INDONESIAN BANKING CLUSTER

Transcription

1 University of Indonesia MICRO ECONOMIC OF COMPETITIVENESS INDONESIAN BANKING CLUSTER Rudy Siahaan M. Taufiek Gunawan Pantja Savitri Mas Wigrantoro Roes Setiyadi

2 Challenges to Economic and Monetary Stability 2 The rupiah exchange rate sharply depreciated in August and early September Stemming from External factors : - soaring oil prices - volatile movement of regional currencies - increased risk premium on emerging markets IDR/USD 11,000 10,500 10,000 9,500 Internal factors : - limited foreign exchange supplies, while demand for forex rose - heightened public concern over fiscal sustainability 9,000 8,500 8,000 Jan-04 Feb-04 Mar-04 Apr-04 Mei-04 Jun-04 Jul-04 Aug-04 Sep-04 Okt-04 Nov-04 Des-04 Jan-05 Feb-05 Mar-05 Apr-05 Mei-05 Jun-05 Jul-05 Agust-05 Rupiah depreciation was worsened by bandwagon effect which triggerred depreciation expectation spiral

3 Comparing with regional currencies: the rupiah is not alone Indeks JPY Curncy KRW Curncy THB Curncy PHP Curncy IDR Curncy EUR Curncy Apresiasi Depresiasi 86.0 Index of nominal currencies, Jan 2005= Sep Jan Jan Jan Jan Feb Feb Feb Mar Mar Mar Mar Apr Apr Apr Apr May May May May Jun Jun Jun Jul Jul Jul Jul Aug Aug Aug Aug Sep-05

4 Prudent Monetary Measures 4 Monetary policy aims at preserving the balance between achieving medium inflation targets and maintaining the growth momentum CPI Inflation vs SBI rate Gradual Disinflation target (%) (%) mth SBI CPI (y-o-y) 0 0 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep- 05* New Monetary Policy Framework Current Framework: Inflation Targeting (started from July 2005) Four key elements - Monetary response and operations: BI-Rate - Forward-Looking Monetary Policy Process - Communication Strategy - Policy Coordination with Government

5 Inflationary pressures are rising mainly from the increase of administered prices, exchange rate pass-through, and particularly higher inflation expectation 5 %, yoy %, m.t.m m-t-m (CPI) 1.9 y-o-y (CPI) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug (%) y-o-y (%) y-o-y IHK Int (exclusion) Administered Inti (trimming) Volatile Food

6 Improved Banking Sector Performance 6 LDR and CAR NPLs CAR (%) LDR (%) Jul-05 CAR LDR (%) 18.8 NPL gross Jul-05 Source: Bank Indonesia Source: Bank Indonesia

7 Immediate Monetary Policy Actions to Restore Macroeconomic Stability 7 Increase BI Policy Rate successively to 10.0% Improve the liquidity management: Short-term: re-activate the o/n fine tuning operation, re-adjust the interest rate of BI facility accordingly Permanently: raise the IDR statutory reserve requirement proportional to LDR Raise the maximum deposit guarantee rates for IDR and FX Alleviate forex market volatility: Managing the demand for forex, mainly from the state owned oil company develop derivative market curb very short-term foreign inflows

8 Progress in the Indonesian Banking Architecture 8 ACHIEVEMENTS IN 2004 KEY PLANS FOR 2005 Improve intermediary function Enhance bankers competence through certification of risk management Improve customer protection in banking sector Establish Credit Information Center (Credit Bureau) Implement Risk Management Certification Program for bank s commissioners Reinforce structure of national banking system via capital-based classification

9 Indonesian Bank & Balance Sheet ASSETS Loans -Corporate xx xx -Commercial xx -Individual & Retail xx Government Bond Before Crisis After Crisis xx xx B Money Market Investments Fixed Assets & Others. Total Total Bank Total BPR Total Bank Sjariah LIABILITIES Source of Funds -Current Accounts xx xx -Saving Accounts xx xx -Time Deposits xx xx -Certificate of Deposits xx xx -Others xx xx Money Market Owners Equity Total Before Crisis 9 After Crisis

10 FURTHER MEASURES 10 Restrictions on IDR margin trading, effective from Sep 15, 2005 Launching of foreign currency swap interventions as an instruments in open market operation, effective from Sep 15, 2005 Provision of swap facility for hedging purposes, effective from Sep 1, 2005 Amendments to NOP regulations, effective October 1, 2005 More intensive supervision of banks, to restrict currency trading not backed by underlying transactions

11 IDR Recovering After Decisive BI Response 11 (%) Monetary policy measures announced by BI on 30 AUgust Further BI measurs were announced on 6 Sept IDR/USD /05/05 07/12/05 07/19/05 07/26/05 08/02/05 08/09/05 08/16/05 08/23/05 08/30/05 09/06/05 09/13/05 BI rate IDR/USD

