Confidence push from BCA sale temporary: Economists

Confidence push from BCA sale temporary: Economists

The Jakarta Post, Jakarta

The government may have won market praise for its successful
sale of Bank Central Asia (BCA), but economists warned the upbeat
mood was temporary and that only a steady performance could
prevent confidence from fading.

Last Thursday's sale of a 51 percent stake in BCA ended what
investors perceived as a test case for the government's will to
press ahead with divestments in spite of local opposition.

"BCA's sale opens the door for future sales," said Hadi
Soesastro, an economist with the Centre for Strategic and
International Studies (CSIS).

Nearly two years of painstaking effort was spent on returning
the country's largest retail bank to private hands amid a sea of
vested interests opposing the sale.

BCA is now being handed over to U.S. investment firm Farallon
Capital Management and the owners of local cigarette maker PT
Djarum.

Hadi described the sale process as in line with market
expectations, although its result was surprising.

Many had expected Britain's Standard Chartered Bank Plc to
win, but its bid fell below that of Farallon.

The government overriding StanChart's attempt to improve its
bid, demonstrated efforts to maintain a credible process, said
analyst Lin Che Wei.

StanChart accepted the outcome and said it remained committed
to Indonesia. "We think there will be many more opportunities in
Indonesia for Standard Chartered in the decades ahead," group
executive Mike Denoma was quoted as saying by Reuters.

While Farallon said in a statement it believed in growing BCA
into a major business thereby helping the entire banking sector.

Hadi further said the government must feed investors with
consistent positive signals.

The next test case, he said, was the sale of cement maker PT
Semen Gresik which was nowhere close to reaching a deal despite
three years of trying.

"If something funny happens, it will immediately bring down
all the past good news," he continued.

This included the recent crackdowns on high profile corruption
suspects.

Since last week the government appears to be showing off a
functioning legal system, as it detained House Speaker Akbar
Tandjung, convicted Bank Indonesia Governor Sjahril Sabirin and
detained businessman Hashim Djojohadikusumo.

Hadi warned of political deals behind the legal proceedings
that could tear down its carefully built credibility.

Che Wei too warned not to let BCA off the hook just yet.

"The question of whether the old owner (of BCA) is still
participating in the consortium has yet to be further studied,"
Che Wei said, noting that BCA's former owner, the Salim Group,
were close associates of Djarum's owners.

Abroad, analysts also question the low asset sales target this
year of only Rp 6.5 trillion which they said reflected the weak
political will to push through privatization.

"The smallness of the target and the fact that they can't make
it reflects the strength of the vested interests that are opposed
to reform," Bruce Gale, a Southeast Asian political analyst for
Control Risk Group in Indonesia told Reuters.