Indonesia Accepts Islamic Megabank Challenge Shelved by Malaysia

Indonesia is taking on the challenge of creating an Islamic megabank that has so far proven too difficult for lenders in Malaysia and the Middle East.

The government plans to merge the Shariah-compliant units of state-owned PT Bank Mandiri, PT Bank Negara Indonesia, PT Bank Rakyat Indonesia and PT Bank Tabungan Negara with paid-up capital of more than 15 trillion rupiah ($1.13 billion) next year, Gatot Trihargo, deputy minister for government-run enterprises, said in a June 10 interview in Jakarta. Financial Services Authority Chairman Muliaman Hadad said in January that the plan may materialize this year.

Malaysia has been touting the idea of forming an Islamic megabank that can compete with the likes of HSBC Holdings Plc for six years and a three-way merger to create one fell apart in January. The Islamic Development Bank, an institution based in Saudi Arabia with 56 member countries, previously planned to set up such a lender in 2012 with capital of $1 billion.

"We have seen the challenges that come with wanting to create a mega-Islamic-banking entity," said Raj Mohamad, managing director at Five Pillars Pte, a consulting firm in Singapore. "If it materializes, it will augur well for Islamic banking and finance for not only Asia but also globally."

Lagging Malaysia

In the Indonesian plan, the government will ask the four lenders to provide 5 trillion rupiah to 10 trillion rupiah of capital to their Shariah banking units before the planned merger, Trihargo said. The combined entity will help manage about 70 trillion rupiah and this would be used to fund infrastructure projects, he said.

"Because of budget limitations, it's hoped that the parents of the Shariah banks will inject capital," said Trihargo.

The proposed amalgamation is one of three options the authorities first mooted in May 2013 to boost Islamic banking assets, which are just over a 10th of neighboring Malaysia's. The government also considered setting up a new state-controlled Islamic lender or converting an existing non-Islamic bank into a Shariah-compliant one.

The combined entity is expected to result in a quadrupling of Islamic banks' share of total banking assets to 20 percent by 2018, compared with 10 percent without the merger, the Indonesia Islamic Banking Association said in February.

Shariah share

"After each bank has reached a sufficient and healthy economic scale, only then should they be merged," said Imam Teguh Saptono, Jakarta-based director at PT Bank BNI Syariah, the Islamic unit of Indonesia's fourth-largest lender. "The intention is really to increase the Shariah banking market share and produce an Islamic bank that's large and competitive."

The assets of Shariah-compliant lenders in Indonesia rose 12 percent to 272 trillion rupiah in 2014, while those in Malaysia recorded a similar pace of growth to 625 billion ringgit ($166 billion), official data show. Islamic banks in Southeast Asia's biggest economy had a combined 213 trillion rupiah of deposits at the end of March, 18 percent more than a year earlier, according to the Financial Services Authority.

Latest Attempt

Indonesia's move marks the latest effort by the $1.7 trillion Islamic finance industry to form a megabank.

Malaysia's central bank in 2009 proposed the creation of one to cement the nation's position as a sukuk hub. A license slated to be awarded in 2011 for a multinational lender to be formed between Asia and the Middle East didn't materialize. The second attempt was a merger between CIMB Group Holdings Bhd., RHB Capital Bhd. and Malaysia Building Society Bhd., announced in October and aborted in January.

In the Middle East, the IDB's 2012 plan to form a mega lender with Riyadh-based Dallah Albaraka Group and the Qatari government also failed to materialize.

Indonesia's proposal aims to "create a catalyst in its Islamic banking sector," said Abas A. Jalil, chief executive officer at Amanah Capital Group Ltd., a consultancy in Kuala Lumpur. "Indonesia needs to have bigger Islamic banks to finance infrastructure development programs and manage the growing Shariah-compliant deposits."

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Source: Indonesia Accepts Islamic Megabank Challenge Shelved by Malaysia

Labor, Greens push for investigation into 'breathtaking' people smuggler claims

Labor and the Greens have requested investigations into claims that taxpayer funds were used to pay people smugglers to turn back an asylum seeker boat.

14 Jun 2015 - 2:06 PM  UPDATED 32 MINS AGO

Prime Minister Tony Abbott has repeatedly refused to deny or confirm the reports despite growing pressure for answers from Indonesia, the United Nations, Labor and the Greens.

