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BRI has people queuing JAKARTA - If there remains a lack of confidence in Indonesia’s economy, no-one told the “huge crowd” that queued for a slice of the initial public offering of Bank Rakyat Indonesia (BRI) on Thursday (23/10/03). The Jakarta Post noted that very little noise has been made about the float, but word has clearly got around that, of all the banks on the market, this is the one that is producing the goods.
BRI will sell 30%, or more likely, 45% of its stock to the public if demand is strong enough, and it clearly is. BRI’s portfolio is different to most banks. Corporate customers make up only 15% of its loans, with the remainder of its non-consumer loans going to small and medium enterprises and particularly to the ‘micro’ sector. This last group of loans, averaging around Rp50 million, have shown a non-performing loan ratio under 3%, and have the added benefit of returning higher rates of interest than other types of credit.
Add to that the bank’s enormous grassroots network, consisting of modest branches and even more low-key ‘units’ that are little more than a hole in the wall, and the bank adds up to enormous potential for anyone who believes there’s hope for the Indonesian economy. And while the government decided it didn’t like the look of the bidders for Lippo Bank, BRI looks certain to put a solid contribution into Treasury to meet the budget deficit.
Those who queued up for some BRI shares obviously were not readers of The Economist. It took a rather more negative view of Indonesia’s prospects in an article with the catchline “When FDI means foreigners ditching Indonesia”. The magazine has always been well known for its poisoned spleen but there is reason behind its acid. The Kaltim Prima Coal saga, for instance, in which two of the world’s foremost mining companies, Rio Tinto and BP, cut and ran.
”The two British multinationals thought they were experienced enough to be able to take care of themselves, but they were still outmaneuvered in a country where corruption, shifting political priorities and an unreliable legal system make it difficult to do business.” Cemex, the Davidoff trademark case and legal uncertainty in general add to the weight of The Economists’ argument. “Alarmingly, even Dorodjatun Kuntjoro-Jakti, (Coordinating) Minister for Economic Affairs, readily reels off reasons why investors remain wary,” it states.
All the doubt is reasonable, but it also does not necessarily negate the possibility that those who dare to play the Indonesian game could come out winners. Hilmi Panigoro, CEO of home-grown oil mover Medco, in an interview with the Post at the beginning of last week, made the point that the lack of interest from foreign companies was an enormous opportunity for local operators. Back at the coal face, Bank Indonesia notched the benchmark Sertifikat Bank Indonesia (SBI) one-month paper up the line to 8.53% from 8.51% while Deputy Governor Hartadi A. Sarwono warned of a spin-off on the Indonesian currency of a trend to higher global inflation.
Bank Indonesia then confused the picture by cutting another major indicator, the overnight money market rate, or FASBI, by 25 basis points to 8.25%. Industry and Trade Minister Rini M.S. Soewandi was happy to be able to point to a rosy future for the country’s non-oil and gas exports, saying a 7% rise next year should be feasible, while at the same time concern continues over the prospects of the textile industry and its millions of workers with the end of the US quota system.
The thousands of Texmaco workers who blocked Jakarta’s Jl. Sudirman last week may have been the prospect of more to come in that area. Rubbing salt into the wound, the World Bank put Indonesia on warning that it must account properly for the loans it receives and not allow them to be frittered away in corruption. In a 127-page report released Monday (20/10/03), the bank said pervasive corruption in nearly every aspect of Indonesian society poses “a significant threat” to efforts for a more prosperous future.
"The choices facing Indonesia's leaders are stark," the report concluded. "Failure to act decisively to strengthen accountability and the rule of law could have serious adverse long-term consequences for Indonesia's political and economic stability," it warned. All of which makes the casual observer wonder why people are queuing to buy bank shares, and rushing out to spend their money on cars and motorbikes. Maybe, just maybe, the factors such as the World Bank mentions have already been factored in by the man (and woman) on the street, and the conclusion remains that there’s room for optimism.
Optimism or not, the government does need to act on the very valid points of criticism. In the long run, large and resilient as its economy may be, it cannot continue to act as if the rules just do not apply to Indonesia.



Posted in General @ 27 October 2003 00:03 CET by Jeroen · 'Blog' RSS feed · permalink






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