BNI Prepares US$100m to Tap South Korea

TEMPO.CO, Jakarta - State-run Bank Negara Indonesia (BNI) has said that it has prepared a budget of US$100 million to establish a branch in Seoul, South Korea. BNI president director Achmad Baiquni said the funds would be used to rent a facility as well as to cover its staff expenses. The move was made in line with the company's plans to provide financial services as well as to profit from the significant population of Indonesian migrant workers in South Korea.

"There are at least 41,000 Indonesian migrant workers in South Korea," he said at his office in Jakarta, on Wednesday.

According to Baiquni, aside from providing financial services for Indonesian migrant workers in South Korea, the company aims at providing financial services for Indonesian companies with strong business ties with South Korean companies, and vice versa. It is known that BNI has already received a preliminary clearance from the local financial authority in Seoul.

Baiquni also said the banks' presence in South Korea would help boost trading between both nations. Currently, the total capitalization of trade between Indonesia and South Korea is valued at around US$30 billion annually. "We aim at getting ahold of at least one percent of the market share, before progressively increasing it to around two to three percent," said Baiquni.

The Governor of the South Korean Financial Supervisory Service, Zhin Woong-Seob, is upbeat that the establishment of BNI's branch in Seoul will be beneficial for Indonesians in the country. Furthermore, he claims that to date, South Korea does not have any policies that discriminate against foreign financial institutions from opening a branch in the country.

The head of the Financial Services Authority (OJK)’s board of commissioners, Muliaman Hadad, said that the approval granted to BNI to establish a branch in South Korea was a form of reciprocity, as OJK has granted Sinhan Bank—a South Korean bank—the right to acquire and merge two Indonesian banks, at the same time as its South Korean counterpart gave BNI the green light to establish its presence in South Korea. "All future cooperation needs to be based on such principle of reciprocity," said Muliaman.

In addition to establishing a branch in Seoul, BNI plans to open another branch in Yangon, Myanmar. The state-owned financial institution plans to open branches that could provide full financial services to all customers—as such, the government plans to inject between Rp1-2 trillion as a startup capital for each branch. BNI claims that it lodged its request to open a branch in Myanmar last year, and another request to establish a branch in Saudi Arabia three years ago. However, the request has yet to be granted to date.

Another state-owned banking corporation, Bank Mandiri (BMRI), also plans to expand its reach beyond Indonesian borders in light of the upcoming Association of South East Asian Nations (ASEAN) Economic Community (AEC), which is set to affect the banking sector by 2020. The corporate secretary for Bank Mandiri, Rohan Hafas, said Bank Mandiri was ready to inject around 300 Million Malaysian Ringgit or Rp1.05 trillion to establish a branch in Malaysia. "We aim at focusing on remittances and the funding of economic activities between Malaysian and Indonesian stakeholders," he said.

Bank Mandiri’s plans to expand its reach into the ASEAN region, however, still encountered a slew of regulatory hurdles despite its large capitalization, said the bank’s executive director, Budi Gunadi Sadikin.

"We applied for permission to establish branches in Singapore and Malaysia five years ago, but we've gone nowhere since then," he said, adding that this was a setback considering the fact that Indonesia's banking sector needed to be able compete once AEC kicked off in 2020.

According to Sadikin, there needs to be more reciprocity in the banking sector, especially considering that the amount of foreign financial institutions operating in Indonesia far outweighs the number of Indonesian banks overseas. Malaysian banks, for instance, have more than 1,400 branches across Indonesia, whereas no Indonesian banks were operating in Malaysia.

"The same story could be seen in Singapore, where BNI and Bank Mandiri have only one branch each, whereas Singaporean banks have 670 established branches in Indonesia," said Sadikin. 

FAIZ NASHRILLAH | ANDI IBNU