Mon, Aug 05, 2013 - Page 15 News List

Indonesia runs risk of scaring investors

FOREIGN FEARS:Analyts say DBS walking away from a year-long effort to buy Bank Danamon will send a negative signal to others thinking of investing in the country

AFP, JAKARTA

There was speculation that DBS might have been granted a waiver to secure Indonesia’s biggest bank takeover in history.

The 99 percent stake DBS was seeking included 67.37 percent held by Asia Financial (Indonesia) Pte Ltd, a subsidiary of Singapore state investment firm Temasek Holdings. However, when the central bank made its decision in May, it only allowed the lender to take a 40 percent stake, and demanded Singapore open its financial sector to Indonesian banks if DBS wanted more.

And while the city-state’s initial statements about the deal seemed positive, there was little outward sign of progress in recent weeks before DBS decided to let the deal lapse last week.

Despite the concerns raised by analysts, Bank Indonesia Governor Agus Martowardojo has insisted that the door is still open to foreign investors.

“We are relatively open compared to other countries in the region,” he was quoted as saying in the Jakarta Globe newspaper.

Some in Indonesia also argued that doing away with the 99 percent cap was long overdue as the economy is booming and the country is right to try to keep more of the rewards from a sector that is set to grow exponentially. Only about half of Indonesians over 15 have bank accounts, leaving about 60 million, including many now joining the middle class, in need of banking services, according to authorities.

The 40 percent cap is also more in line with other Southeast Asian countries, none of which currently allow foreign companies to take controlling stakes in banks.

“Bank Indonesia has clearly reacted to noises made by leaders and parliament, but it’s quite true there has been an awful lot of access in the bank sector in the past,” said Keith Loveard, chief risk analyst at Concord Consulting in Jakarta.

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