Indonesian banks need government incentives for M&As

This will reduce foreign ownership domination of national banks.

The Association of National Commercial Bank proposes that state-controlled bank speed-up their M&As to reduce the number of banks. It said the M&As aim to make Indonesia’s international commercial banks capable of competing with their ASEAN rivals.

This push for consolidation is in line with government efforts to increase competitiveness of the banking industry at international level.

National Economic Committee Secretary Aviliani said if incentives can be provided, local banks will choose mergers and acquisitions rather than being controlled by foreigners.

She also said there foreigners should reinvest a certain percentage of their profits in Indonesia. She also believes foreigners cannot invest in Indonesia after making a profit for three years and then leave. They also must provide a multiplier effect to the Indonesia economy.

Bank Indonesia, the central bank, mandates the maximum limit of foreign ownership as 40% of a bank’s capital.