Financial sector told to prepare for free trade
Financial sector told to prepare for free trade
JAKARTA (JP): Minister of Finance Mar'ie Muhammad is
encouraging domestic financial and banking institutions to
improve efficiency in a bid to prepare themselves for entering an
era of free trade in services.
"In the negotiations on General Agreement on Trade in Services
(GATS), Indonesia included the financial sector in its schedule
of commitments, meaning that we have to gradually open this
sector," Mar'ie said on Friday evening.
Principles of trade in services embodied in GATS are part of
the Marrakesh accord, signed in April last year by more than 120
countries, including Indonesia. The accord also involved the
General Agreement on Tariffs and Trade (GATT), which is
administered by the World Trade Organization.
Speaking at the ceremony of a joint operating agreement
between state-owned multi-finance company PT Bahana Pembinaan
Usaha Indonesia and New York-based Goldman Sachs, Mar'ie warned
that, as a consequence of GATS, foreign competitors in the
financial sector are on Indonesia's doorstep.
"In recent years, we have witnessed increasing interest from
multinational financial companies to enter Indonesia ...
especially those working in financial services, life insurance,
property insurance and securities.
"The banking sector's interest to operate in Indonesia has
also increased," the minister said.
The government currently limits the operation of foreign banks
in seven major cities only -- Jakarta, Surabaya, Semarang,
Bandung, Denpasar, Ujungpandang and Medan.
To foster the growth of the financial sector, the government
encourages the establishment of joint-venture banks and financial
institutions in the country.
Currently Indonesia has over 30 joint-venture banks and
financial institutions.
In addition to the financial sector, Indonesia has also
committed itself to opening its markets in telecommunications,
maritime transportation, tourism and professional services.
The commitments, which came into affect at the establishment
of the World Trade Organization earlier this year, will be
reviewed in the year 2000 by the world trade-in-services watchdog
body, to see whether Indonesia is required to give further
commitments or not.
Minister Mar'ie also asked financial and banking institutions
not to expect the government's protection in facing fiercer
competition from foreign institutions in the future.
"Don't rely on the government's protection in facing the
competition, but instead rely on efficiency-driven efforts," the
minister said at his keynote address at the signing ceremony.
Agreement
Under the agreement, Bahana and Goldman Sachs will cooperate
in underwriting securities, providing financial consultation
services and financing projects, mergers and acquisitions in
Indonesia.
The two companies established their cooperation as joint
financial advisors on the initial public offering of the state-
run international telecommunications company PT Indosat, both on
the New York Stock Exchange and on two local stock markets -- the
Jakarta and Surabaya stock exchanges.
Mark Evans of Goldman Sachs said that his company's
partnership with Bahana is an historic one as it is the first
local partnership his company has entered into in Asia.
Ali Wardhana, chief commissioner of Bahana, who served as the
minister of finance from 1968 to 1983 and as the coordinating
minister for economy, finance and industry from 1983 to 1988,
noted that the joint cooperation between his company and Goldman
Sachs serves as evidence that there is increasing interest and
confidence from foreign investors and fund managers towards the
country's financial sector. (rid)