RI's financial structure grows stronger: Soedradjat

JAKARTA (JP): The growing capital market will soon compete with the banking industry to finance economic activities, Bank Indonesia Governor J. Soedradjad Djiwandono says.

The total funds raised from the issuance of shares and bonds through the capital market, for example, steadily increased from Rp 10 trillion, or 10.4 percent of total banking credits provided by banks as of the end of 1990, to Rp 29.4 trillion, or 18.1 percent of banking credits as of the end of June 1994, he said yesterday.

Companies apparently prefer to generate funds to finance their investment activities or to strengthen their finances rather than banking the credits, he added.

More investors, both foreign and domestic, hope to utilize the capital market as a place for their portfolio investments, he said.

However, the banking industry has expanded rapidly since the introduction of financial deregulatory measures in October 1988.

The number of banks in the country, for example, increased from 124 as of October 1988 to 237 as of May 1994 and the number of banking offices from about 1,900 to almost 6,000, excluding the 9,000 offices of secondary banks.

The amount of credits extended by banks also increased steadily from Rp 49 trillion as of October 1988 to Rp 161 trillion as of May 1994, he added.

"These developments indicate that the country's financial structure is growing stronger and is conducive to supporting its development programs," Soedradjad said.

"I am optimistic that the financial developments will enable the country to achieve its development goals during the current Sixth Five Year Development Plan (Repelita VI) period," he said.

The plan will end in March 1999.

Repelita VI aims for the country's gross domestic product (GPD) to grow by 6.2 percent annually in the coming five years.

Achieving the development goals will require total investments of Rp 660 trillion, of which 73 percent should come from the private sector and the rest from the government. (icn)