Multimedia Mania/abacus-multimedia-mania.iso/dp/0024/00240.txt

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$Unique_ID{bob00240}
$Pretitle{}
$Title{Indonesia
Banking and Other Financial Institutions}
$Subtitle{}
$Author{Department of Information Republic of Indonesia}
$Affiliation{Embassy of Indonesia, Washington DC}
$Subject{cooperatives
investment
projects
bank
banks
industry
companies
development
total
million}
$Date{1990}
$Log{}
Title:       Indonesia
Book:        Indonesia 1990 an Official Handbook
Author:      Department of Information Republic of Indonesia
Affiliation: Embassy of Indonesia, Washington DC
Date:        1990

Banking and Other Financial Institutions

     Bank Indonesia is the country's central bank. Its three major functions
are to regulate and maintain the stability of the Indonesian rupiah, to
promote production and development in various sectors of the economy, and to
improve the standard of living of the Indonesian people.

     The bank is the sole issuer of Indonesia's currency, and the official
holder of the country's international reserves; it supervises and regulates
all financial institutions in the country except insurance companies.

     Bank Indonesia is also in charge of preparing and implementing monetary
policies under the direction of the Economic Stabilization Council, presided
over by the President. Under the direction of the Government, Bank Indonesia
regulates the money, credit system and interest rates. It also regulates the
liquidity positions of other banks by adjusting the minimum liquidity ratio
and the minimum reserve requirements which all deposit banks are required to
maintain.

STATE-OWNED COMMERCIAL BANKS

     Commercial banking is dominated by five state banks. Each state bank
emphasizes banking services in specific sectors of the economy. "Bank BNI",
the largest of the banks in terms of assets, is not only primarily responsible
for development projects concerning industry but also those concerning
agriculture, transportation and export of domestic commodities. "Bank Dagang
Negara", specializes in the financing of mining projects and the production of
export commodities. "Bank Bumi Daya", specializes in agriculture, forestry and
plantations. "Bank Rakyat Indonesia", is primarily concerned with agricultural
smallholdings and rural development. "Bank Eksim Indonesia", finances the
export and import of commodities.

FOREIGN BANKS

     There are ten foreign bank branches and one joint-venture bank with more
than 63 representative offices now operating in Indonesia. Until March 1987,
those foreign banks had 21 offices.

     Formerly their operations were limited to the Jakarta area but as of
November 14, 1988, those foreign banks are allowed to open sub-branches in the
country's other six major cities i.e. Medan, Bandung, Semarang, Surabaya,
Denpasar and Ujungpandang. Foreign banks which have already representative
offices in Jakarta are also permitted under certain conditions to set up joint
ventures with national banks in above-mentioned cities.

PRIVATE BANKS

     Up to March 1987, there were 65 private banks with 464 offices scattered
throughout the country. Since 1983 the number of private banks has shown a
declining trend, commensurate with the Government's call to merger in the
context of improving their efficiency and strengthening their working capital.

SAVING BANKS

     There are to date one state-run savings bank, the Bank Tabungan Negara,
with 15 offices; and two private saving banks with 28 offices. In addition,
there are also rural banks consisting of Bank Desa (Village Banks) numbering
3,555 offices, Lumbung Desa (Village Fund Banks) totalling 2,063 offices, and
Bank Pasar (Market Banks) with 175 offices. Bank Desa, Lumbung Desa and Bank
Pasar are also functioning as agents for channeling credits to small
entrepreneurs, farmers, vendors, retailers, fishermen, etc.

CAPITAL MARKET

     The country's sluggish economy and high rate of inflation inherited by
the Old Order Government during the early 1960s had crippled the stock
exchange development. At that time the New Order Government's efforts were
focussed on bringing the economy back to normal and curbing the inflation. In
1977, inflation was recorded at 12% against 650% in 1966.

     Later on the government adopted a series of strategic measures and
actions in the financial, monetary and also banking sectors, among other
things by issuing Presidential Instruction No. 25 of 1976 under which the
Capital Market Executive Agency (BAPEPAM) and PT. Danareksa have been set up.
The main functions of BAPEPAM are to grant permits to companies to "go public"
after assessing the companies' liabilities and viabilities, to organize stock
exchange and to observe the development of the companies. Meanwhile, PT
Danareksa acting as underwriter of stock exchange brokers, is responsible for
helping companies to float shares on the stock exchange and taking charge of
converting companies shares into certificates in the context of promoting
public participation in the stock exchange.

