BI to limit ex-pat bank workers

Business and Investment - April 13, 2007

Urip Hudiono, The Jakarta Post, Jakarta

The central bank is currently drafting a regulation to restrict the employment of expatriate labor in the banking sector amid recent concerns in some circles about perceived foreign domination of the country's banking industry.

Banks with a foreign-ownership level of 25 percent or more will still be allowed to employ non-nationals, but only in positions higher than middle-management level -- two levels below directorial level -- and only in the credit, treasury, risk management, investor relations and IT departments, Bank Indonesia Deputy Governor Muliaman D. Hadad said during a discussion on the issue Thursday.

Non-nationals with special expertise that is not available locally may also be employed, but will required to transfer their skills to local employees within three years, he said.

The human resources and compliance departments of banks would be specifically barred from employing expatriates, and at least half of the members of a bank's board of commissioners and board of directors would have to be Indonesians.

Meanwhile, banks with a foreign-ownership level of less than 25 percent would have to employ Indonesians at all levels.

Muliaman admitted that the regulation was still at the proposal stage pending further discussions with bankers, adding that it was intended to improve the overall human-resources situation in the domestic banking industry.

"Our main concern is to ensure the transfer of knowledge from foreign to local bankers.

"But, non-national employees can actually learn a lot as well by working here. So, lets not get the matter out of proportion and get stuck in shallow nationalistic arguments, or in a foreigners-versus-Indonesian scenario," he said.

BI Governor Burhanuddin Abdullah first alluded to the proposed new policy during the central bank's annual Bankers Dinner last year. He said the policy was being considered as part of the effort to ensure that overseas-owned banks fully participated in job creation.

Expatriate bankers are currently subject to a BI requirement that all bankers working here be certified by the Indonesian Bankers Institute (IBI).

Some analysts have voiced concern that the Indonesian banking sector is coming under the control of foreigners, which, they say, threatens employment prospects for Indonesians.

At the moment, Indonesia has only 41 foreign-owned banks out of a total of 131 banks, but they manage nearly half of the industry's total assets. Concerns have also been expressed that efficiency and consolidation drives by the foreign-owned banks could result in Indonesian workers being laid off.

Burhanuddin, however, dismissed these fears, saying foreign investment and the employment of foreign bankers in Indonesia had greatly benefited the industry by making it healthier and more professional, although he expressed the hope that the foreign-owned banks would make further efforts to expand lending.

Muliaman said the knowledge-transfer requirements proposed under the envisaged new regulation were intended to protect local workers by providing them with sufficient skills to retain their jobs.

He further said that BI had already received submissions from foreign-owned banks regarding the new policy. They had referred to possible difficulties in implementing the regulations due to the lack of adequately trained banking professionals in Indonesia.

"Banks sometimes have no option other than to hire expatriate employees. They also face a dilemma when training their local workers as, after training, they might then be tempted to jump ship to other firms," he said.