Almost seven percent in the second quarter this year. If we exclude oil and gas sectors, that is.
Indonesia’s economic growth (2002-2007)
Indonesia’s economy as a whole grows by 6.3%, which is also quite good. But, the slower growth is because oil and gas sectors continue contracting.
If this seven percent growth translates into lower unemployment- and poverty rates, all would be very well.
We examine the effect of strategic sale—the sale of banks to strategic foreign investors—on banks’ performance. The Government of Indonesia implemented such a policy as a part of bank restructuring in the aftermath of the 1998 banking crisis. Using difference-in-difference models, we find that strategic sale leads to 12%-15% cost reduction. These results are robust to the use of other estimators such as difference-in-difference matching-estimators and stochastic-frontier analysis, to that of other performance measures such as return on assets and net interest margin, and also to that of different types of samples. These suggest that strategic sale could play an important role in restructuring troubled banks in developing countries.
In short, the sale of Indonesian banks to strategic foreign investors a couple of years ago is a good thing.
That’s from a recent working paper by Parinduri and Riyanto.