Indonesia - Banking Sector
Indonesia has 120 commercial banks (October 2011), of which 10 are majority foreign-owned and 28 are foreign joint venture banks while the number of bank branches has continuously increased from 6,397 in 2000 to 14,510 in 2011. The top 10 banks control about 62.4% of assets in the sector. Four state-owned banks (Bank Mandiri, BNI, BRI, BTN) control about 34.8% of assets (September 2011). The Indonesian central bank, Bank Indonesia (BI), announced plans in January 2005 to strengthen the banking sector by encouraging consolidation and improving prudential banking and supervision. BI hoped to encourage small banks with less than Rp 100 billion (about U.S. $11 million) in capital to either raise more capital or merge with healthier "anchor banks" before end-2010, announcing the criteria for anchor banks in July 2005.
In October 2006, BI announced a single presence policy to further prompt consolidation. The policy stipulated that a single party could own a controlling interest in only one banking organization; exceptions would be granted in controlling two banks that do business under different principles, such as commercial and sharia, or one of which is a joint venture bank. Controlling interest is defined as 25% or more of total outstanding shares or having direct or indirect control of the institution.
BI has started to move toward Basel II standards in 2011, which focus on advancing other aspects of the Indonesian Banking Architecture (IBA) and has improved operations of its credit bureau to centralize data on borrowers. The IBA is a joint effort between BI, the Capital Market and Financial Institution Supervisory Board (BAPEPAM-LK), and the Ministry of Finance that was launched in 2004. A cornerstone program of the IBA is the structural reinforcement of the national banking system, aimed at building stronger capitalization for commercial banks to underpin its expansion and accelerate the required consolidation process among Indonesia’s 120+ banks.
Another important banking sector reform was the decision to eliminate the blanket guarantee on bank third-party liabilities. BI and the Indonesian Government completed the process of replacing the blanket guarantee with a deposit insurance scheme run by the independent Indonesian Deposit Insurance Agency (also known by its Indonesian acronym, LPS) in March 2007. The removal of the blanket guarantee did not produce significant deposit outflows from or among Indonesian banks. Sharia banking has grown in Indonesia in recent years, but represented only 3.7% of the banking sector, about $14.4 billion in assets as of October 2011.
In October 2011, Indonesia has a new regulator to oversee a growing financial industry. The new regulator, Financial Services Supervisory Authority (OJK), will take over the supervision of banks, brokerages and insurance firms from the central bank (BI) and the capital market watchdog BAPEPAM-LK. By early 2013, OJK will have the power to supervise capital markets and non-banking institutions, while the oversight of commercial banks will start from 2014.
Exports and Trade: Indonesia's exports were $158 billion in 2010, a rise of 35% from $116.5 billion in 2009. The largest export commodities for 2010 were oil and gas (17.8%), minerals (14.9%), textile and footwear (8.9%), crude palm oil (8.54%), electrical appliances (8.2%), and rubber products (4.7%). The top destinations for exports for 2010 were Japan (16.3%), China (11.6%), the U.S. (11.1%), Singapore (8.5%), and Korea (8.3%). Meanwhile, total imports in 2010 were $136 billion, up from $96.83 billion in 2009. Indonesia is currently our 28th-largest goods trading partner with $23.4 billion in total (two-way) goods trade during 2010. The U.S. trade deficit with Indonesia totaled $9.5 billion in 2010 ($6.9 billion in exports versus $16.5 billion in imports).
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