Abdul Khalik, Jakarta – President Susilo Bambang Yudhoyono told top bankers gathered at the palace Friday to further expand real sector credits, particularly for infrastructure and agriculture.
"In line with the banks' role in fueling the economy," the President said, "I seek a joint contribution with banks in disbursing capital."
Amid the global economy's current turbulence, three-way communication between the banking industry, the government and the central bank has become more important, the President said.
He said the country needed to increase productivity in the agricultural and food production sectors to prepare for a jump in global food prices, which have risen over the last several years.
As global fuel prices continue to rise, Yudhoyono underlined an urgent need to invest in energy, especially in electricity, natural gas and geothermal projects.
"Electricity has become a major problem. I want to add another 10,000 megawatts of electricity to our current electricity production of 25,000 megawatts over the next two to five years. This plan needs support from the banking sector," he said.
The 10,000 megawatt project, which is a government priority, has been suffering from a lack of capital as foreign lenders, initially interested in backing the project have withdrawn their support because of, among other reasons, disagreements over electricity pricing.
Other energy projects demanding capital, the President said, include alternative energy projects, such as geothermal and biofuel. These projects have become profitable with oil prices hovering above US$100 per barrel.
Banks also need to focus on export-oriented industries, said Yudhoyono, using the Asian Tigers of Taiwan, South Korea, Hong Kong and Singapore as examples of countries achieving substantial economic growth using export-oriented industries as their engines for prosperity.
"We have huge domestic potential to achieve the same level of success," he said.
Bank Indonesia Governor Burhanuddin Abdullah said the Indonesian banking sector had improved over the first three months of 2008, with liquidity being under control and banking risks decreasing.
Non-performing loans, he said, had decreased from 4.82 percent to 4.72 percent during that period. Banking risks remained low with bank-owned foreign currency at only 3.49 percent, Burhanuddin said.
"Low interest rates have a positive impact on banking's intermediary function. The loan to deposit ratio has now reached over 70 percent," he said.
The amount of credit channeled into the real sector, Burhanuddin said, had also increased in the first three months of the year, with total value of credits for working capital and consumption reaching Rp 9.1 trillion and Rp 5.5 trillion, respectively.