Urip Hudiono, Jakarta – It appears to be payback time for Indonesia's banks, with the Vice President again urging them to do their part in helping finance the country's development needs in return for the state bailing them out during the financial crisis.
"The banks owe a huge debt – morally and materially – to this country," Vice President Jusuf Kalla said Friday while opening the first national congress of the Indonesian Bankers Institute (IBI).
In a strongly-worded address to the bankers, Kalla reminded them of how the government had to clean up the mess left by the banks during the financial crisis of the late 1990s as the result of reckless intergroup lending. This curtailed development spending, and was continuing to do so even up to the present time.
He said that it was high time for the banks to pay back the debts they owed by devoting a larger part of their funds to productive lending, rather than parking them in central bank bills (SBIs).
"All the government is asking for now is that the banks do their job (of providing loans). If you still put your money in central bank bills, the debt you morally owe to the state will only double: once for the money the state has given you, and twice for the interest the state still has to pay you.
During the crisis, the government shelled out some Rp 145 trillion (US$16 billion) in "Bank Indonesia Liquidity Support" (BLBI) funds and another Rp 450 trillion in recapitalization bonds to prevent the banking sector from collapsing.
Only some 20 percent of the money has been recovered, with much of it being embezzled by unscrupulous bank owners, many of whom also pledged collateral whose value in the end turned out to be far lower than their debts due to asset depreciation arising as a result of the crisis.
Ironically, the government is still paying interest to the banking sector as the bailout funds were financed by government bonds.
Kalla urged the banks to stop complaining and to start working by providing more loans for much-needed development in the infrastructure, agricultural and manufacturing sectors. Kalla further urged the banks to improve their efficiency and reduce costs, offer affordable lending rates, and upgrade their services.
"Unnecessary costs include maintaining lavish, luxurious offices. I don't think there are banks anywhere in the world, except in Indonesia, that have offices as large as football fields, with toilets bigger than my office. And we won't even start comparing salaries," Kalla railed.
"What's the need for offices as big as Citibank's when our banks still serve their customers like run-down grocery stores? Let's change all this so that we can provide cheap and productive loans to the real sector."
Indonesia's banks have also come under fire for placing up to Rp 200 trillion in central bank bills, which are primarily intended to be used only as market-liquidity instruments, thereby costing Bank Indonesia Rp 100 trillion in annual interest payments.