Labor immigration spokesman Richard Marles wrote to the Auditor-General on Sunday night requesting an investigation into whether the payments were made.

"If this happened, there are serious questions about the legal basis upon which it has happened," Mr Marles told ABC radio on Monday.

Greens senator Sarah Hanson-Young will ask the Australian Federal Police to investigate the claims and whether any laws have been broken.

She says Australians have a right to know whether taxpayer funds have been used.

"(Mr Abbott) doesn't have a mandate to break the law," Ms Hanson-Young told ABC radio.

"He doesn't have a mandate to hand out wads of cash on the ocean to people smugglers."

Jakarta seeks answers on 'boat payment'

Jakarta wants to know if the Australian navy paid people smugglers to turn their boat around and sail back into Indonesian waters.

Meanwhile, Foreign Minister Julie Bishop has urged Indonesia to enforce sovereignty over its own borders, after Indonesia's Foreign Minister Retno Marsudi sought an explanation from Australia's ambassador Paul Grigson over the allegations.

Ms Bishop told The Australian the best way for Indonesia to resolve its concerns about Australia's operations to stop asylum seeker boats was to "enforce sovereignty over its borders".

Mr Marles says the claims are affecting Australia's relationship with Indonesia.

Asked whether he agreed with Ms Bishop that Indonesia needed to get its own house in order, Mr Marles said: "I don't think now is the time for the Australian government to be walking down that path."

The Australian Greens on Monday will try to win Senate support for a motion requesting the government table documents detailing any payments to individuals on board asylum seeker boats.

Passengers tell UNHCR the crew received a payment

The United Nations refugee agency says it's interviewed the 65 passengers from the boat who claim the crew were paid by Australian officials to return to Indonesian waters.

The UNHCR's James Lynch has told the BBC the passengers were transferred to a customs boat for four days before being put on two boats and sent back to Indonesia.

"The boat that was rescued by the Indonesian navy on 31 May - we have interviewed the 65 passengers and they have said that the crew received a payment," Mr Lynch said.

Indonesia's Foreign Minister Retno Marsudi sought an explanation from Australia's ambassador Paul Grigson on Saturday over the allegations.

Mr Abbott has repeatedly refused to confirm or deny the allegations, or whether the government would investigate them.

"The only question that matters is, is this government prepared to do what's necessary to keep the boats stopped?" he told reporters in Canberra on Sunday.

"The answer is yes."

He said it was important for Indonesia to know the government was "absolutely resolute" in its determination not to allow the people smuggling trade to resume.

Immigration Minister Peter Dutton refused to comment on the allegations on Sunday after denying them earlier in the week.

"From day one we have not commented on operations," he said, following the line taken by Mr Abbott and several other senior ministers on Operation Sovereign Borders.

Opposition Leader Bill Shorten said Australians deserved an answer following Mr Dutton's backflip.

"It is now time for Mr Abbott to make it clear ... has Australian taxpayer money been paid by the Abbott government to criminal people smugglers or not?" he told reporters in Canberra.

Opposition immigration spokesman Richard Marles said the claims were affecting Australia's relationship with Indonesia.

If the claims were true, Mr Dutton would have a "serious problem".

"If he has denied this up front and it turns out to be true, Peter Dutton is seriously injured," Mr Marles told ABC TV.

Finance Minister Mathias Cormann said the proposition that Mr Abbott's refusal to deny the allegations translated into payments having been made was "just wrong".

Former Howard government treasurer Peter Costello said it was appropriate that the government neither confirm or deny the reports.

"There's a lot of stuff that happens in the security area which a government neither confirms nor denies - that doesn't mean it happens," Mr Costello told Network Ten's Bolt Report.

"You don't want the smugglers to know what you're doing."

Greens Leader Richard Di Natale said any government payments to people smugglers would effectively put Australia in the people smuggling business.

Calls for truth from PM on asylum boat pay off claims

Prime Minister Tony Abbott says his government will do whatever is reasonably necessary to protect Australia from people smuggling.

Source: Labor, Greens push for investigation into 'breathtaking' people smuggler claims

Indonesian volcano unleashes fresh burst of clouds and ash

© AP Photo/Binsar Bakkara A farmer watches as Mount Sinabung releases pyroclastic flows in Tiga Pancur, North Sumatra, Indonesia, Saturday, June 13, 2015. The volcano, which was put on it highest alert level last week, has sporadically erupted since 2010 after being dormant for 400 years.

