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em>With a diversified business and Rp 442.99 trillion (US$45.19 billion) in total assets reported last year, Bank Central Indonesia (BCA) cemented its position as the second-largest bank by assets in Indonesia. BCA president director Jahja Setiaatmadja talked to The Jakarta Post'€™s Tassia Sipahutar on its stance on the latest banking issues.

Question: Many foreign banks are expanding their businesses into the Indonesian market. What do you think about that?

Answer: They come here to do business and I'€™m actually not too worried about that. World-class banks, such as Citibank, Deutsche Bank and Standard Chartered, have been here ever since we introduced a very open banking system, and yet, they have not been able to overtake local banks.

Southeast Asian banks from Malaysia, Singapore or Thailand have not been successful in developing their own branches either. UOB, OCBC, CIMB and Maybank have had their joint ventures, but their businesses only started to grow bigger after taking over local banks. It was actually the local banks that helped them grow, not the other way around.

So, [...] local banks will remain in the premier position. Those banks couldn'€™t have grown had the regulations been relatively loose, let alone in the future.

Even if they inject a large amount of capital into their businesses?

Capital can be acquired easily. Capital is not the problem, human resources are.

So, foreign banks will not have an easy time developing their businesses in Indonesia. Sure, they can develop niche marketing. For instance, Chinese banks only focus on bilateral business relations between Indonesia and China, but their businesses will not be broad-based.

Will you expand overseas?

We have banks come to Indonesia from countries whose finances are much greater than ours, such as from Japan and China, and yet, none of the Japanese and Chinese banks are in the top 10 biggest banks list [in Indonesia].

So, if they cannot grow that well in Indonesia, I don'€™t think we [BCA] could make it in their countries.

Commercial calculations also play a role. We can get a 5 percent margin in Indonesia and the expenses are relatively lower, in terms of rents and personnel. What happens if we enter Singapore? Expenses will skyrocket and we will only get small NIM [net interest margin]. Even a layman knows that we will not be able to make profits. We have to be realistic.

I want us to make profits and I don'€™t think we can achieve that in those countries.

What about your expansion plans within Indonesia? Growth is spread out along with regional autonomy, but it seems that a lot of banks are still reluctant to expand, especially to the eastern part of the country.

Banks will play a bigger role in supporting regions in which businesses are flourishing. What will we do in a place that has no purchasing power? We cannot just come, open a branch and expect people to borrow money and start their own businesses. Who will buy their products?

As we can see, Sumatra and Kalimantan are now booming because of the commodity sector. People go there to work, are paid and are able to purchase things. That triggers a business cycle and banks follow businesses, not the opposite.

I think the most important thing is to create jobs, whether in micro or large sectors. Once people get a job, they have an income and there goes the multiplier effect. The government can be the leader in developing the regions. Don'€™t leave it up to banks. I don'€™t see added value for banks without the government'€™s involvement in the development, especially in infrastructure by constructing roads or ports for easy access.

What is your opinion on the branchless banking implementation?

We need to cooperate with telecommunications companies for branchless banking, but what do we want to achieve by implementing the branchless banking system? It makes sense if we want to reach small businesspeople in cities or towns, but if we target the suburbs or villages, I often wonder, do people there actually need what we think they need?

They may have been so used to using cash that the system may pose an inconvenience.

Overall, I think this is an interesting issue. Some banks have embarked on their branchless banking pilot projects. As for me, I would like to learn more about it.