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NEWS UPDATES Asean Affairs        9  April 2011

Citibank episode exposes Indo bank rivalry

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Citibank Indonesia's current predicament has provided a glimpse of the tensions and politicking in the country's competitive banking sector. The competition for new customers in Southeast Asia's largest economy among the more than 120 foreign and local banks has been intensifying in the past few years.

Indonesia's banking industry added 6.3 million customers above the 2009 total, but the market for deposits is still ripe — only a fifth of Indonesia's 237 million people have bank accounts.

The central bank is pushing for banks to loan more money to spur economic growth. It has set a target of 24 per cent loan growth, up from 22.8 percent last year. The playing field is level, at least on paper, and this has fueled some jealousy.

Local banks ask why foreign banks - even those which are almost fully owned by foreign entities - find it relatively easy to operate in Indonesia while Indonesian banks face major hurdles when expanding into neighboring countries. Last September, Bank Indonesia (BI) governor Darmin Nasution singled out Malaysia when he spoke about the lack of “reciprocity” towards Indonesian banks. More recently, Bank Mandiri president director Zulkifli Zaini spoke of how the bank — Indonesia's largest lender by assets — was hamstrung by rules limiting the number of automated teller machines it could open in Malaysia. What has kept the issue from bubbling over is that seven of the top 10 largest lenders are controlled by Indonesian entities.

Banks with foreign ownership make up under a third of the sector, while the four state-owned Indonesian banks are said to control over a third of banking assets. Still, foreign banks leveraging their global reputations are fast catching up, buoyed by an expanding middle class and the growing trend of wealthy Indonesians preferring to bank with a well-known name at home.

In the past three days, Indonesian legislators from a parliamentary committee overseeing the financial sector have urged BI to consider tough sanctions on Citibank — even revoking its license to operate in Indonesia.

The calls came after a Citibank customer, a politician from a small party, died at the bank branch in Jakarta while disputing a $12,000 debt. Citibank executives were this week summoned to parliament and grilled on whether Mr. Irzen Octa, 50, was roughed up by third-party debt collectors. An initial police autopsy revealed that Mr. Irzen had bleeding in the brain. A foreign bank executive who wanted to remain anonymous said, “If there are suspicions that regulations have been contravened by a foreign bank, they can expect a more severe public reaction and punishment.”

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This year in Thailand-what next?

AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

The first issue that can’t be answered is the health of Thailand’s beloved King Bhumibol, who is now 83 years old. He is the world's longest reigning monarch, but elaborate birthday celebrations in December failed to mask concern over his health. More


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