JAKARTA, Indonesia — A volcano in western Indonesia unleashed a new powerful burst high into the sky on Saturday, sending hot ash far down the mountain's slopes, an official said.

Authorities have been closely monitoring 2,460-meter (8,070-foot) -high Mount Sinabung on Sumatra, one of Indonesia's main islands, since June 2, when its status was raised to the highest alert level due to the growing size of its lava dome.

Hot ash tumbled down the slopes of the mountain as far as 3 kilometers (2 miles) southeastward on Saturday, said Wendy Cahya, an official at the mountain's monitoring post.

No injuries were reported from the latest eruption, he said.

Cahya said that as of Saturday evening, 11 avalanches of hot ash had been recorded, with volcanic ash released as high as 2 kilometers (1.2 miles) into the air.

Volcanologists have warned that smoldering rocks mixed with hot gases may tumble down from the mountain at any time.

More than 2,700 people from villages within the danger zone of 7 kilometers (4.4 miles) from the crater have been evacuated to temporary shelters. No casualties have been reported from this month's eruptions.

Mount Sinabung is among about 130 active volcanoes in Indonesia, which is prone to seismic upheaval due to its location on the Pacific "Ring of Fire," an arc of volcanoes and fault lines encircling the Pacific Basin.

The volcano has sporadically erupted since 2010, after being dormant for 400 years. An eruption last year killed at least 17 people.

Mount Sinabung releases pyroclastic flows as seen from Tiga Pancur, North Sumatra, Indonesia, Saturday, June 13, 2015. The volcano, which was put on it highest alert level last week, has sporadically erupted since 2010 after being dormant for 400 years.

© AP Photo/Binsar Bakkara
Source: Indonesian volcano unleashes fresh burst of clouds and ash

Jakarta decries Australia PM’s asylum boat stance

JAKARTA: An Indonesian official on Friday criticized Australia's prime minister as "unethical" for sidestepping allegations the Australian navy paid the crew of a boat carrying 65 migrants to return to Indonesian waters.Indonesia's Foreign Ministry has said it is "very concerned" by a report from police in East Nusa Tenggara province that the boat's captain and five crew members detained on remote Rote island had about $30,000 in cash. The group said they were paid to return the migrants to Indonesia after being intercepted by an Australian navy ship on May 20.Australian Prime Minister Tony Abbott did not deny the payment claim in a radio interview Friday. He said border officials are being "incredibly creative" in coming up with responses to human trafficking.Agus Barnas, spokesman for Indonesia's coordinating ministry for political, legal and security affairs, said Abbott's comments could be interpreted by Australian officials as endorsing bribery and might encourage people smuggling."His statement is very unethical," Barnas said.The sharp rhetoric from Jakarta is the latest flaring of tension over Australia's policy of turning back and refusing to settle any migrant who arrives on its shores by boat. Migrants escaping poverty or oppression use Indonesia as a transit point for the perilous journey in often barely seaworthy vessels to Australia.Abbott also dodged questions about the allegation during a subsequent news conference. Asked whether the government had paid people smugglers to turn back boats, he replied, "We've used a whole range of measures to stop the boats because that's what the Australian people elected us to do."Australian opposition lawmakers jumped on the controversy, accusing the government of creating an incentive for people smugglers.

Source: Jakarta decries Australia PM's asylum boat stance

1,200 Workers Recruited to Rehabilitate Drug Users

A total of 700 social workers and 500 counselors will be equipped with the knowledge and skill to handle problems pertaining to narcotics, psychotropics and other addictive substances. (AFP Photo/Choo Youn-kong)

Jakarta. The Ministry of Social Affairs has recruited a total of 1200 social workers and counselors in an attempt to provide rehabilitation services for drugs addicts throughout the country, an official said on Friday.

"The recruitment is done to comply with the demand of social workers and counselors at the ministry," said Mu'man Nuryana, the ministry's education and research body chief.

Mu'man said that 700 social workers and 500 counselors will be equipped with the knowledge and skill to handle problems pertaining to narcotics, psychotropics and other addictive substances (NAPZA) before being sent off to 24 provinces to serve at the IPWL.

As for the first batch, 168 social workers and 118 counselors are in ongoing two-weeks training in Yogyakarta.

Source: 1,200 Workers Recruited to Rehabilitate Drug Users