Indonesian banks urged to merge

JAKARTA (JP): Indonesian banks should merge as a way to strengthen themselves in order to face the increasing competition within the industry, a foreign banker said.

"I think Indonesian banks need to change to strengthen themselves and merger is something they must pursue to survive the increasingly tougher competition," Morgan T. McGrath, the Chase Manhattan Bank's senior country officer for Indonesia, said yesterday.

He was commenting on the question of how Indonesia's local banks, which currently total about 240, will survive the growing competition as a result of trade liberalization in the world.

Asked about the impact of the new policy of the central bank, Bank Indonesia, to increase the reserve requirement from 3 percent to 5 percent, he said it would not slow down the country's economic growth significantly.

"Such a policy is mainly aimed at anticipating the overheating economy. But it will not affect Indonesia's economic growth significantly," he told reporters at a press briefing on his bank's performance in Indonesia during the last nine months, which he claimed was better than that of last year.

He refused to elaborate, however, on the bank's revenue and profit targets this year.

According to McGrath, during the last nine months, Chase Manhattan, which merged with Chemical Bank of the U.S. in July, had arranged US$2.5 billion worth of financing facilities for private companies, financial institutions, government agencies and state-owned firms in Indonesia.

The financial facilities included a $500 million standby loan with Bank Indonesia, $150 million in refinancing and a $200 million bond issue for PT H.M. Sampoerna cigarette company, $107 million in credit for Astra Sedaya Finance, $350 million in telecommunication financing for PT Pramindo Ikat, $614.85 million in telecommunication financing for PT Ariawest International and $105 million in project financing for PT Polypet. (13)