May 22, 2013
Mercantilism In International Finance
Posted by David Zaring

In a trade-in-services dispute that looks quite a bit like pre-WTO trade in goods disputes, Indonesia is conditioning the sale of one of its banks to a Singaporean company on access to the Singaporean market:

Difi A. Johansyah, a spokesman for Bank Indonesia, said it would be “unfair” if Indonesian state-owned banks like Bank Mandiri, Bank Negara Indonesia and Bank Rakyat Indonesia could not expand in neighboring Singapore while DBS could expand in Indonesia because of the country’s more open ownership regulations.

“We will still open the door if they want to increase the stake up to 67 percent, but it’s conditional on whether M.A.S. grants access to our national banks to enter Singapore, which is still under negotiation,” he said in an interview.

This sort dynamic is a point of modest tension between economists and business people.  The former would surely insist on unilateral surrender by Indonesia on the access issue.  Who wouldn't prefer a big foreign investment in your country's infrastructure to no foreign investment?  But businesses often look to leverage access on access, it is one of the things, ironically, that keeps some commitment among export-oriented industries to trade barriers - so their government can have something to give up.

 

Finance, Financial Institutions, Globalization/Trade | Bookmark

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