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Indonesia welcomes foreign banks following MUFG's Danamon deal
[SINGAPORE] Banks from countries including China are looking to follow the example of Japan's largest lender and buy stakes in Indonesian financial institutions, according to the head of the South-east Asian nation's Financial Services Authority.
After the agreement last month by Mitsubishi UFJ Financial Group to purchase a US$1.2 billion stake in PT Bank Danamon Indonesia, the government in Jakarta wants to see similar investments as it seeks to boost lending and fund ambitious infrastructure projects, according to Wimboh Santoso, who was appointed in June as chairman of the regulator, known locally as OJK.
"A lot of international banks are intending to come to Indonesia. The reason is that we have a big market here. And we have a large population, we have rich natural resources," he said in an interview at his Jakarta office on Friday. "We are happy to entertain them - to have more contribution to lending and to finance all the infrastructure for Indonesia."
The Indonesian government has been grappling with a revenue shortfall and rising debt even as President Joko Widodo, or Jokowi, seeks to fund hundreds of billions of dollars of infrastructure projects. Economic growth has fallen short of the 7 per cent target set by Jokowi when he came to power three years ago.
As well as Chinese banks, lenders from India and South Korea are keen to invest in Indonesia, Mr Santoso said. "Under my chairmanship we are very friendly" to any ideas that help to improve business, technology and the economic development of Indonesia, he said.
Beyond providing finance for infrastructure, OJK sees foreign investment as a way to encourage consolidation among the country's more than 100 lenders, which serve a population of 260 million. Foreign banks are restricted from purchasing stakes of more than 40 per cent in Indonesian lenders, a regulation imposed in 2012 when Singapore's DBS Group Holdings was involved in an earlier attempt to acquire control of Danamon. DBS abandoned the plan in 2013.
MUFG plans to seek regulatory permission to increase its stake to the 40 per cent limit later this year, before applying for approval to exceed the cap and make an offer to all other Danamon shareholders, it said last month. Tokyo-based Sumitomo Mitsui Financial Group is also asking to raise its 40 per cent stake in PT Bank Tabungan Pensiunan Nasional, Heru Kristiyana, the Indonesian regulator's commissioner for banking supervision, said earlier this month.
"It is too soon to discuss on this," Mr Santoso said when asked whether he will allow foreign banks to acquire control of Indonesian lenders. He said OJK will look at each deal on a case-by-case basis, with the key factor being the foreign bank's plans to develop their local partner.
"The issue is not about lifting or lowering the bar. But when we discuss with individual banks, we usually ask what they are going to do," Mr Santoso said. "We are not happy if you keep the bank as it is. We are not happy when you have no 'quantum leap' to support the economy."
Referring to coming talks on MUFG's Damanon purchase, Mr Santoso said: "We will ask to have more commitment about how to contribute to development in infrastructure, lending, and of course technology."
Mr Santoso, 60, joined OJK from Indonesia's largest lender, state-owned PT Bank Mandiri, where he was chairman. He previously worked at the International Monetary Fund and as head of the New York branch of Bank Indonesia, the nation's central bank, where he started his career as a banking supervisor.
Because the top state-owned banks are already so large, Indonesia is looking to the nation's private lenders and foreign firms for the planned consolidation, Mr Santoso said. "Without additional capital, it will be very difficult for Indonesian banks" to become more competitive and to grow into regional lenders, he said.