Indonesia’s Finances Are the Most Lagging in ASEAN 5

Finance Minister, Sri Mulyani

Finance Minister Sri Mulyani said that Indonesia’s financial sector is the shallowest among ASEAN 5. This can be seen from some indicators of gross domestic product.

Sri Mulyani conveyed this in a working meeting of the House of Representatives Commission XI with the Minister of Investment, Minister of Cooperatives and SMEs, and Minister of Law and Human Rights. The meeting discussed the introduction to the Draft Law on Development and Strengthening of the Financial Sector (RUU PPSK) or the financial omnibus law.

Sri Mulyani said that from various indicators of the financial sector to GDP, Indonesia was quite lagging.

He compared it to the Philippines, Malaysia, Thailand, and Singapore, which are members of ASEAN 5 or the five largest economies in Southeast Asia.

Indonesia’s banking assets account for 59.5 percent of GDP. Its value is the lowest compared to the Philippines (99.2 percent), Thailand (146.6 percent), Malaysia (198.6 percent), especially Singapore (572.1 percent).

Then, Indonesia’s capital market capitalization to GDP was 48.3 percent. In comparison, the Philippines was at 93.2 percent, Malaysia at 109.9 percent, Thailand, at 120.9 percent, and Singapore at 189.0 percent.

“This condition indicates that for the public to raise funds by the financial industry, it is still very limited, and the potential for market deepening means that it is still very large,” Sri Mulyani said on Thursday (11/10/2022).

Similar conditions also occurred in the non-bank financial industry (IKNB) sector, with insurance industry assets recorded at 5.8 percent of GDP and pension fund assets at 6.9 percent of GDP.

Malaysia recorded insurance industry assets of 20.3 percent of GDP and pension fund assets of 59.9 percent of GDP.

Sri Mulyani also sees that the overhead costs of Indonesian banks are relatively high compared to ASEAN countries. This is reflected in the high net interest margin which has an impact on high loan interest rates.