Indonesian banks urged to merge

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)