D

espite the expected slowdown in many of the nation’s traditional exports, Indonesia’s economic forecast for 2012 has been revised upward to 6.3 percent. Equally promising is the outlook for 2013, with gross domestic product (GDP) growth expected to touch 6.5 percent in the year ahead. There isn’t another G20 economy that has such confidence. Nor one that has consumer confidence levels anywhere near the rating Indonesians continue to record month after month.

International demand for natural resources isn’t going to boom again any time soon. For the next year or two, and perhaps for the rest of this decade, much of the heavy lifting will be done by the country’s consumer economy. The present contribution of 65 percent to GDP is likely to keep on rising, year after year. Consumer demand for goods and services for the next 12 months remain robust. Key indicators like “intention to buy” a car, a motorcycle, a refrigerator, a mobile phone or open a savings account are as strong as ever. The nation’s middle-class continues to grow, racing forward as an economic force. The voracious appetite is being recognized the world over, with FDIs still pouring in. Yet, unlimited opportunities for new investments exist in this large developing country. The endless cycle of investment, consumption and growth looks set to keep on rolling.

The robust performance of Indonesia’s financial services sector is a reflection of the overall confidence of the Indonesian consumer. Talking in rounded-off numbers, there are some 150 million Indonesian 18 years of age and over, nationwide. Today, 33 percent of them have at least one savings account. Just over 32 percent of all adults consider at least one bank their “Main Financial Institution”. Each month and every quarter, these numbers are surging forward with millions of new entrants stepping in to the banking sector for the first time. Interest in other products and services like insurance for example is very high, but conversion is still very low. The potential for growth is obvious. Despite the new regulations requiring a 30 percent cash deposit for a new car or motorcycle loan, demand is expected to recover soon. Across the spectrum of products and services, prospects for continuing growth are excellent.

Banks in Indonesia enjoy unparalleled levels of customer satisfaction. This is particularly true of the country’s Top 10 banks. Also reassuring are the levels of trust and respect enjoyed by the bigger banks, both local and regional. New entrants from far and wide will add marketing pressure, giving customers more choice and making them less easy to please than before. Cut-throat competition is already visible in the small but growing credit card segment. We can expect the competition to intensify, across the board. Good news on the one hand, bad news on the other.

Increasingly, we live in a borderless world. The financial world in particular has very barriers. Billions of dollars and trillions of rupiah are transferred with the click of a mouse. It is blindingly clear that one central bank’s regulations, another regulatory authority’s rules are no longer enough to keep banks in check, either internationally or domestically. The influence of the big American banks runs deep internationally. The British and European banks aren’t too far behind. But the endless reports of financial skulduggery that emanate from the world’s financial hubs month after month are doing little to reassure either the seemingly powerless authorities or innocent customers.

Guilty or not, all of the big global banks are now tarred and feathered. Today, it is difficult to name one that hasn’t been charged or penalized. But naming and shaming is achieving little, with the list of rule-breakers and repeat-offenders growing longer by the month.

This, despite the fact that the rules that exist are woefully inadequate in the first place. While legislators and regulatory authorities in the EU and Britain have started making the right noises in recent months, the political stalemate in the United States has seen initiatives like the proposed Dodd-Franks bill and the Volcker Rule go into deep-freeze. In a deeply divided country, the November elections are likely to see that state of paralysis continue for another four years regardless of who wins. In the unlikely event that Mitt Romney and the Republicans take charge, the financial world can expect more deregulation than new regulation. The cowboys will be in for an easier ride and the US influence on international banking is all-pervasive. No country can stand alone, let alone a single bank. Local regulatory authorities in Australia and Singapore for example have helped produce some of the strongest banks in the world, but they too are not immune from global misdemeanors of the giants. It’s the culture that needs changing, collectively.

Developing countries like Indonesia remain vulnerable to maneuverings. It has been burned by a regional tragedy, it has weathered a global financial crisis. It must act to prevent another. The national potential against the gloomy international landscape is too precious to ignore. The G20 has no legal framework for a collective initiative. The only institution that can create such a framework is the one so many love to abuse, the United Nations. Financial security has become almost as vital as military security. Despite the occasional conflicts of interest, the Security Council is worthy of emulation.

The writer can be contacted at debnath.guharoy@roymorgan.com