Bill on banks

Bill on banks

From Neraca

A bill on banks will be discussed shortly in the House of Representatives. An interesting side of this bill is that foreign companies will be allowed to own 100 percent of a local bank's shares.

It is hoped that in the near future, many foreign banks will be operating in Indonesia. This will help to alleviate the bad effects of the economic crisis.

However, the bill should block the tide of banking crimes. One of which is money laundering.

A foreign bank must be a corporate body in the form of a limited liability company (PT). The requirements for a PT are clear, as stated in Law No. 1 of 1995, which stipulates that the founders or the shareholders of a PT should consist of at least two people or two corporate bodies.

Therefore, it would be better to introduce some limitations that could yield long-term profits for the local partner, mainly in terms of managerial technique and technology transfer or know- how. For example, by imitating the pattern of foreign investment, as mentioned in Law No.1 of 1967, where a foreign partner is allowed to have shares up to a maximum of 96 percent. However, several decades later, foreign ownership should be reduced (divested) to 55 percent in order to offer a chance to local partners.

On the board of directors and commissioners, the key positions of the local partners must be determined. Foreigners should not occupy all key positions while Indonesians get lower management jobs.

Furthermore, short-term periodic reports should be necessary on the traffic of foreign exchange in a bank. There must also be a regulation on credit facilities for Indonesians. It should be avoided that foreigners take money from the Indonesian people to their country.

There should also be clear criteria for banks and bankers, and Bank Indonesia should no longer act as the last lending resort or an agent of development. It is those two functions that have turned Bank Indonesia black and blue.

TAUFIK KARMADI

Jakarta