HSBC Upbeat About Indonesia, Asia Chief Says
by Roffie Kurniawan
The global economy appears headed toward a recovery, with Asia leading the way. However, the road ahead is unlikely to be smooth, said Sandy Flockhart, HSBC’s chief executive for the Asia-Pacific region, during a recent exclusive interview with the Jakarta Globe.
In the interview, conducted during Flockhart’s recent trip to Indonesia, he expressed optimism about Indonesia’s economy and discussed HSBC’s strategy for the country following the $600 million acquisition of mid-sized lender PT Bank Ekonomi Raharja in May.
Before being appointed to his current post in 2007, Flockhart served as HSBC’s president and group managing director in Latin America and the Caribbean. Below are excerpts of the interview.
Is the global economic crisis over?
I think there will be few bumps still to come, particularly once the stimulus packages are withdrawn. We have seen demand coming back, the prices of commodities increasing and improvement in international trade. If you look at Asia, we have seen im proving trends in many countries such as South Korea, Malaysia, Singapore and Indonesia and India.
We have also seen a recovery beginning in some of the European countries. We have seen improving manufacturing in the UK and much more stable financial conditions in the US. We are seeing the beginning of a recovery. But it may well be a slow recovery to begin with.
Are you expecting a fragile recovery?
All I would say is that we may have some bumps along the way. Things probably won’t go in a linear fashion.
Many global financial giants essentially collapsed during last year’s financial crisis. What can we learn from this crisis?
I think human nature has always told us that things won’t continue forever. We are going to see more focus on maintaining strong capital and liquidity in financial systems and less reliance on the creation of financial products that are highly risky. Certainly, in the medium term, people will focus on investing in more transparent investment products.
What is your view of Indonesia’s economy?
Indonesia has done remarkably well during this period in terms of maintaining consumption internally and equally in terms of getting GDP to grow this year. Our forecast is that Indonesia could record 4.2 percent growth this year and perhaps 1 percent better growth next year. This is a very satisfactory result. I think it is very much a reflection of the state of the country entering the crisis and the steps that were taken in terms of stimulus measures, and in managing its way conservatively through the crisis.
How important is Indonesia to HSBC’s operations in Asia Pacific?
We have been here for 125 years. If you hang around for that length of time, it shows how important the country and its economy are to our operations. We signed a deal to acquire Bank Ekonomi last year. It was a dark period in terms of economic activity and sentiment. That shows the strengths of HSBC as well as its commitment to and confidence in Indonesia.
What is your main purpose in acquiring Bank Ekonomi?
We want to grow our business in various sectors such as commercial banking, retail, and corporate activities. The acquisition gives us the ability to provide our services to more and more customers in many different parts of the country. In addition, Bank Ekonomi has a significant SME business.
We intend to develop that business as well. We have around 2.3 million SME customers worldwide. We are probably the largest SME bank in the world. We know how to do that business.
In the retail sector, we are the third-largest issuer of credit cards in Indonesia. We are also active in capital market and investment banking. The acquisition of Bank Ekonomi give us a strong platform to grow our business here and make us more competitive.
Will Bank Ekonomi merge with HSBC or will remain as it is?
Bank Ekonomi will in time become a principal vehicle to help develop HSBC’s business in Indonesia. It will take us to its 26 branches across Indonesia. It will also enable us to provide our services, our expertise to new customers and equally enable Bank Ekonomi customers to get access to HSBC financing. It makes us more of a universal banking presence in Indonesia. Effectively, it will double our size [here].
Some critics say foreign banks come here just to capitalize on Indonesia’s large market base. What value does HSBC bring to the country?
We employ 5,000 people already in Indonesia. We invested about $700 million in the acquisition of Bank Ekonomi. That’s a lot of money and that is good for the country’s economy. We of course pay taxes and offer good services and products at competitive prices. Competition is good for the economy, between foreign and local banks.