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em>The world'€™s largest banking and financial services company, the Bank of New York (BNY) Mellon, currently has US$27.4 trillion of assets under custody and $1.5 trillion of assets under management. BNY Mellon chairman for Asia Pacific Steve Lackey shared the bank'€™s view on investment climate in Indonesia with Indonesian journalists, including The Jakarta Post'€™s Tassia Sipahutar. Below are excerpts of the interview.

Question: What kind of services do you offer to your Indonesian clients?

Answer: Traditionally our businesses here with Indonesian banks are in the corresponding banking area. We support them on their cross-border business, payment and trade. In every country that we have a presence, we complement our clients. Almost all of the business we do here is with the local banks.

The biggest opportunity for growth in the financial system in Indonesia is serving retail and small enterprises. BNY Mellon does not do that anywhere in the world. So we are never going to compete with Indonesian banks. That said, we are able to support Indonesian banks, given our global abilities, particularly in payments, facilitating trade, but also, in servicing global assets.

Given our business model, most of what we are doing for our clients here is actually done offshore. Whether we are working with other banks on trade or payments; working with corporations as a trustee; or providing depository receipts on the equity markets to a lot of companies to access the equity markets overseas. This is all done
offshore from Indonesia.

Where does Indonesia stand in your Asian market?

Indonesia is relatively small. Our largest markets in Asia [and the Pacific] by size, in order, are Japan, Australia and China. In each of those countries, we have been there longer and we have a much bigger based business. If you think about how our business develops over time or our business model, we get more opportunities as the economy develops and as the capital market within the economy develops.

Asia represents about 7 percent of our revenue base in the third quarter and it is our fastest growing area from our revenue sample.

Indonesia has been growing at around 6 percent for several years, how do you think Indonesia will develop in the coming years?

For BNY Mellon, the opportunity in Indonesia has really been based on growth of trade demands and US dollar payments as it relates to local financial institutions, as well as the government itself. But the opportunity for the growth of some of our businesses has been limited because most of the growth in Indonesia is more retail-oriented as opposed to the demand for foreign capital or demand from the standpoint of asset management products. Most of the market growth has been domestic as opposed to global.

How has global economic volatility affected your business in Indonesia and in Asia?

It really has not affected our business at all. We are the source of liquidity during this period. That is positive, particularly for our clients. We have continued to operate through thick and thin in Indonesia. In 1997, we never left, we never pulled back. We continued to support our local clients.

We did not have any issues this summer when things tightened up. It is unfortunate from the currency standpoint. Indonesia has certainly suffered as the value of the rupiah has declined almost 30 percent. We are not expecting a recovery in the Indonesian currency in the near term. Part of that is driven by factors inside Indonesia. Some of it is also driven by factors outside Indonesia.

While everyone likes to blame the policy in the United States, what happened in Indonesia this past summer has to be a combination of factors because certainly some economies faced greater pressure this summer than others did within the emerging markets.

What do you think is more influential for Indonesia? The internal or external factors?

It is really a combination of the two. We view that the expected tightening by the Fed is going to happen in the first quarter. It is only natural. The good news is that it is occurring because the strength of the US economy. Ultimately the stronger US economy is good news for Indonesia. It is good news for all the markets in Asia.

Now the offset to that, of course, is that investment capital that might have been directed at the emerging markets over the last several years during the financial crisis has come out of those markets, but that is sort of hot money.

Indonesia has probably been viewed as too strong for several years because people were not necessarily focusing on the fact that there are still some fundamental issues that need to be addressed in Indonesia.

I think the good news is that the government seems to have come out quite strongly to support the Indonesian economy, mostly through increasing the interest rate. But it is not just the interest rate, the decline in oil subsidy is another policy aimed at giving confidence globally to the Indonesian economy.

Any plans for Indonesia in 2014?

We are just very optimistic with the market. We have been here for quite a number of years. We do have a very strong footprint with the Indonesian clients and are very confident that we can expand our business in supporting our client base in the country.

The government sets the growth target between the low 5 and 6 percent. Whether it is the low 5 or 6 percent, it is still a relatively attractive growth rate. They may not meet the upper band, but even if they do not meet the upper band, you are still relatively attractive compared to other markets.

The government is also taking strong action on the inflation. Unfortunately, inflation has crept up above the GDP (Gross Domestic Product) growth rate and that is never a positive sign. Indonesia is one of the countries in the region where that is the case right now.