Troubled small banks expected to merge<\/p>\n
JAKARTA (JP): The planned merger of four state-owned banks as
\npart of banking reform measures would encourage small private
\nbanks to follow the move in order to survive, an economist has
\nsaid.<\/p>\n
Arief Ramelan Karseno of Yogyakarta's Gajah Mada University
\nsaid yesterday the merger would force ailing private banks to
\nmerge in order to compete with the new state bank.<\/p>\n
\"The merger of the four banks will give birth to one giant
\nbank with capital of about Rp 95.5 trillion,\" Arief said.<\/p>\n
\"This will force other private banks with a grim future to
\nmerge just to stay alive,\" he was quoted by Antara as saying.<\/p>\n
With the large amount of capital, the new state bank could
\nperform better and could be flexible in meeting the demands of
\nits customers, he said.<\/p>\n
The merger would reduce transfer fees between banks, thus
\nlowering the interest rate, he said. This would restore
\ncustomers' confidence in government banks, he said.<\/p>\n
He said small private banks must consolidate to prevent losing
\ntheir customers to the new bank.<\/p>\n
Private banks had already been losing customers since the
\ngovernment closed 16 private banks in November as part of reform
\nmeasures backed by the International Monetary Fund, he said.<\/p>\n
Minister of Finance Mar'ie Muhammad announced Tuesday the
\ngovernment would merge four of seven state-owned banks into a
\nsingle bank.<\/p>\n
The merger of Bank Bumi Daya, Bank Dagang Negara, Bank Ekspor
\nImpor Indonesia and Bank Pembangunan Indonesia will be completed
\nby July.<\/p>\n
The government will also allow foreign banks to become
\nshareholders in the yet to be named new bank.<\/p>\n
Another Gajah Mada University economist, Sri Adiningsih, said
\nyesterday the participation of foreign investors in state banks
\nmight make the new state bank more commercially oriented.<\/p>\n
\"The government's mission to be an agent of development by
\nproviding loans to small-scale entrepreneurs would face
\nobstacles,\" Sri said.<\/p>\n
Small businesses would be the worst hit by this transition,
\nshe said.<\/p>\n
To avoid this, the plan to sell the bank's shares to foreign
\ninvestors should be implemented gradually, she said.<\/p>\n
This would give time for the transition of technology so that
\nthe management of the new bank could learn to manage large
\ncapital efficiently, she said.<\/p>\n
Arief said the government's challenge in merging the banks
\nwould be in combining the corporate cultures of four different
\ninstitutions, which could take a long time.<\/p>\n
The merger would also inevitably lead to layoffs and the
\nlowering of some staff positions, he said.<\/p>\n
Arief said the participation of foreign investors would help
\nenforce transparency in the new bank.<\/p>\n
Bank analyst Nyoman Moena urged the government to make
\ncomplete preparations before the bank merger.<\/p>\n
\"In a situation like this, when the monetary authority is
\nbeing burdened by other things, the merger must not be done
\nhastily,\" he said.<\/p>\n
Moena said a merger would not be an easy matter, because the
\nfour banks were very different from each other.<\/p>\n
The government must conduct a complete feasibility study
\nbefore the merger actually took place, he said.<\/p>\n
The study would show what the government wanted to achieve
\nwith the merger, he said. This would help indicate whether or
\nnot the government would reach its goal after the merger took
\nplace.<\/p>\n
Moena said the merger would fail without good preparation. He
\ncompared it to the government's failed attempt to merge its banks
\nin 1965.<\/p>\n
He said the failure in the 1965 merger was due to political
\ninstability.<\/p>\n
Conditions were not any better now, he said.<\/p>\n
\"Without good preparation, this will be the beginning of (the
\nmerger's) failure,\" he said. (das)<\/p>",
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