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.