Banks still unable to tap telecom sector

JAKARTA (JP): Local banks still lack the financing ability to tap into the country's growing telecommunications sector, causing most telecommunications projects to use large foreign loans, a banking executive says.

A director of the central bank, Mukhlis Rasyid, said yesterday the situation occurred because local banks were still in a consolidation phase.

The lack of local lending in the telecommunication sector was also partly because of the central bank's policy of limiting their lending growth. They were also often short of the funds needed for telecommunications projects, he said.

"Local banks are required to abide by the government's shrewd fiscal and monetary policies because they are essential to maintain macroeconomic stability," Mukhlis said.

"This is why local banks have not been able to play an active role in project financing and servicing for this growing sector," Mukhlis said in a seminar yesterday.

The seminar, held by private telecommunications firm PT Satelindo, discussed banking facilities for telecommunications businesses in Indonesia.

Mukhlis said Bank Indonesia expected local banks to continue to limit their credit growth to between 17 and 18 percent this year to prevent the economy from overheating.

Despite the lending restrictions, Mukhlis said domestic banks could, and should, consider giving more attention to the telecommunications sector.

"In fact, the sector's bright, long-term prospects can help improve a bank's soundness, as long as the bank adheres to sound credit principles," Mukhlis said.

Most telecommunications projects were now funded by export credits and offshore loans.

Mukhlis said local banks could participate in one of the large banking syndications or consortium to finance a big telecommunications project.

"Surely local banks can participate without violating government-set guidelines and prudential banking practices," he said.

Banks, which currently had difficulties in meeting their legal lending limit because they were too focused on a single sector, for instance, could join consortiums to disperse their credit portfolios without creating extra risks, he said.

Satelindo's treasurer, Hadyat A. Hidayat, said yesterday local banks should take the advantage of the country's growing telecommunication sector.

"If these opportunities are not seized by Indonesian banks, they will be taken by foreign financiers," he said.

He said that by participating in consortiums or bank syndications, local banks would also gain more knowledge and experience about telecommunications projects.

"It will also allow them to gain a better understanding of the risks involved and the techniques used in such projects," Hidayat said.

Satelindo's Financial Director Hessel Frensen, said Satelindo had a debt-to-equity ratio of 2:3. Most of the company's debt came from foreign loans, giving a ratio of domestic to foreign loans of 7:25.

Frensen said Satelindo was planning to spend between US$150 million and $250 million on expansion this year.

Satelindo operates services in international telephone calls, satellite transponder leasing and cellular telephones using the global system for mobile communications. (pwn)