Indonesia's long-term outlook still sound: OCBC

SINGAPURA. Indonesia's economic woes have sent many share and currency investors stampeding for the exit in recent weeks but OCBC Bank boss Samuel Tsien has faith in the country's long-term prospects.

He told The Straits Times he is confident that the challenges facing Indonesia's economy are just a blip on its growth trajectory.

"I am not worried at all with respect to our portfolio investments there," he added.

OCBC's Indonesia business has been growing steadily, contributing 5 per cent of the bank's overall revenues last year and 6 per cent in the first half of this year.

The bank has been in Indonesia since 2004 through its OCBC NISP unit, which has 340 branches across the country, and it is on track to continue growing in various business segments, Tsien said.

His confidence was bolstered by the decisive action taken by Bank Indonesia last Thursday.

The central bank's moves to raise the interest rate and to extend a US$12 billion swap deal with Japan that allows the two countries to borrow from each other's foreign exchange reserves will help Indonesia steer clear of the worst-case scenario, he said.

"I see this as good evidence that the maturity of the central bank has really improved. They understand what is happening, they know what is required and they have done it fairly quickly," he said.

"Now, what needs to be done is on the fiscal side - we have to see what the government will do to reduce its deficit."

He believes that, with more of the right measures in place, Indonesia's high inflation rate - now at 8 per cent - is likely to ease, and its once-neglected manufacturing sector will find its feet and contribute more revenue to government coffers.

Time will be needed for any policy moves to take effect but, meanwhile, OCBC NISP will still grow, even if at a slightly slower pace, Tsien noted.

"Loan demand will decrease because interest rates are now higher, but it will still grow at double digits. This year, we expect asset growth to be around 30 per cent; next year, it will probably be 20-plus per cent."

OCBC's growth plans for its Indonesia business will continue unabated, Tsien added.

"What we have done is that we have basically converted this bank from what was originally a mass-market commercial bank dealing primarily on the (small and medium-sized enterprise) side, and helped it grow on the corporate banking side with large corporates and helped it deepen its penetration into the small business side," he said.

"On the consumer side, we have helped it refocus to the emerging affluent sector because that's the sector that will bring in future wealth-management clients." (Yasmine Yahya, The Straits Times/ANN)