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)