin
for banks. Moreover in BI’ regulation on multiple license it was underscored
that banks were obliged to pipeline 20% of their credit allocations to the UMKM
sector. So what is there to wait for? (SS)
Business News - May 01,2013
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