Plans by Indonesia’s central bank to limit the number of expatriates allowed to work in banks and to restrict outsourcing of operations are drawing concern from foreign bankers in the country.
Burhanuddin Abdullah, governor of Bank Indonesia, the central bank, has said he wants to limit expatriates working in banks to senior management within a year or two and restrict operations conducted overseas.
But foreign bankers, who say officials have already begun enforcing some proposals informally, warn that the proposals will significantly curtail their operations and could slow the nation’s economic growth.
They also say they are being pressed to increase lending, which risks replicating the massive defaults that were a main cause of the 1997 Asian financial crisis that hit Indonesia badly.
Richard McHowat, chairman of the Foreign Banks Association of Indonesia and HSBC’s country manager, said foreign banks needed to import workers to make up for a shortage of skilled bankers. “A lot of the skills we need to manage our various businesses just aren’t here yet,” he said.
The restrictions on outsourcing would also hit big foreign banks that concentrate some operations in regional centres to maximise efficiency. One foreign banker who asked not to be named said if outsourcing was banned, his bank might cut back its services. “The eventual loser would be the Indonesian economy more than anything else,” he said.
Jusuf Kalla, the former tycoon who is now Indonesia’s vice-president, and Mr Burhanuddin have been leading a government push to urge banks to raise lending to stimulate growth.
Several foreign bankers said they would prefer to pay penalties than to meet unrealistic lending targets. “Indonesia has just got out of crisis. We don’t want to be forced into another,” one banker said.
Populist politics may be a contributing factor. Legislators have accused foreigners of taking jobs away from locals. Mr Burhanuddin, who is elected by parliament, faces re-election next March.
Mr McHowat said foreign banks usually created jobs, citing HSBC’s consumer finance department – run by a mid-ranking expatriate who would have to leave under the proposal – which is expected to have created 700 jobs within 18 months by the end of this year.
Foreign banks are also seen as “universities” by young Indonesians, who can receive high-quality training both onshore and abroad.
Muliaman Hadad, a deputy Bank Indonesia governor, said the regulations were still being finalised “to avoid misinterpretation”. He declined to say when a final decision would be reached.
Some analysts see this as part of a wider trend, ahead of the 2009 general election. For example, virtually all TV advertisements may soon have to feature and be produced by Indonesians.