Indonesian banks forced to face global competition<\/p>\n
JAKARTA (JP): Indonesian banks have to seriously prepare
\nthemselves as they enter an era of free trade in services early
\nnext year, when the new GATT principles go into effect, Bank
\nIndonesia Governor J. Soedradjad Djiwandono says.<\/p>\n
\"Indonesian banks have to improve competitiveness as there are
\nmore and more competitors waiting at the doorstep,\" he told
\njournalists after addressing the 11th general meeting and seminar
\nof the Asian Bankers Association here yesterday.<\/p>\n
Soedradjad said in his address at the meeting that with the
\nimplementation next year of the new General Agreement on Tariffs
\nand Trade (GATT), market competition will become more intense.<\/p>\n
\"As we are all aware, the Marrakesh accord involves not only
\ncommodity trade, but also Trade on Related Investment Measures
\n(TRIMs), Trade on Related Intellectual Property Rights (TRIPs)
\nand trade in services as well,\" the governor said, referring to
\nthe new GATT which was signed in Marrakesh last April.<\/p>\n
Soedradjad said banking competition will be even tougher as
\nfinancial sectors in the world become globalized and national or
\nregional borders begin to blur, since borders now move \"as the
\nsun rises and sets.\"<\/p>\n
In terms of financial globalization, the role of conventional
\nbanking in financial intermediation has been decreasing due to
\nthe emergence of non-bank financial intermediaries such as
\npension funds and mutual funds, he added.<\/p>\n
There are also fund resources which can undermine the role of
\nbanking, such as commercial papers, bonds or stocks, according to
\nthe central bank governor.<\/p>\n
\"From the macro-economic point of view, the trend is
\npromising, it is a diversification in financial structure. But,
\nfrom banking sector, it means tougher competition,\" the governor
\nsaid.<\/p>\n
Besides Soedrajad, the two-day seminar yesterday also
\npresented Minister of Finance Mar'ie Muhammad, American
\nAmbassador Robert L. Barry and economist Mari E. Pangestu. Henry
\nKissinger, a former U.S. secretary of state, is scheduled to
\naddress the meeting today.<\/p>\n
Adjustment<\/p>\n
Minister Mar'ie noted that Indonesian banks which have
\nexperienced some problems of institutional failure have
\ndifficulties in adjusting themselves to the new and more
\ncompetitive environment.<\/p>\n
He pledged that his ministry is committed to restoring all
\nstate-owned banks to sound footing and to improving the quality
\nof their credit portfolios.<\/p>\n
\"We are making strong efforts to move state-owned banks toward
\neligibility for listing in stock exchanges,\" Mar'ie said in his
\nkeynote address at the seminar, which was attended by some 140
\nbankers from 14 Asian and 7 non-Asian countries.<\/p>\n
Economist Mari, however, questioned the readiness of the
\nIndonesian banking industry to enter the era of free trade in
\nservices, either regionally or internationally.<\/p>\n
\"If we have to compete with banks in Singapore or Hong Kong, I
\ndon't think we are ready to do so as they are more advanced in
\nmany ways than we are here,\" Mari told journalists.<\/p>\n
She noted that loopholes in Indonesian banking rulings,
\ncorruption as well as collusion among bankers, bureaucrats and
\nbusinessmen have hampered the development of Indonesia's banking
\nindustry.<\/p>\n
When asked, Soedradjad admitted that the Indonesian banking
\nindustry still works within inadequate legal frameworks. \"Be
\npatient, we cannot mend them all overnight.\" (rid)<\/p>",
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