Bank Indonesia to boost role of foreign banks
The Jakarta Post, Jakarta
Bank Indonesia (BI) has vowed to seek ways to boost the role of foreign banks in the country's struggling economy, especially in the provision of investment and working capital loans.
BI Governor Burhanuddin Abdullah said on Monday that currently, foreign banks still played a minimum and limited role in supporting the nation's economy.
"From my point of view, the work of foreign banks is still limited to treasury, credit cards, and consumer and trade finance. Their role in providing more investment and working capital loans should be our main objective," he said on the sidelines of a seminar on the Indonesian Banking Landscape (API).
Burhanuddin was responding to questions about the increasing ownership of local banks by foreign banks, including the preponderance of foreign banks in the shortlist of bidders for a 51 stake in Bank Permata announced on Tuesday.
Some experts have expressed the fear that foreign banks would focus on big businesses, particularly foreign-owned businesses, and ignore small and medium enterprises, which are mostly owned by locals. As result, the government's current efforts to strengthen the small and medium sector could flounder due to a lack of support from the banking sector.
Burhanuddin said that the real problem was not about whether a bank was owned by foreign or local investors, but was rather about finding ways to strengthen the banking sector so that it could contribute more to the progress of the economy as a whole.
He added that full government ownership was not healthy for the industry and the bank itself as it would mean that the government would be the party exposed to all the risk.
"It's not good because it is the government who runs and also supervises it. This way, the government becomes the party that carries all the risk alone. Banks should be owned by the private sector -- being owned by domestic banks would of course be better, he said, adding that foreign ownership currently accounted for about 30 percent of the equity in the country's banks.