Govt should allow full foreign ownership: APPI

Govt should allow full foreign ownership: APPI

The Jakarta Post, Jakarta

The pace of growth in the country's finance industry could
further be accelerated if the government allowed full ownership
in local financing firms, the industry's association says.

Chairman of the Indonesian Financing Firms Association (APPI)
Susilo Sudjono said on Monday there was actually high interest
from foreign investors to get into the country's financing
business.

However, it has been hampered by the fact that the government
had since 2002 prohibited full foreign ownership.

"It is ironic. While many foreign investors wanting to expand
the industry cannot get the needed business permits, on the other
hand, there are many licensed financing firms who are actually
not doing any business at all," Susilo said.

There are currently 230 financing firms licensed at the
finance ministry and members of APPI, but only 126 are active.

Susilo explained that for the time being, interested foreign
investors could only enter the industry through joint venture
schemes, by buying up to 85 percent of the shares of local
financing firms.

Of the 230 APPI members, there are a total of 35 joint venture
financing firms.

"Foreign investors can actually strike up a joint venture with
dormant financing firms, but it would be too risky, as such firms
are usually in an unhealthy financial condition," he said.

Concerning the prospects for financing firms in the country,
Susilo cited data from APPI that shows the total assets of
financing firms in the country rose to Rp 74.9 trillion (some
US$7.8 billion) last year, up from Rp 47.2 trillion in 2003, or
almost double 2002's Rp 39.9 trillion in assets.

The largest contributor to the financing firms' assets is
funds channeled to consumer financing activities -- particularly
for car loans -- reaching 90 percent or Rp 34.4 trillion of the
assets.

Financing firms are also becoming the public's main
financiers, as 90 percent of motorcycle loans and 70 percent of
car loans are done through the firms, as compared to 10 percent
and 30 percent, respectively, through banks, Susilo claimed.

Susilo however denied that financing firms promote consumptive
behavior, as many of the car and motorcycle loans are used for
productive purposes such as going to work or being rented for
businesses.

APPI expects the figures to grow by another 10 to 20 percent
this year, with more financing firms resorting to bond issuances
as a source of their funds.

At least four financing firms have issued bonds worth Rp 3.1
trillion as of April, in addition to nine firms issuing Rp 5.2
trillion in bonds last year.