Citibank

CITIBANK INDONESIA

Citibank expanded into Indonesia in 1968, after President Suharto allowed a limited number of foreign banks to set up operations in Jakarta. One of the primary reasons to have it’s operations in Indonesia was to share in the potential for profits and growth the Indonesian economy offered, as the Indonesian economy has a lot of potential being rich in raw materials, particularly oil and tin. Mr. Mehli Mistri was appointed the country head of Indonesia in 1979, where he has maintained a profitable growth of Citibank successfully. In fact, it exceeded the corporation’s long-term goals of a 12%15% growth per annum. In 1983, Citibank managers at the corporate had increased Indonesia’s profit goal to be between $500,000 - $1,000,000. The instant reaction to this instruction is to reject it on the basis of the oil prices going down & Indonesian economy going into recession. Also, with a high staff turnover & restrictions to Citibank as a foreign bank (by the government) limits the options to make any modifications in order to consent to the budget changes. It is commendable to see Citibank Indonesia’s successful growth alongside the Indonesian economy & the budgeting process adopted highlighting the effort that is put in by the managers to ensure good performance. Further analysis & observations show that it would be a high risk to accept the budget change. However, setting up operations in a developing economy requires the company to take high risks and maintain short-term plans to be equipped for any unforeseen circumstances. In this case, an economy going into recession and a push for an increased profit goal. Analysis & Observations Although the corporate made the decision of increasing the profit goal, there have been no suggestions regarding the increasing risk nor has there been any dialogue between the corporate managers & the local branch regarding the riskreturn ratio, something that Mr. Mistri was concerned about. We are not aware of the...