Megawati opens 15th Perbanas banking congress

The Jakarta Post, Jakarta

President Megawati Soekarnoputri has advised bankers not to repeat the mistakes of the past and to uphold the principles of professionalism in order to regain public confidence in the banking sector.

In so doing, "We hope our bitter experience in the past will not occur again," Megawati said, referring to the devastating banking crisis in the late 1990s that severely damaged the public's trust in the nation's banks.

Megawati made the statement on Thursday to open the 15th congress of the Federation of Private Domestic Banks (Perbanas) at the State Palace.

Minister of Finance Boediono, Bank Indonesia governor Burhanuddin Abdullah and Perbanas chairwoman Gunarni Soeworohe were also present at the event, which was attended by 250 bankers.

Perbanas, now in its 51st year of existence, currently has only 79 member banks, a sharp drop from its 160-strong membership before the banking crisis.

During the crisis, a great number banks went under as their loans turned bad, with many blaming the crisis on the sector's inability to implement a prudent credit risk management.

The President's remarks came at the height of criticisms that banks had yet to resume proper lending activities to the corporate sector.

While Bank Indonesia has aggressively cut down its benchmark rate to around 8.76 percent -- a decline of more than 4 percent since early this year -- banks still charge an interest rate of around 17-18 percent for loans, little changed from the 19 percent at the start of the year.

Analysts have said the high rates helped discourage businesses from asking for new loans from the banking sector, and some have even said that the insufficient amount of loans from the banks had contributed to the country's lackluster economic growth rate.

For the past three years or so, the economy has been growing at a modest 3 to 4 percent.

For an economic growth of the over 5 percent needed to absorb the huge unemployment rate, loans from the banking sector must expand by more than 25 percent.

Acknowledging the challenge, Gunarni said that reviving banks' intermediary role would be the main agenda of the congress.

"One of the main aims of Perbanas is to help speed up economic activities through financing. This is why there must be a concerted effort from the sector to maximize the banks' intermediary role to help spur economic development," she said.

Also high on the agenda of the two-day congress will be the election of a new Perbanas chairman for the 2003-2006 period.

Although the names of potential candidates have been already circulating, no official nominations have yet been announced.