velopment within Indonesia will soar.
A threat to the country risk of Indonesia is the long simmering dispute involving East Timor. A failure to resolve this dispute and a failure by the Indonesian government to cease its violent political repression in the East Timor area could compromise Indonesia's economic future.
Indonesia's Domestic Financial Sector
The domestic financial sector of Indonesia is reviewed in the discussions in this section. These discussions cover the financial market in Indonesia, the institutional structure of the Indonesian financial sector, and governmental regulation of the financial sector.
The financial markets in Indonesia in the 1990s are experiencing increasing activity levels in the 1990s. The Jakarta Stock Exchange, Indonesia's only such institution, has suffered a total share value loss in 1994. A similar outcome has occurred in other Asian markets.
The emergence of derivatives--options, futures, warrants, swaps, swaptions, collars, caps, floors, circuses, and so on and so forth--has swept the international stock markets including the Jakarta exchange. The explosion of derivatives is a cause of increasing concern for stock trading regulators. The Indonesian government has tightened regulation of the financial markets.
The Bank of Indonesia is the central bank in Indonesia. There are 117 commercial banks, 28 development banks, eight development finance companies, and nine joint-venture merchant banks in Indonesia. Commercial banking in Indonesia is dominated by seven large government-owned institutions.
A total of 70 of Indonesia's commercial banks are privately owned by Indonesians. There are 11 foreign-owned commercial banks in the country. The foreign-owned banks specialize in foreign exchange transactions and in direct lending operations to joint venture involving foreign participation.
Additionally, the government owns and ope...