HSBC has positive outlook for Indonesian economy
Alex Wilson, The Jakarta Post, Jakarta
HSBC Indonesia CEO Brian Fredrick has expressed confidence in the Indonesian government's economic management and the country's ability to return to prosperity.
Fredrick said the positive steps toward recovery were often not given recognition abroad.
"I think that the potential narrowing of the fiscal deficit as the result of the increases in fuel and electricity prices is the biggest positive step in fixing the Indonesian economy, for which Indonesia does not get sufficient credit in the international media," he told The Jakarta Post in an interview this week.
He described the government's reduction of fuel and electricity subsidies as courageous.
The government last month raised fuel prices by an average of 22 percent by cutting its massive fuel subsidies to ease pressure on the state budget. Raising fuel prices has been a politically sensitive issue in the country, particularly as its people have been suffering from years of economic difficulties. The government also raised electricity prices.
Fredrick said the government economics team was well respected, and that the current administration was stable and would continue to function until the 2004 elections.
The Indonesian Bank Restructuring Agency (IBRA) was also doing well considering the pressure from different sides to sell assets quickly at the right price to the right people, he said.
"I think that we've seen more sales in 2001, and obviously if the BCA sale goes through we'll see some revenue generated for the budget in 2002. It's important for Indonesia's fiscal position that asset sales take place swiftly and at good defensible prices."
The government is currently in the process of selling a 51 percent stake in Bank Central Asia (BCA), the country's largest retail bank.
He conceded there were still many risks for foreign investors here, citing the troubled legal system. "If you add to that the sovereign ratings of Indonesia by Moody's and S&P compared to other South East Asian countries, clearly there are higher political and economic risks in Indonesia than elsewhere."
Moody's Investor Service described Indonesia's financial position as fragile in a new report on Thursday, citing instability and slow progress on reforms.
Fredrick however remained upbeat about Indonesia's prospects expressing confidence the country could get back on its feet.
"It is important to point out that the Indonesian economy has performed relatively well in the last couple of years compared to some other countries. GDP growth of about three to three and a half percent is very positive."
He said HSBC would continue to expand its banking operations in Indonesia, with more branches to be opened in 2003.
"In Indonesia we've been expanding in personal banking and consumer banking. If you take credit cards as an example our card base has grown from 50,000 to just under 200,000 cards in a couple of years. We've increased our banking customers to about 50,000 from about 10,000. So long as that remains a profitable and low-risk opportunity we will continue to grow."
The Londoner, who has worked with HSBC since 1974 in Hong Kong, the Philippines and the Middle East, said HSBC had taken a look at BCA when IBRA asked for bidders.
"I can see why BCA looks a very attractive proposition. I think one of the reasons why we looked at it and didn't proceed is that there were clearly a number of other issues which had to be addressed, including the concern by bank staff and others that a bank this size shouldn't be owned by foreigners."
He said it was normal for there to be some concern when traditionally domestically-owned assets were sold to foreigners.
"Certainly in the UK when Rolls Royce was bought by the Germans people didn't enjoy it. Indonesia has no monopoly on people expressing concern about foreign investment," he said.