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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

SEPTEMBER 10, 1999 VOL. 25 NO. 36

You Call This Autonomy?
Mandiri shows troubling signs of the past
By TIM HEALY and TOM MCCAWLEY/Jakarta

    FINANCIAL 500 1999
Renewal
How the Asian Crisis is spawning new banks and recasting the Financial 500

McBank A Japanese bank gets creative

Mandiri Troubling signs that a new bank is not independent

Scandal The Krung Thai fiasco jeopardizes reform

Niche Player Keppel targets the middle and the region

Bounce Back South Korea's financial system continues to reorganize

Giants Creating the world's biggest bank

Weddings Mergers made in heaven?

Ambition Equitable aims to be number one

Internet Banking Managing money via modem

The Foreign Factor Insurers still face closed doors

  THE 500

How the Nations Fared
in the 500


1-50 | 51-100 | 101-150 | 151-200 | 201-250 | 251-300 | 301-350 | 351-400 | 401-450 | 451-500 |

It isn't typical for a newborn to be yanked from its mother at birth and sent out into the cruel world, but that was the plan all along with Indonesia's Bank Mandiri. The institution was meant to be a shining example of the nation's rehabilitated and strengthened banking system when it opened its doors a month ago. Mandiri was supposed to demonstrate an independence heretofore rare in Indonesia by steering clear of the government that created it. Gone, in theory, were the days when banks were mere tools of the state and policy loans were just another form of political patronage.

But it seems the umbilical cord attaching Bank Mandiri and the Jakarta government remains intact. As the rupiah has come under increasing attack this month in the wake of an old-fashioned scandal involving Bank Bali and the violent run-up to an independence referendum in East Timor, Mandiri has played a high-profile role fighting currency speculators. Bank officials acknowledge that they intervened in currency markets to sell dollars and buy rupiah at the height of the battle in mid-August. Although it is probable that the bank was, at least in part, only acting on behalf of the central bank, Bank Indonesia, the news is not good for those who want to see signs that Indonesian banks have changed.

Patrick Winsbury, a banking analyst for Moody's Investors Service in New York that has examined Bank Mandiri, says the news raises questions about Mandiri's independence. It is hardly unusual for private banks to dabble in currency markets. On top of that, Mandiri is not private. For the next two years, until the government spins it off, it is state-owned. However, given that the world financial community is watching for signs that Indonesia's devastated banking sector is actually reforming, small signs loom large. "We're currently taking a wait-and-see attitude," Winsbury told Asiaweek. "Certainly, in the first month we've had mixed signals about the bank's independence."

Download the complete 1998 Asiaweek Financial 500
He is being kind. Moody's recently gave Bank Mandiri its lowest rating for overall financial strength: E. But Moody's indicated that it had adopted a positive outlook on the bank, which Winsbury says means an upgrade would be considered in coming months. Now, a better rating may be in jeopardy. Winsbury says he is concerned not just about the currency intervention. Indonesia hasn't injected a promised $20 billion to recapitalize the bank and restore it to financial health. "I think the [International Monetary Fund] is particularly concerned about that." Also, Mandiri's new president, Robby Djohan, has promised that the bank will expand its loan portfolio by 20% this year. "Theoretically, there are quality borrowers out there," says Winsbury. "But it raises the question about whether there will be [government-directed] lending."

Mandiri is the banking phoenix rising from the ashes of four failed banks. "Bank Mandiri will be the locomotive of the real sector," enthuses Djohan. That may not be what Winsbury and others in the international community want to hear. The IMF and World Bank, in particular, will be watching closely to see that loans are made on the basis of the creditworthiness of borrowers rather than national considerations. Djohan expects the bank to channel nearly $1 billion to companies in the export, services and natural resources sectors by the end of this year. Unfortunately, as his predecessors could tell him, lending is the easy part. It's getting paid back that can be tricky.


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