12 New Monetary Policy Framework 12 Current Framework: Inflation Targeting (started from July 2005) Four key elements Monetary response and operations: BI-Rate Forward-Looking Monetary Policy Process Communication Strategy Policy Coordination with Government

13 Analysis and Recommendations 13 Major Strides in Financial Sector Reforms Monetary Regional Industrial Cluster Focus and Cluster Banking Indonesian Banking Cluster Government Influence on Cluster Upgrading Private Sectors Influences on Cluster Upgrading

14 Analysis & Recommendation: Major Strides in Financial Sector Reforms KEY INITIATIVES KEY MILESTONES 14 RECOMMENDATIONS Financial Sector Restructuring and Reform Program Improved Regulatory Supervision and Governance Closing down problem banks: Number of banks reduced from 239 (in 1996) to 133 (as of Dec 2005) Successful divestment of recap banks and corporate debt restructuring Implementation of risk based management But also driving some banks to segmented market But also strenghten the real sectors as market of banking cluster But also reduced the moral hazard Indonesia Financial Safety Net Removal of Indonesia from FATF list of non co-operative countries Consolidation of financial sector supervision But also the law enforcement efforts But also the law enforcement efforts

15 Recommendation: Monetary 15 Monetary Solving the GOVERNMENT BOND problem by strengthen the real sector and change the banks assets to more nature and productive one (GOOD LOANS) Restrictions on IDR margin trading, effective from Sep 15, 2005 Launching of foreign currency swap interventions as an instruments in open market operation, effective from Sep 15, 2005 Provision of swap facility for hedging purposes, effective from Sep 1, 2005 Amendments to NOP regulations, effective October 1, 2005 More intensive supervision of banks, to restrict currency trading not backed by underlying transactions

16 Recommendation: Regional Industrial Cluster Focus 16 Regional Cluster Competitive Matrix Value added cluster Sunrise industries (Knowledge Based) - Hi Sunset industries (Labor Intensive) - Hi Med Indonesia: IT, R&D, Services Singapore Natural Resources Weak Malaysia: Natural Resources Medium Singapore Life Science (Bio-tech; Pharmacy; Health), IT, Tradingand Financials Malaysia: Manufacturing and services and tourism Indonesia : Agriculture, Natural resources Strong Nation Cluster Focus Cluster banking refers to the idea of concentrating lending on clusters of enterprises, both spatially and across the value chain. A cluster bank would target locally owned small and medium-sized enterprises (SMEs) with growth potential. The banking cluster is implemented through national financial institutions. It is expected that the cluster banking would have an implication to the SME cluster development

17 Indonesian Banking Cluster 17 Pension Funds ICT Vendors Media, Publishing & PR Security Service Providers Human Resources Outsource Service Providers International Banking Cluster Multifinance/Factoring Cluster Bank Perkreditan Rakyat Cluster Bank Sjariah Cluster Government Agencies (Bank Indonesia, Ministry of Finance, etc.) INDONESIAN BANKING INDUSTRY Educational, Research and Banker Associations (IBI, Perbanas, Himbara, University of Indonesia, STEKPI, etc) Manufacturing Industries Trading & Services Industries Real Estate Industries Hotel & Tourism Individual & Credit Card Small & Medium Enterprise Secondary Mortgage Fac Insurance & Surety Bond Cluster Investment Banking, Capital Market & Mutual Funds Cluster

18 Recommendation: Government Influence on Cluster Upgrading 18 GOVT Context for for Firm Strategy and and Rivalry Factor (Input) Conditions Create specialized education and training programs Established local university research efforts in cluster-oriented technologies Support cluster-specific information gathering and compilation Enhance specialized transportation, communications and other infrastructure Eliminate barrier to local competitor Organized relevant government dept around cluster Focus effort to attached foreign investment around cluster Focus effort promotion around cluster Related and and Supporting Industries Sponsor forums to bring together cluster participants Encourage cluster specific effort to attract suppliers and service provider from other locations Established cluster oriented free trade zone, industrial park and suppliers park Demand Conditions Create streamlined, pro innovation regulatory, standard affecting the cluster to reduce regulatory uncertainty, stimulate early adoption, encourage upgrading Sponsor independent testing, Product certification, and rating services for cluster product/services Act as sophisticated buyer of the cluster s product/service

19 Recommendation: Private Sectors Influences on Cluster Upgrading 19 Context for for Firm Strategy and and Rivalry Factor (Input) Conditions Market jointly through trade fairs and delegation Collaborate with government export promotion efforts Create directories of cluster participation Demand Conditions Jointly develop specialized vocational, technical, college, and university curricula Sponsor specialized university research center Collect cluster information through trade association Maintain close liaison with infrastructure providers to address specialized cluster needs (e.g data communication, logistics) Develop courses for managers on regulatory, quality, and managerial issues and Supporting Related and Industries Established a cluster-based trade associations Encourage local supplier formation and attract local investments by supplier based elsewhere through individual and collective effort Work with government to streamline regulations and modify them to encourage innovation Established local testing and standards organizations