Sandeep Pahwa - Barclays Bank PLCMultinational financial services provider Barclays Bank PLC is looking to expand its footprint in Indonesia, one of its key markets in Southeast Asia, as its growing economy is expected to fuel more business deals
Multinational financial services provider Barclays Bank PLC is looking to expand its footprint in Indonesia, one of its key markets in Southeast Asia, as its growing economy is expected to fuel more business deals. The Jakarta Post's Tassia Sipahutar recently met with Sandeep Pahwa, Barclays Indonesia CEO and investment banking vice chairman, to discuss its plan. Here are excerpts of the interview:
Question: How do you view Indonesia now that it has a new administration?
Answer: Indonesia is like India. Both had a very important inflection point. There was a huge amount of optimism that has resulted in a very strong election mandate. Their direction of travel is the right one. They have successfully announced measures to address difficult issues.
Foreign investors now have a more positive sentiment and people are beginning to believe. I think that's the most important issue because it's one thing to see an opportunity, but it's another thing to believe because there's a long road ahead of us.
Everything seems to be working right. The government is very well aligned with the reform agenda and I think that's when the magic happens.
Do you think the projects or targets that the government has proposed so far too ambitious?
No, I think there has to be a little bit of a dream, a little bit of a vision. By nature, when somebody sets me a target, as a banker, nobody gives me a target that's super-easily achievable. You have to have a little bit of a stretch in your goals.
The growth and all, these are all very attainable economic issues if all the right things come together. India and Indonesia are key and very large economies and if they both start driving growth, it will be a phenomenal catalyst for all of Asia.
Do you think government's move to increase tax revenue will deter investors?
No. I think in an economy where you're not growing and the opportunity is not there, it might have. But people understand that in an economy where the pie is growing and you have an opportunity to grow your business manyfold. They understand that it's a give and take.
I think it's necessary that the tax footprint or tax base is widened. I don't think people will object to it, as long as they see the government provide them with the environment to grow their business.
What does your own business prospect look like?
We have been present in Indonesia for a long time, but we have a momentum now. Many of our guys, senior managers and all, have been coming into Indonesia in the past few weeks to hold meetings with clients.
In the last 18 months, we have closed 12-plus M&A [merger and acquisition] transactions, five to six high yield transactions, six to seven equity capital market transactions and 20-plus hedging transactions.
The transactions were from Southeast Asia. Of this, I would say, about one-fourth has come from Indonesia. The figure is very bullish and exciting. So, therefore, our commitment to Southeast Asia and Indonesia is growing.
We have lent money to clients and we are becoming a more active lender. We are beginning to cross-sell much better with our wealth business and obviously wealth is a big business in Indonesia. We also have a very robust pipeline of transactions across our product spectrum.
So, I am looking to grow the business in Indonesia quite dramatically. We have just hired a banker for Indonesia. We are also looking for a senior and a junior banker.
We are looking to increase our risk dial, increase our risk appetite and our overall balance sheet commitment to Indonesia. We have a very strong management conviction and commitment. I've been told by the senior management, 'Let's grow Indonesia to the next level.'
I'm not looking for a one-shot growth. I'm looking to build a sustainable, credible investment banking franchise and regional franchise.
What about lending?
We are increasing our balance sheet commitment. I want to be very aggressive on acquisition financing, especially as clients look to do big deals in our home markets, such as the US, Europe, Africa.
In terms of growth, how do you differentiate Indonesia from other Southeast Asian countries?
To me, Indonesia is the jewel. It is where the opportunity is tremendous and the need for true advice is tremendous. True global advice, not just a local capital market issuance.
We've been in the business and we know our clients. Our clients are generally in the banking sector, in the consumer or retail sector, in the real estate sector, in the towers sector and in the textile sector, too. We're looking for new clients in health care and new vertical businesses, such as insurance and infrastructure to some extent.
When you say you want to grow the Indonesian market, are you looking to increase the one-fourth figure?
The pie will grow for Southeast Asia, but I will look at at least one-third of our business to come from Indonesia, if not half, over a three- or five-year period. Indonesia has the potentials. The business will grow to be half of our business.
Our clients here in Indonesia have regional ambitions. They want to be an ASEAN player, or regional player, or Asia player or global player. That's going to fuel deals. They want to buy companies and have businesses outside.
I think there are many businesses that are still fragmented and they need more consolidation. Let's see just the banking sector. It is fragmented, needs consolidation, and there are players looking to get in and get out. It's a huge opportunity.
How much does Southeast Asia contribute to your Asian business?
Southeast Asia is probably 12 percent to 15 percent of our Asian business. This is a region where we are committing to grow. We are looking to increase our risk appetite in Southeast Asia and India with our key clients. It won't happen in a day. It's a staged business for us.
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