     Up to the middle of 1989 there were 25 companies selling their shares at
the stock exchange, while funds already accumulated by these companies
amounted to Rp 193.8 billion upon 70,546.7 thousand certificates issued. The
number of companies issuing obligations was 14, absorbing accumulative funds
of Rp 1,098.7 billion. In the meantime, PT Danareksa has also issued 16,920.3
thousand certificates amounting to Rp 167.8 billion.

NON-BANKING FINANCIAL INSTITUTIONS

     The policy on non-banking financial institutions in the context of
intensifying their role, aims at the enhancement and promotion of their
financial performance pertaining to the money market and stock exchange in
serving the public.

     The non-banking financial institutions' main function is to sustain the
development of the money market and stock exchange through issuance and
trading of short- and long-terms obligations (bonds).

     Up to December 1988, there were 13 institutions, consisting of nine
dealing with investment, three engaged in development, and one concerned with
housing construction financing, in addition to 11 overseas representative
offices acting as liaison of their respective headquarters. Accumulatively
their assets reached Rp 3,062.9 billion, with total amount of funds of Rp
2,901.4 billion and that of investment funds amounting to Rp 2,905.3 billion.

INSURANCE AND LEASING

     Insurance companies play an increasingly-important role in the economy.
Thanks to high mobility in the sectors of trading and industry leading to the
need of securities over the higher rate of unpredictable risks of economic
doers, insurance business is growing impressively. The number of insurance
companies up to 1988/89 was 116, comprising 30 life insurance companies, 81
lost/reinsurance companies, and five social insurance companies, with combined
investment values of Rp 2,655.6 billion.

     Introduced in Indonesia just in the 1970s, leasing business has been
growing fast, parallel with the rapid growth of the country's manufacturing
industries. Leasing is more and more demanded by industries which need higher
effectiveness and efficiency in obtaining capital. Until 1988/89, there were
83 companies engaged in this business, with a combined leasing contract value
amounting to Rp 1,451.6 million.

THE NATIONAL AGENCY FOR EXPORT DEVELOPMENT

     The National Agency for Export Development (NAFED), established in 1971
as part of the Department of Trade, deals with the development and promotion
of the country's non-oil and-gas exports and provides an extensive range of
services to overseas buyers and local exporters.

     Through its headquarters in Jakarta, nine Indonesian Trade Promotion
Centers and 19 commercial attache offices at Indonesian embassies and
consulates abroad, NAFED is responsible for, among others, providing
up-to-date information; distributing information to potential importers and
manufacturers for further action; arranging trade visits to Indonesia by
preparing programs and providing contacts; and organizing business contacts
with Indonesian exporters during sales missions and Indonesian participation
in various international trade fairs and exhibitions.

     For Indonesian exporters wishing to set up trade contracts and expand
their export trade, NAFED is responsible for providing them with trade
information on target markets; giving interested exporters advice about
prospects and assisting them in arranging meetings with potential buyers;
counselling exporters in business philosophies and attitudes of likely
markets; and coordinating exporters wishing to participate in international
trade shows and various products displays organized and conducted by NAFED.
The agency has a trade representative office in every province throughout the
country. The office renders services related to the areas of agriculture,
industry and crafts.

THE CHAMBER OF COMMERCE AND INDUSTRY

     The Indonesian Chamber of Commerce and Industry (KADIN) is the sole
organization of Indonesian entrepreneurs and industrialists at both national
and regional level. Founded in 1968 in Jakarta, it has now 27 representative
offices in all provinces of Indonesia.

     The Chamber's chief activities are among others to carry out research and
surveys in the economic and social fields related to entrepreneurship; to draw
up policies with regard to restrictions imposed on certain types of
undertaking on the basis of both national and international needs; to observe
and build up public opinion in support to economic efforts; and to organize
training courses for national entrepreneurs to improve their profession and
enhance their awareness as national entrepreneurs. The Chamber acts as a
source of information on trade and serves as a communicating, coordinating
and consulting agents as well.

     The Chamber is now active in promoting trade relations with its partners
abroad. A member of the ASEAN-CCI Chamber of Commerce, it sent missions abroad
to hold business meetings and negotiations.

