Law, problem loans hamper state banks<\/p>\n
JAKARTA (JP): Inadequate legal framework and the high rate of
\nnon-performing loans at state-owned banks hamper them from
\ngenerating funds through capital markets and direct private
\nplacement.<\/p>\n
Sutan Remy Sjahdeini of state-owned bank BNI 1946 said at a
\none-day seminar here yesterday that a number of articles in the
\n1992 Banking Law need revision so that state banks can go public
\neasily.<\/p>\n
Article 26 of the law, for instance, requires all state banks
\nplanning to go public to offer their shares on local stock
\nmarkets only.<\/p>\n
\"This article limits the state banks from generating funds
\nthrough capital markets. The government should actually give
\nchances for state banks to go international as well, just like
\nthe opportunity given to Indosat,\" Remy said at the meeting
\norganized by the Indonesian Business Data Center.<\/p>\n
Indosat, the state international telecommunications company,
\nis the first of the state-owned companies going international by
\nlisting its shares on the New York Stock Exchange. Part of its
\nshares are also listed on two local stock markets, in Jakarta and
\nSurabaya.<\/p>\n
Remy noted that the article also limits the privatization of
\nstate banks as it stipulates that the private sector, either
\nlocal or foreign investors, may not hold the majority of their
\nshares.<\/p>\n
Non-performing<\/p>\n
Another constraint for state banks to go public, Remy said, is
\nthe high rate of non-performing loans, which reaches over 10
\npercent of their total loans. The tolerable rate for any bank
\nwanting to go public is not more than five percent.<\/p>\n
\"The only way to solve the problem is writing off the non-
\nperforming loans. However, again our legal frameworks require a
\nlong and time-consuming bureaucratic process to do so,\" Remy
\nconceded.<\/p>\n
Besides, the World Bank which has extended soft loans to state
\nbanks forbids them from writing off some of the non-performing
\nloans before 1994 and 1996 for some others.<\/p>\n
He noted that the government's policy to name state banks as
\n\"the agents of development\" will possibly ward off foreign
\ninvestors from buying the banks' shares.<\/p>\n
\"This term is interpreted to mean that at any time the
\ngovernment can introduce a new policy or intervention which can
\nhamper the operation of the banks,\" Remy said.<\/p>\n
The most worrying form of intervention is the duty given to
\nthe banks to finance high-risk projects which are not profitable
\nat all.<\/p>\n
Remy said foreign investors have also stampede the state banks
\ninefficient in their management and operations as the result of
\nthe government's protection given to the banks in the form of
\nsubsidies a few years ago.<\/p>\n
Besides Remy, yesterday's seminar also presented the president
\nof the state-owned electricity company, PT PLN, Zuhal, the
\npresident of the state-owned telecommunications company PT
\nTelkom, Setyanto P. Santosa, the president of the state-owned
\nrailway company PT Perumka, Anwar Supriadi, the president of PT
\nDanareksa, Rustam Effendi, and the international director of
\nLondon-based Adam Smith Institute, Peter Young. (rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/law-problem-loans-hamper-state-banks-1447893297",
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