Mon, 22 Jun 2009
The role of foreign business in Indonesia has come under the microscope once again, as presidential candidates debate the merits of a more nationalistic economic policy. This sentiment has been gathering as the country's economy is affected by the global downturn, which originating from the near-collapse of developed nation's financial sectors (most notably the US) points to the need for Indonesia to focus more on the domestic economy and make steps towards independent. Last week, The Jakarta Post's Vincent Lingga and Aditya Suharmoko spoke with chairman of Foreign Bank Association of Indonesia (FBAI) and (CEO) of Standard Chartered Bank Indonesia, Simon Morris, to discuss these issues and other matters of concern for the country's economy. The following are excerpts:

Question: How do you think the upcoming presidential election will impact foreign banks? Do you notice any heightened xenophobic sentiments?


Answer: We've been in Indonesia 146 years, so we've seen quite a number of changes during that time. We'll just continue to do business as usual.

I, personally and professionally, have not seen any xenophobia coming out of this campaign.

I think that you clearly see some pro-Indonesian view points, but you know, this is Indonesia and this is what the government is for. So I don't see anything negative from a foreign bank's perspective. Indonesia tends to be pretty balanced in this perspective.

What has been the role of foreign banks in Indonesia's economy this far?

There are more than 30 foreign banks operating in Indonesia.

Quite a number of these banks, including Standard Chartered, have been in Indonesia for more than hundred years.

So I think that foreign banks have played their part in the establishment of banking system here in Indonesia.

We've seen quite widespread economic turbulence that we should be fully aware of.

What I think we'll probably see is systemic issues in the West and cyclical issues in the East.

Countries like Indonesia emerged stronger, from a banking perspective, after the Asian crisis *in the late 1990s*.

There has been a lot of hard work done since that time by successive governments to actually establish a robust banking system.

Through a combination of long-term commitments to Indonesia by foreign banks and some transferring of global best practices, foreign banks are ready to act as a bridge between Indonesia and the rest of the world, which includes partnerships with local banks as well.

Do you think that the share of foreign investors in the ownership of banks is too large? Are local and foreign banks competing against each other?

I think that you have seen a continued improvement in performance from quite a number of local and national banks, who are well managed by experienced and seasoned bankers.

And I see no reason why that should not continue.

In some cases there will be a modest overlap where you might be competing for business.

But the more interesting aspect is to determine how we can complement each other and how we can partner with banks with franchises and a domestic network to help them become more regional.

Perhaps we can partner with them strategically to give them some new thoughts, new ideas, in a way. We've done that with a number of state-owned banks.

I think this partnership with the local banks actually benefits everyone. I don't see any downside to it.

I think the foreign banks have greater expertise in certain areas and candidly lesser expertise in others.

So this is why the partnership works rather well. It would be inappropriate and incorrect to sort of assume that one is better and therefore one is worse, or that one is stronger and one is weaker.

You have outstandingly good local banks that foreign banks can learn from in the context of the domestic market.

How do you see Indonesia's positive economic growth amid the wave of global financial and economic turmoil? Have we reached the bottom of the crisis?

Professionally, I hope we've reached the bottom.

I think the sentiment seems to be split between those who think that we've reached the bottom and other economists who would say, well, what we've seen is the first wave, and there's going to be a second wave coming through.

I tend to professionally relate more to the first point, which is that we've probably seen the worst of the crisis now and sentiment is more positive.

I think there are number of issues we have to consider regarding the crisis.

You have the facts that you can look at, but some of it has a little bit more to do with the general sentiment itself.

I think we need to bring the two aspects together, which is the business sentiment plus the financial capability.

We've had very high quality fiscal and monetary management from the combination of the *Finance Minister* Ibu Sri Mulyani and *former central bank governor* Pak Boediono.

I think that the steps they've taken led to some of the stability that we see today.

And that's clearly been enhanced by the fact that we have been blessed by political stability.

One of the challenges is perception. Reality is still better here than perception. So we need to work on the perception of external investors.

Because sometimes the country is unfairly, in my opinion, viewed in a negative sense, which is, I think, rather unwarranted.

All of us can do more, as a bu-siness community, to share our experience of doing business in Indonesia.



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