INVESTMENT

     Act No. 11 of 1970 (amendment of Act No. 1 of 1967) regulates foreign
investment, and Act No. 12 of 1970 (amendment of Act No. 6 of 1968) adjusts
domestic investment. However, investments in the fields of oil and gas,
banking, insurance, non-banking financial institutions and leasing, are
subject to different laws and regulations.

     Responsible for formulating investment policies, coordinating and
planning regional and sectoral investment, communicating the country's
investment objectives to the investment community, and reviewing and approving
investment applications, the Investment Coordinating Agency has its regional
offices in all provinces.

INVESTMENT POLICY

     Policies on investment are founded on the idea that investment should
contribute to strengthening and deepening the country's industrial structure.
Therefore, the Government gives priority to industries that produce capital
goods, intermediate products and raw materials needed to construct a strong
foundation for accelerating industrial growth. Priority is accorded to
investments that are based on natural as well as human resources so that those
industries will have strong roots and excel in competition because of their
inherent comparative advantage. Investment producing goods for export will
particularly be encouraged. In fact the Government provides additional
facilities for such export-oriented industries including concessionary export
credits, bounded areas, and the development of the concept of export
processing zones.

     Investment effecting the regions outside Java, which open up new centers
of economic growth, develop the potentially available natural resources and
related to transmigration schemes are given special priority. Investment
should also contribute towards the enhancement of the quality of life and
protection of the environment.

     In creating a more favorable climate for investment, the Government
has during the last five years issued a series of measures. In 1984 the
Government imposed tax reforms that simplified the tax rate and procedures.
In 1985 import procedures underwent a big change aimed at improving the
in-and outflow of goods and lowering the cost. In May 1986 the Government
also introduced the "6 May Package", a newly-revised policy to promote
non-oil and -gas exports and investment. Following the package, the "25
October 1986 package" was also issued, by which foreign investments are
accessible to the under-the-domestic-investment-scheme companies on condition
that they increase exports of their products. The Government further imposed
the "24 December 1987" Package to increase foreign and domestic investments.
In the meantime, the "21 November 1988" Package was introduced, among other
things to smoothen the way for foreign investors to invest in joint-venture
companies in the sea transportation business. Investment procedures have also
been simplified and less time is needed to obtain its approval.

APPROVED INVESTMENT FIGURES

     There were 155 foreign investment projects approved during fiscal year
1988/89 with a total investment value of US$1,849.1 million. Compared to that
of the previous year the number of projects has not changed but investment
value amounted to US$2,387.1 million. In addition, there were also 74
expanded foreign investment projects involving a total amount of US$1,261.6
million. During the previous fiscal year, there were 65 projects absorbing
US$681.6 million.

     By country of origin, the United States of America ranked first with a
total investment value of US$716.8 million. Trailing behind were South Korea
with US$272.5 million and Japan with US$244.6 million. Meanwhile, for
expanded projects, Taiwan invested US$614.5 million to take first place,
followed by Singapore with US$172.6 million and Japan with US$120.8 million.

     By industry, the paper industry accounted for 35.6% of the total value,
surpassing chemical industry with 32.2% and textile industry with 8.4%. For
expanded projects, the paper industry accounted for 48.6% of the total value,
followed by hotel and housing 13.3% and chemical industry 11.1%.

     By location, out of 155 projects 58 projects are situated in West Java
Province, 45 projects in the Special Territory of Jakarta and 15 projects in
East Java Province. It is worth noting that eventhough there are only two
investment projects in Irian Jaya, in terms of value it ranks first with a
total sum of US$667.3 million, compared to the US$566.0 million invested in
58 projects in West Java.

     During the period of fiscal years 1983/84 to 1988/89 the number and value
of new foreign investment projects experienced an annual increase of 37.5% and
34.6% respectively. In the meantime, the number and value of the expanded
foreign investment projects grew on an average of 13.8% and 46.1%
respectively.

     Concerning domestic investment, there were 852 projects with a total
investment of Rp 10,321.0 billion which were approved during fiscal year
1988/89. This shows remarkable increase of the number and value of domestic
investment projects by 28.3% and 7.2% respectively compared to those of the
previous year. Meanwhile, 219 expanded domestic investment projects have been
approved with a total value of Rp 4,080.6 billion. This means that the number
and value of domestic investment projects have increased by 10.1% and 45.4%
respectively compared with those of the previous fiscal year.

