High demand for Indonesian bank

Investors have flocked to Indonesia's biggest flotation since the 1997 Asian financial crisis, and the government is reportedly considering expanding the number of shares on offer.

Bank Mandiri, the country's biggest, was formed in 1999 by merging four state banks which had been almost wiped out by the collapse of Indonesia's currency, along with those of many of its neighbours, two years earlier.

The government had put 15% of the bank, or 3 billion shares, up for sale as part of an IMF-led economic reform programme, but early indications are that the demand is more than three times higher.

The Kompas newspaper reported on Monday that another 5 billion shares will be added.

Any expansion will be announced later on Monday, at the same time as the government sets the final price for the selloff, likely to be about 700 rupiah (8 US cents).

After the crisis

The popularity of the flotation is welcome news for Indonesia, whose economy is inching its way back to health after being almost flattened in 1997.

At that time, the rupiah was one of the Asian currencies which slumped as speculators took advantage of open capital markets to pull out of countries across the region.

The effects were devastating, leaving tens of millions across the region unemployed and destitute and thousands of companies in ruins.

Now, though, even the IMF is praising the country's progress, saying that it can expect to beat the government's forecast of 4-5% growth next year.

But in the wake of the financial crisis, the government is keen to cut its ties to the IMF if possible.

It hopes to raise as much as 34 trillion rupiah from asset sales this year.

In May, the Indonesian Bank Restructuring Agency (IBRA) - the repository for the many financial institutions nationalised after the crisis - announced it was welling 51% of Bank Danamon to a consortium of Singapore's Temasek Holdings and Germany's Deutsche Bank.

Local and national

And the government is now pushing for regional government to join the selloff.

Home Affairs Minister Hari Sabarno told the Antara state news agency on Monday that too many state enterprises at the regional and local level were losing money, and only those with a public service mission should be allowed to do so.

"If regional state enterprises continue to incur losses," the agency reported him as saying, "why should you have them?

"Their existence should be reviewed: if they are unhealthy, release them to the private sector."