The Thinker: It’s All About Fairness
When Indonesia proposes anything that might be unfavorable to foreigners, such as measures to help the country get a fairer share of its natural resources or banking, a barrage of criticism is likely.
Pundits often misinterpret the proposals as economic nationalism, limits on their freedom of investment or, in the worst case, a blatant example of antiforeign sentiment. These are baseless assumptions. Indonesia will not be like Venezuela, nationalizing foreign investment in lucrative businesses. It is just aiming for fairness and reciprocity.
Take the example of Nur, an Indonesian woman in Singapore who wanted to send S$1,000 ($800) to her daughter, who was studying at an Indonesian university and needed tuition money. She called Bank Mandiri in Singapore to inquire about sending the funds, but to her surprise, the receptionist said the bank couldn’t help: “Even if we could, it would take days [to send the money]. Why don’t you go to Lucky Plaza? There, there are money agents who can help you instantly.”
Nur was desperate. She asked around and went to Western Union, where she paid a sending fee of S$16 so the funds could be received at any Bank Mandiri office in Indonesia.
In the back of her mind, she wondered why Bank Mandiri, an Indonesian bank in Singapore, couldn’t help her in a time of need. She was then informed that Bank Mandiri probably lacked a license to offer remittance services in Singapore, to protect the banking industry there.
Indonesia hosts Singaporean banks — OCBC, UOB and DBS — and other foreign banks that offer all kinds of services. A foreigner can easily bank here or make remittances. Nur found this unfair, saying Singapore should adopt reciprocity.
Her desire for reciprocity is shared by Indonesia’s policy makers. They were alarmed when the central bank, Bank Indonesia, thought foreign investors planning to enter the nation’s banking industry should help develop the economy and should therefore channel their credit to the productive sector instead of eyeing consumer banking.
Indonesia has always been generous to foreign banks, which are currently active in credit sectors they should not be in. Many countries prohibit foreign banks from entering the retail-consumer sector and microfinance. It is understood that the banks prefer consumer banking in a country with such a huge population.
In a recent report, Malaysia’s CIMB Bank posted huge earnings — far larger in Indonesia than at home. Other foreign banks also earn huge profits from their operations here, so it is only fair to offer reciprocity.
It is true that foreign banks understand the behavior of many Indonesian consumers — not good at saving and very good at spending. And it’s no surprise that a market of 240 million people is a magnet for foreign banks. It’s understandable that Singapore’s Temasek Holdings wanted to acquire a majority stake in Bank Danamon through its DBS arm, and why foreign banks eye Indonesia when their own markets are saturated.
Theoretically, Indonesians can also own a stake of up to 40 percent in foreign banks, but who would invest in a foreign bank while Indonesian banks are offering the same opportunities?
While Indonesian banks are developing well — just look at Bank Mandiri, BCA and Bank Rakyat Indonesia — they are justified in demanding protection for the national banking industry and in calling for reciprocity in Singapore. Although foreign banks are known to have better know-how and expertise, Indonesian banks are getting stronger and more efficient. BRI, for example, earned Rp 15 trillion ($1.6 billion) in profit last year.
If foreign investors are jittery over the recent discourse that Indonesia is about to change its policies in banking, mining and other sectors, they should remember the policies are not economic nationalism. They are about fairness and have nothing to do with nationalization, economic nationalism or anti-foreign sentiment.
Yanto Soegiarto is the managing editor of Globe Asia,a sister publication of the Jakarta Globe.