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