Foreign banks plan more loans to RI
SINGAPORE (JP): Foreign banks plan more commercial loans to Indonesia to tap the country's lending market.
Ong Choon Hong of the Singapore branch of Japan's Daiwa Bank, said that his bank is ready to increase its lending portfolio to the Indonesian private sector, which is now being groomed to become a dominant player in the country's economy.
"We are now giving a closer look to Indonesia to ensure that we will not lose any business chances," he said following the signing of a lending facility of US$120 million between the publicly-listed PT Unggul Indah Corporation as a borrower and a syndication of 24 international banks.
He said on Wednesday that the government's plan to further boost the economy will consequently create a larger lending market for foreign banks as local banks are unlikely to be able to provide all of the huge investments needed to support the country's high economic expectations.
Ong said that the planned increase in Daiwa Bank's lending portfolio to the Indonesian private sector reflected the bank's confidence in the country's economic outlook.
He acknowledged that Daiwa's rating on Indonesia is not as good as other developed countries but said that "it is still considered not so risky".
More important
Shuichi Takenaka, an executive of the Jakarta branch of Japan's Long-Term Credit Bank (LTCB), said here that Indonesia, the largest recipient of LTCB's commercial debts in Southeast Asia, is becoming more important to the bank's future.
"The economy is growing and that's why we are very confident on Indonesia," he said.
Merrill Lynch, a U.S. securities company, predicted in its recent monthly report that Indonesia's economy is likely to grow by about 7.7 percent, as compared to 7.3 percent in 1994.
Merrill Lynch's estimate is much higher than the government's revised growth projection of 7.1 percent per annum in the sixth Five Year Development Plan (Repelita VI) period ending in 1999.
According to Bank Indonesia's records, the commercial loans of the private sector totaled approximately $30 billion as of April, nearly half of the $64 billion in soft loans owed by the government.
The high amount of the country's external debts, however, worries many economists, who say that the increase in the external debts could further widen the country's current account deficit.
The economists said the commercial loans of non-bank private companies should also be limited to prevent the deficit from growing.
The offshore borrowing restriction is now imposed only on domestic banks and state-owned companies.
Foreign bankers said that limiting non-bank private companies to raise commercial loans overseas could result in a stagnation of business activities because the available funds at home are not enough to support their rapid growth, given the country's tight monetary condition.(hen)