RI not ready for ASEAN financial liberalization<\/p>\n
JAKARTA (JP): The weak capitalization of Indonesia's banks and
\ninsurance companies will inhibit them competing in other ASEAN
\ncountries when the financial services within the group are
\nliberalized, bank executives said yesterday.<\/p>\n
Executives of Bank Rama, Bank NISP, Asuransi Astra Buana and
\nAsuransi Central Asia warned that weak capitalization would make
\nit hard for local banks and insurance firms to compete with
\nforeign companies even in the domestic market.<\/p>\n
\"I therefore fully support the suggestion that local banks
\nmerge with each other to strengthen their capital,\" Bank Rama
\npresident Putu Antara said.<\/p>\n
Putu said with their current capital structure not one
\nIndonesian bank could establish branches in Malaysia, Thailand or
\nSingapore.<\/p>\n
\"But it would be easier for banks from those countries to
\nenter Indonesia when the barriers to financial services trade
\nhave been abolished,\" Putu said.<\/p>\n
Indonesia has 239 commercial banks and almost half are foreign
\nexchange banks. The minimum capital requirement for a foreign
\nexchange bank in Indonesia is only Rp 150 billion (US$62.4
\nmillion) compared with $700 million in Singapore.<\/p>\n
At their meeting in Phuket, Thailand, over the weekend, ASEAN
\nfinance ministers reaffirmed their commitment to further
\nliberalizing their financial services sectors.<\/p>\n
Many ASEAN countries, including Indonesia, have strongly
\nprotected their financial services sectors, arguing their markets
\nwere not mature enough to withstand competition from abroad.<\/p>\n
The problem for Indonesia's insurance sector is even worse. It
\nalso has too many insurance firms with weak capitalization. The
\nminimum authorized capital for general local insurance firms is
\nRp 3 billion and for life insurance firms Rp 2 billion.<\/p>\n
Teddy Hailamsah, president of general insurance firm Asuransi
\nCentral Asia, has said the government should make insurance firms
\nto increase their capital to enable them to underwrite large
\nprojects, thereby reducing premium outflows.<\/p>\n
\"The problem in our insurance industry is the mentality of
\nthose running the businesses. Most of us are less committed to
\nthe industry because we put less capital there.<\/p>\n
\"If we were required to put more capital into the industry, we
\nwould be more committed to our business because we put more money
\nat stake,\" Teddy said.<\/p>\n
Asuransi Astra Buana president Willy Suwandi Dharma supported
\nTeddy's proposal, stressing that with their current capital
\nstructure local firms were too weak to compete.<\/p>\n
\"On one hand, we feel we are not yet ready if the sector is
\nopened because it will let foreign insurance firms dominate our
\nmarket. However, only liberalization will force us to improve our
\ncompetitiveness,\" Willy said.<\/p>\n
Efficiency<\/p>\n
To improve local banks' competitiveness Bank NISP president
\nPramukti Surjaudaja suggested banks improve their human
\nresources, efficiency and soundness so they can achieve high but
\nsustainable growth despite having less capital.<\/p>\n
Pramukti said the central bank should make a concerted effort
\nto reduce local deposit and lending interest rates to the most
\ncompetitive level in ASEAN.<\/p>\n
Interest rates in Indonesia's banking system are among the
\nhighest in ASEAN. This will make local banks less competitive
\nwhen liberalization starts.<\/p>\n
Putu Antara agreed and said local banks also needed to
\nstrengthen their internal systems and procedures, product
\nsystems, information technology and market niches.<\/p>\n
\"If a bank is strong in retail banking, for instance, it
\nshould concentrate on that business so it becomes stronger in
\nthat sector. So when liberalization comes into force the bank can
\nsurvive and win the competition,\" he said.<\/p>\n
No date has been set for the liberalization of ASEAN's
\nfinancial services sector. (rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/ri-not-ready-for-asean-financial-liberalization-1447893297",
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