www.thejakartaglobe.com - While Singapore’s DBS Group Holdings awaits approval from Indonesian authorities for its multibillion dollar purchase of a controlling stake in Bank Danamon, the real battle is just starting.
Some lawmakers are raising the issue of a reciprocal principle in investment with Singapore and limitations on foreign ownership in local lenders.
Harry Azhar Azis, a deputy chairman of House of Representatives Commission XI, which oversees banking, told the Jakarta Globe on Wednesday that the House was preparing a draft revision of the 2009 Banking Law that would require reciprocal treatment. (source)
That means Indonesian lenders should also be given the same privileges in Singapore as those offered to Singaporean companies here.
DBS, owner of Southeast Asia’s biggest bank, is seeking to buy 67.4 percent of Danamon from a unit of Singaporean sovereign wealth fund Temasek Holdings, for 6.2 billion Singapore dollars ($4.9 billion). It will buy the remaining shares it doesn’t own from minority owners. Should all the shareholders sell, DBS would complete the purchase for 9.1 billion Singapore dollars.
The transaction is expected to be completed in the next six months, toward the end of the year, DBS’s chief executive officer, Piyush Gupta, said on Monday. Approval must also be given by authorities including Bank Indonesia, the central bank, and the Capital Market and Financial Institution Supervisory Agency (Bapepam-LK).
“At the moment, nothing is legally standing in their way to acquire Danamon,“ Harry told the Globe in a telephone interview on Wednesday.
“However, our bank, Bank Mandiri, when they want to expand to Singapore, they [the Singapore government] make it difficult. That’s not fair.”
Harry, a lawmaker from the Golkar Party, which holds the second-largest number of seats in the House, said lawmakers were studying some options, including limiting investors to 20 percent stakes in banks, or limiting foreign investors to a 45 percent stake in banks here. A presidential decree in 2010 set the maximum foreigner ownership in banks here at 99 percent.
Arif Budimanta, also a member of the House’s finance commission from the Indonesian Democratic Party of Struggle (PDIP), was worried that foreign lenders would eat into the market share of local banks.
Muliaman Hadad, deputy governor at the central bank, said Bank Indonesia would send a letter to DBS, inquiring about its motives for acquiring Danamon. He said the central bank would also ask about the reciprocal principle when deciding whether to approve the deal.
Karen Ngui, head of group strategic marketing and communication at DBS, defended the deal in an e-mail on Wednesday.
“DBS’ regional expertise in infrastructure, project finance, trade finance and Shariah banking will contribute to banking sector growth,” she said.
She added that, from the point of view of consumers, the deal would provide access to a wider range of products and services, while it also “enhances connectivity across the region.”
Danamon has more than six million customers and operates more than 3,000 branches and 3,000 ATMs in Indonesia. After the integration with DBS, consumers will have additional access to DBS’s operations in 15 markets with a network of 200 branches/outlets and more than 2,000 self-service banking machines such as ATMs and cash machines.
“Why would something like this have to be blocked? We also have to think about the consumers’ side,” said Fauzi Ichsan, an economist from Standard Chartered Bank in Jakarta.
A senior banker who was well informed of the DBS-Dananon deal told the Globe that although Temasek Holdings did not officially announce that it was offering its stake in Danamon, “lots of bankers have discussed the opportunity to buy Danamon with many of the local and other foreign banks.”
He said it was unfair to criticize DBS since Danamon’s stake had been made available to Indonesian investors to purchase.
Danamon’s shares surged 39 percent on Tuesday after DBS said it was willing to pay a premium for the bank, betting that Indonesia’s economy — the largest in Southeast Asia — will continue to grow.
“They have been trying to sell the bank for the past two years, but there were no takers, because of the acquisition premium placed on Danamon,” the banker said, adding that “in summary the opportunity was there for any buyer to come forward.”
Sigit Pramono, chairman of the Indonesian Banking Association (Perbanas), acknowledged the difficulties of state-controlled lenders making large investments as DBS’s acquisition.
“As you know, you have to go through the government’s approval, securing lawmakers’ permission. It has never been easy,” he said.
Source : http://www.thejakartaglobe.com/business/real-battle-in-dbs-purchase-of-danamon-has-just-begun/509347 - April 4, 2012
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