Rigid govt regulation hinders state banks' growth

Rigid govt regulation hinders state banks' growth

BATAM (JP): A rigid government regulation imposed on state-
owned banks has made it hard for banks to catch up with the rapid
development of the country's banking industry, a former bank
executive said.

Kamardy Arief, the former president of state-owned Bank Rakyat
Indonesia, said Friday the inflexibility of state-owned banks,
such as in personnel recruitment, often caused them to be less
efficient than private banks.

"The regulation prevents bank flexibility, and therefore slows
down the development of state-owned banks," Kamardy said before
the loan signing of PT Intan Fajar, of which he was a
shareholder.

"If they keep moving at this pace, state-owned banks will not
be able to compete with private banks, which are developing at a
very rapid rate," he said.

One weakness of state-owned banks was their weak human
resources, he said. Private banks recruitted some of the best
personnel, who have had foreign schooling, because they were able
to pay them higher salaries, he said.

"I am not saying that people who have foreign university
diplomas are better employees, but many of those who have been
educated abroad are more systematic and quicker in decision-
making," he said.

State-owned banks could not benefit from such skilled
personnel because of their rigid recruitment system, he said.

"State banks cannot just hire someone and put them in a
management position with a high salary. They have to go through
certain regulated levels for civil servants," he said.

Kamardy said the government restriction also tended to make
work at state-owned banks slower.

For example, state-owned banks must wait for government
approval before carrying out big projects, he said.

Unlike state-owned banks, the decision making process in
private banks was much faster and this made them more apt to
benefit in business opportunities, he said.

Another issue affecting state-owned bank development was the
ownership of the banks.

"State-owned banks would have to go through lengthy procedures
before they could, for example, increase capital, unlike private
banks which could do it anytime," Kamardy said.

State-owned banks were also left behind in technology, he
said.

All credit cards in this country were from private banks, and
their ATM machines were much faster than those of state-owned
banks, he said.

Kamardy said state-owned banks must improve their efficiency
soon, in order to prepare for globalization in the next century
when competition could get even tighter.

"The gap between state-owned and private banks is getting
wider. Unless the government does something to improve their
banks, state-owned banks will not be able to compete in the
globalization era," he said. (das)