The government will go ahead with selling a 30% stake in Bank Negara Indonesia (BNI), instead of a previous plan to sell 51%, according to Mahmuddin Yasin, the deputy for privatization at the State Minister of State Enterprises. The sale proceeds are intended for the State coffers, and it is expected that BNI itself will benefit from improved corporate governance in the process. Observers will argue that a restructuring of BNI is required, in light of the massive lending fraud that has befallen the bank recently, for investors to begin to trust BNI again in the matter of good governance. Furthermore, policymakers are worried that the bank will eventually be under the control of foreigners, therefore diminishing Indonesia’s control over the formulation and execution of policies. The worry here is mostly that the government will not be able to rely on BNI when it is interested in allowing credit to strategic industries. A cautiously optimistic observer will argue that such a situation will not arise as even foreign investors will always favor strategic industries; only protectionists of defunct ventures need worry.

According to Arwin Rasyid, BNI’s vice president director, the bank is also expected to issue subordinated bonds of up to US$ 300 million in June in a bid to fortify its capital and to fund the bank’s credit expansion; right after BNI conducts road shows in Singapore, Hong-Kong, London, and New York in May. [aws]