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RI faces growing pains, no 7% growth in near future: StanChart

  • Tassia Sipahutar

    The Jakarta Post

  /   Tue, February 24, 2015   /  11:17 am
RI faces growing pains, no 7% growth in near future: StanChart Tse Koon Shee - (Courtesy of Standard Chartered Bank Indonesia)

Tse Koon Shee - (Courtesy of Standard Chartered Bank Indonesia)

Tse Koon Shee took the helm of Standard Chartered Bank Indonesia when he was appointed as its CEO in June 2014, replacing Tom Aaker. As the leader of one of the largest foreign bank branches in Indonesia, Shee maintains his optimism that the country still has potential to unleash, despite previous economic setbacks. He recently talked with The Jakarta Post'€™s Tassia Sipahutar to discuss the lender'€™s role in the economy and banking sector competition. Below are excerpts from the interview:

Question: Indonesia saw its economy go up and down last year. With that and the latest economic development, how do you think its course will be?

Answer: We are positive about Indonesia because of the underlying fundamentals of the economy; the demographics, the size of the economy. There is a lot more in Indonesia with its diverse economy.

But Indonesia has obviously got certain structural reforms that it has to go through, a bit like growing pains, but again, we see that as a positive development.

For instance, the decision by the government to lift fuel subsidies last year could be deemed as painful from a consumer angle. But from a wider and bigger picture, it was the right thing to do, a necessary thing to do for the economy and the country.

With that happening, it will have an inevitable impact of a slowdown in the economy because 60 percent of the GDP [gross domestic product] is consumption-led.

The years of 6 to 7 percent growth, I don'€™t think it is something that we will see in the very, very near future, until such time when the structural reforms or the effects of the structural reforms kick in.

By then, the potentials of Indonesia are going to be unleashed much better and that'€™s what I think is interesting, going for this market. What we may be seeing now is a temporary slowdown, but this slowdown is actually a positive development.

During a recent gathering, the OJK [Financial Services Authority] called on foreign banks to help boost trade and investment in Indonesia. What do you think of that?

I went on a roadshow to Taiwan late last year and I told investors there that Indonesia is not just a factory, but a huge market in itself and actually a platform into the bigger market of ASEAN [the Association of Southeast Asian Nations], which is 600 million people.

This is one of those things that an international bank like us is able to respond to, what [OJK chairman] Pak Muliaman Hadad was asking. We are able to link our network up.

I think that foreign banks can play a key role, probably better than some others because of the way we'€™re configured. No one institution is good at everything, but it is important to recognize some of the strengths and some of the other things that we can bring to the table. One of them is our network.

We already have clients in many parts of the world and we have started to work on how to bring them into our markets and Indonesia itself will be a key beneficiary.

On the other hand, we have brought some of our Indonesian clients overseas in order to expand their business. For example, cement producer Semen Indonesia: we took it into Vietnam and actually facilitated a transaction from which it was able to acquire Thang Long Cement.

Because of that network, we have been able to continuously sell and promote Indonesia amongst our portfolio investors. We have organized calls, for example, for [Finance Minister] Pak Bambang Brodjonegoro to reach out to investors.

We hosted it because those were our contacts and Pak Bambang was able to introduce and give his vision about Indonesia, what he thinks is important, what he'€™s going to do, etc.

A lot of that is about softening the ground, so that when we come into the market with a government bond or a government sukuk, this will not be the first time investors are hearing about Indonesia.

What about the domestic banking industry itself? Do you think competition has become more difficult for banks?

Competition in the banking sector here is clearly difficult for a few reasons. First, there are a lot of banks here.

On the other hand, the other challenge generally in the banking sector is that the interest rate is still very high. Cost of funding is very high, especially if we look at IDR [Indonesian rupiah] funding. The deposits tend to be concentrated in a few of the big four local banks.

But generally if we look at the industry, the LDR [loan-to-deposit ratio] has been going up quite steadily for the last couple of years. I think last year it went up to 90 percent.

We also saw deposit price wars last year. That actually shows that kind of competitiveness that there is because without it, you cannot lend.

You can see that it is certainly not an easy sector to maneuver. Part of it is that there is genuinely not a ready supply of liquidity in the market. That continues to be an underlying challenge and one of the reasons behind the competition.

What'€™s your opinion about talks on the banking law?


We have seen the evolution and development of this country because we were here before independence. So we are a longtime player and we are obviously committed to this market.

Being committed to this market place would inevitably and rightfully mean that we will have to respect the regulations and laws of the country. That'€™s the first thing that we need to register. That'€™s the same everywhere where we operate.

As we understand it, this draft banking law is still under discussion. It is our hope, and I believe the hope of our colleagues in the other foreign banks, that the implications of what is being proposed will certainly be taken into consideration during the discussions.

Indonesia at this moment requires a lot more good foreign capital. In fact, there'€™s probably a need to attract more good foreign capital that comes in and stays here.

In a way, we do hope that in the discussions that have not concluded, that there will be consideration of what Indonesia really needs and also the important role that foreign banks have actually played in this marketplace.

What about PermataBank? Why are there talks about Standard Chartered wanting to sell its stake in
Permata?


I have to be very clear. Standard Chartered Indonesia and Permata run separately. Permata and Standard Chartered actually do not interact. If there'€™s any interaction, interaction is only at arm'€™s length, just like any other bank.

It'€™s not something that I can comment about. We are in a closed period as well. This is one area in which we cannot comment, other than the fact that I myself run separately from them.

But if the underlying question is about Standard Chartered'€™s commitment to Indonesia, I'€™d say that there'€™s no question about that. Indonesia'€™s is one of our eight strategic markets.

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