     By sector, agriculture accounted for 26.3% of the total investment,
chemical industry 22.2% and textile industry 14.9%. Whereas, in the previous
fiscal year the chemical industry absorbed 22.9% of intended domestic
investment, followed by the agriculture sector with 19.1% and the timber
industry with 9%. In terms of expanded projects, 29.3% of the total investment
went to small-scale industries, 18.5% to hotel and housing and 8.5% to the
timber industry. Compared to the previous year, 20.4% of the total investment
was absorbed by the non-ferrous mineral industries, 17.0% by textile industry
and 12.1% by the agricultural sector.

COOPERATIVES

     The 1988 Guidelines of State Policy states that cooperatives as an
economic undertaking of the people should be further developed to achieve the
principles of an economic democracy. Cooperatives should be able to grow into
an independent economic unit with its roots planted in the community. The
community's awareness and interest in joining cooperatives should be
stimulated through education, instruction and guidance in the operation of
cooperatives. Active participation of members should be encouraged at all
levels and close relations should be maintained between all cooperative
organizations.

     In guiding cooperatives first priority should go to the primary
cooperatives, in particular the village unit cooperatives, so that they may
grow into sound and viable cooperatives and become the village's economic
strength.

     The development of village unit cooperatives and other types should be
geared toward (1) auto-activity and auto-capacity; (2) becoming the prime
vehicle to guide the ability of the economically-weak bracket; (3) increasing
their services to their members and the community; (4) actively participating
in various sectors, like agriculture, industry, rural electricity, trade,
crediting, transportation and the like; (5) cooperating with other primary
cooperatives in their respective field of activity.

     The policy pursued in achieving the aim of guiding cooperatives is
implemented through two main programs, namely the program of guidance to
cooperative institutions and the program of development of cooperatives
undertakings.

     Under the program of guidance to cooperatives institutions the
following steps have been taken: (1) providing education, training and
up-grading, courses for members of the executive and auditing staff of
managers and their assistants; (2) taking councel towards improving
organizational and administrative order; and (3) providing information on
cooperatives to members of cooperatives through radio, television and other
mass media.

     In addition, steps have been taken toward the development of
cooperatives especially the village unit cooperatives in order (1) to step up
activities on food supply, distribution of agricultural production implements,
marketing of agricultural produce, transportation, rural electricity,
crediting and savings and the like; (2) to help obtain credit facilities on
reasonable terms for cooperatives in need of credit to develop their business.

     The success of the development of cooperatives depends on the successful
education of the managers and members of cooperatives. The knowledge, skill,
performance and attitude of the personnel of cooperatives, be they managers,
supervising officials or members will determine the growth of cooperatives.
The training of skills and courses on cooperatives will greatly help
accelerating the progress of cooperatives.

     The development of cooperatives including the village unit cooperatives
in general shows that the average growth of non-village unit cooperatives is
bigger than those of the village unit cooperatives. In the period of
1983-1988, the average increase of village unit cooperatives and non-village
unit cooperatives stood at 4.3% and 6.3% per year respectively. The number of
cooperatives in 1985 and 1986 was 28,103 and 30,446 respectively. In 1988,
village unit cooperatives totalled 7,873, while in the previous year their
number was 7,480.

     In the same period, members of village unit cooperatives numbered 9,608
thousand. In 1988 their total membership increased to 17,494 thousand or an
average rise of 13.1% per year. As for members of non-village unit
cooperatives, their number rose from 4,044 thousand in 1983 to 9,668 thousand
in 1988, or an average increase of 20,1%. The total membership of village unit
cooperatives in 1987 and 1988 was registered 25,545 thousand and 27.162
thousand respectively.

     To run a cooperatives well, besides having highly-dedicated officers and
auditors, it requires at least skilled-and-capable managers in this field. By
having large numbers of managers, it is hoped that more cooperatives will be
able to manage their own business.

     The members' total amount of savings in 1985 and 1986 was Rp 178.1
billion and Rp 415.0 billion respectively. The large increase was due to fees
obtained from village unit cooperatives in the form of food supplies and sales
of crops etc., with the purpose to boost the advancement of cooperatives.

     To help village people owning small businesses, credit is extended to
small vendors (KCK) through the cooperatives.

     In 1987, there were 5,981 cooperatives involved in distributing KCK to
16.4 million customers amounting to Rp 234.5 billion. In 1988, a total amount
of Rp 244.3 billion had served 16.8 million customers.