TUGAS SOFTSKILL TULISAN

FOREIGN BANK WHICH OPERATES IN INDONESIA

NAMA NPM

: AMALIA LUCIA KOMAR : 10212683

International

Investors

Jittery

Over

Indonesia's

Rebuff

of

Bank

Bid

Indonesia's initial rejection of Singapore's DBS Group Holding Ltd's (D05.SG) bid to acquire a majority stake in PT Bank Danamon Indonesia (BDMN.JK) sends the wrong signal to international investors, many of whom are worried Indonesia is leaning toward more economic nationalism and protectionism, some analysts and investors say.

DBS, Southeast Asia's largest lender, has been waiting for more than a year to find out whether it would be allowed to acquire a 99% Indonesia's sixth-largest bank. This week, Indonesia's central bank clarified that DBS could only buy up to 40% of Danamon. Whether it can buy a bigger stake will depend on whether Singapore is willing to further open its banking industry to Indonesian banks. While in April 2012 DBS had offered to pay around $7 billion for the 99% stake--making it the biggest acquisition ever in Indonesia--the future of the monster deal as well as other bank acquisitions are now in doubt as many investors will be less interested in buying Indonesian banks if they are not guaranteed a controlling stake. "If there is a limited chance of ultimately gaining majority control, this may deter some longterm investors from looking to establish and build a local franchise," Fitch Ratings said in a report Wednesday.

Both Danamon and DBS said they had yet to receive any official notification of the central bank's decision so they could not comment on the ruling. The Monetary Authority of Singapore said it is in discussion with Indonesian authorities on how to open Singapore's market further. "DBS hopes the application will be approved as originally submitted," a DBS spokesman said. After DBS announced its bid for Danamon Bank, Indonesia asked it to wait for new acquisition regulations. In July, the central bank outlined new rules, stipulating that both foreign and domestic banks are limited to initial stakes of 40%. The central bank then said banks could raise their stakes to more than 40% in some cases. Back then, it did not explain whether DBS would be allowed to hold more than a 40% stake in Danamon. On Tuesday, Indonesia's outgoing central bank governor Darmin Nasution said the Singapore bank would only be allowed to buy a larger than 40% stake if Singapore opens more access to Indonesian banks. Indonesia has one of the most open banking sectors in Southeast Asia. It previously had no limits on foreign ownership, while in most Asian countries foreign investors are restricted to holding less than 50% of domestic banks. Indonesia's banking executives complained it is unfair foreign banks have had such easy access to the Indonesian market, while they have trouble even opening branches in Singapore and Malaysia to serve the millions of Indonesians working there. Meanwhile the biggest global and regional banks have been ramping up operations in Indonesia. The country is considered one of the last great growth markets for banking as most of its close to 250 million citizens have never had a bank account, loan or credit card. It is also one of the most profitable with high growth and margins as millions of Indonesians start using banks.

Indonesia's gross domestic product has expanded more than 6% in four out of the past five years. Economists expect it to top 6% again this year. Analysts and executives say Indonesia's hot growth streak has made it a bit cocky and more likely to slap new restrictions on foreign trade and investment. Anti-foreign rhetoric is expected to intensify ahead of a parliament election scheduled for next April, and the presidential election in June, as politicians try to attract votes with the promise to give Indonesians more control of the economy. The government in March last year issued a decree requiring foreign investors to divest 51% of ownership in local mines to local entities by the 10th year of operation. Jakarta is also seeking higher royalties from mining companies. Last May, Jakarta placed a 65% tax on some raw mineral exports and is planning a full ban on unprocessed minerals. In September, the country started restricting imports of certain agricultural commodities to protect local farmers. "Protectionist and nationalist pressures may intensify in the lead up to elections next year," Bank of America Merrill Lynch's economist Hak Bin Chua said. Some investors said they are not worried about the new restrictions on banking acquisitions. The new regulations still leave room for bank acquisitions by international and local players, but the acquiring company may have to join forces with other investors or existing shareholders to ensure they have the control they want, said Sandiaga Uno, managing director Saratoga Capital, one of Indonesia's largest private equity funds. "Life begins at 40 and you can always go up," as the central bank will allow some investors majority stakes, he told the Wall Street Journal. "This is a good signal for investors." -Martin Vaughan contributed to this article.

Read more: http://www.foxbusiness.com/news/2013/05/22/international-investors-jittery-overindonesia-rebuff-bank-bid/#ixzz2U6BlOa00