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)