Confidence-building deals<\/p>\n
Amid the great controversy over the US$200 million lending
\nscam at state-owned Bank BNI, Indonesia's second largest bank,
\nthere are two developments last week that contributed to
\nstrengthening the public's confidence in the banking industry.<\/p>\n
One is the Indonesian Bank Restructuring Agency's (IBRA)
\nannouncement that it had selected a consortium led by South
\nKorea's Kookmin Bank and the Singapore government investment arm,
\nTemasek Holdings Pte. Ltd, as the winner of 51 percent of its
\nshareholding at Bank Internasional Indonesia (BII), contingent
\nupon approval from Bank Indonesia.<\/p>\n
IBRA now holds 93.50 percent of BII with the other 6.50
\npercent owned by the investing public.<\/p>\n
The other confidence-boosting development is the great
\nenthusiasm of the investing public, notably foreign investors, in
\nthe initial public offering of state-owned Bank Rakyat Indonesia
\n(BRI) shares. Even before the Nov. 3 to Nov. 5 subscription
\nperiod, BRI had booked buying orders for 65 billion shares,
\nalmost 14 times as large as the initial offering of 4.76 billion
\nshares or 40.50 percent of its total shares.<\/p>\n
These developments show how local banks have been coming under
\nincreasingly intense market scrutiny despite the government's
\nblanket guarantee of bank deposits and claims. Even domestic
\ninvestors have become more capable of distinguishing the good
\nbanks from the bad.<\/p>\n
Witness how IBRA was recently forced to cancel the strategic
\nsales of its 52 percent equity holding at Bank Lippo, Indonesia's
\nninth largest bank, because not a single credible bidder was
\ninterested in the controversy-ridden bank.<\/p>\n
These encouraging developments which occurred only three
\nmonths after the successful IPO (initial public offering) of
\nstate-owned Bank Mandiri, Indonesia's largest bank, will surely
\nbolster the vicious circle within the banking industry and
\naccelerate its restructuring.<\/p>\n
The BRI IPO will not only bring in almost the equivalent of
\n$490 million to the state coffers but most importantly will speed
\nup the reform of the bank. As a publicly-listed bank, the
\ncountry's fourth largest bank will be subject to much tougher
\ndisclosure requirements and to higher standards of
\naccountability.<\/p>\n
Likewise, BII's strategic sale will contribute to accelerating
\nits operational restructuring as its new controlling shareholders
\n-- Kookmin Bank, Korea's largest bank, and Temasek, which is also
\na major shareholder at Bank Danamon -- will bring strong synergy
\nto BII in all the areas most vital to a sound bank, such as
\ncapital strength, market reputation, human resources and
\nnetworking.<\/p>\n
Even though the divestment will likely bring in only about
\n$230 million, just a fraction of the $1.3 billion the government
\nhad invested to recapitalize the bank in 1999 and 2002, the
\nstrategic sale is still a much better way of securing a higher
\nrate of recovery of its investments.<\/p>\n
The new investors are the kind of synergy BII badly needs to
\nbolster its market competitiveness, in view of the fragile
\neconomic condition and the fierce competition within the banking
\nindustry, as most domestic and foreign banks now compete in the
\nretail market.<\/p>\n
IBRA's decision to select the Temasek-Kookmin alliance as the
\npreferred bidder, even though the second final bidder, the Bank
\nPanin-Raiffeisen consortium, offered a higher price, is quite
\nwise a choice.<\/p>\n
Price should indeed be a secondary yardstick to assess the bid
\nin the strategic sale of such a trust institution as BII. Much
\nmore important is the reputation of the bidders. It is these
\nfactors that will determine the credibility and the quality of
\nthe management that will be brought in by the new majority owners
\nto BII.<\/p>\n
We are glad to learn that the Singapore-Korean consortium
\nscored much higher than the Bank Panin alliance in terms of
\nmarket reputation, quality (capital, networking), the conditions
\nof the sales and purchase agreement and business plan for BII.<\/p>\n
We are confident that the new majority owners will be able to
\nimmediately increase BII's shareholder value -- through better
\nmanagement, stronger capital and more extensive networking --
\nthereby enabling the government to get big capital gains from its
\nremaining 42.50 percent stake in the bank. Take, for example, how
\nnew majority owners of previously divested banks, such as Bank
\nCentral Asia, Bank Niaga and Bank Danamon, succeeded in
\nsignificantly raising their share value.<\/p>\n
However, much more important than the direct benefit to BII
\nitself, the strategic sale of this sixth largest bank in
\nIndonesian to the Temasek-Kookmin consortium will be another
\nbuilding block in strengthening the foundations of the whole
\nbanking industry.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/confidence-building-deals-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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