Nicolas Parrot is the President Director at PT Bank BNP Paribas Indonesia and an Executive member of the Indonesia International Banks Association and board member of the Indonesian French Chamber of Commerce. He recently spoke to Indonesia Business Post on his career at BNP Paribas, being a banker in Indonesia and his views on Indonesia’s biggest challenges.
Nicolas, tell us about yourself and how did you end up in Indonesia.
A 25-year veteran at BNP Paribas, I started my career at the Bank upon graduating from École des Mines de Paris (Paris School of Mines) in 1995. A memorable internship experience in Singapore as an engineering student motivated me to pursue opportunities outside of Europe. In October 1997, I seized an opportunity to work in Tokyo and have been in Asia ever since. My experience in banking has been largely in aviation and shipping in APAC, but I’ve always found Indonesia an exciting market with lots of growth opportunities and when the opportunity to be the country manager for Indonesia presented itself, I put my hand up for it.
What do you like most about Indonesia?
For me as a banker, what is interesting about Indonesia is its young and growing work force and its abundant natural resources, which make it one of the fastest-growing markets in Asia. It’s an exciting time to be here.
What do you think is Indonesia’s biggest challenge?
I would say that there are three – infrastructure, energy transition and the nickel value chain. They are challenges, but they also present immense opportunity.
Infrastructure
Inadequate infrastructure development used to be an issue. But, under the current administration, there has been a significant focus and investment in infrastructure, which is pivotal for economic growth. Every rupiah that is invested in infrastructure has a multiplying effect on the rest of the economy. An area that has developed quite rapidly is road transport infrastructure.
Energy Transition
I think the next challenge for the country, and where investments will be required, is the energy transition. While there are vast resources of cheap fossil fuel available here, Indonesia also has ambitions to accelerate its transition to green energy. Speed and cost of scaling are the two main challenges for industry. While Indonesia is a newly industrialized, middle-income country, it is still not quite there yet as a high-income, developed country. This will factor in the speed of transition and the ability to scale quickly.
Nickel Value Chain
The country also has ambitions in the development of the nickel value chain. This will be one of the most important economic developments over the next 10-20 years. Nickel is integral for the growth of the electric vehicle industry. However, there is an intense focus on ensuring a sustainable value chain and that means finding ways for the sustainable production of nickel and its extraction as well the electricity/energy used to power the smelter. There are no easy answers, but what is clear is that it’s not going to be only about producing nickel but how it will be produced.
Tell me more about what BNP Paribas is doing in Indonesia, your networks and clients?
In Indonesia, as in Asia-Pacific, our focus is on corporate banking, supporting corporations and financial institutions. Our corporate clients are multinational companies, promoter-driven private companies, SOEs or state-owned enterprises and institutional clients including government investment funds in Indonesia. We deal equally with the largest conglomerates in the country and the independent companies.
Multinational clients are those who are headquartered in Europe, Americas or Asia and are our clients in those respective countries. BNP Paribas offers them seamless services globally across their overseas subsidiaries.
BNP Paribas is present in 65 countries in the world and our extensive global network is an advantage we offer our clients. We are among the few banks that have a truly global footprint in all the key markets.
Besides, corporate and institutional banking, we also have an asset management business in Indonesia, again not retail, but institutional-focused. Our asset management business is ranked among the top performers in ESG practices.
What is your company’s strength that differentiates you from other banks?
BNP Paribas has had a presence in Asia Pacific for more than 160 years and we have been helping large corporates and institutions grow by offering a full range of specialised financial services and investment products.
Our value lies in the deep understanding we have of the Asia-Pacific region and the global expertise that we offer to our clients.
What we are very good at is connecting Indonesia with the rest of the world. We are the largest bank in Europe and very strong in Asia Pacific and also in the Middle East. In Asia Pacific, we operate in 13 markets and have more than 18,000 employees. Globally, the bank has 190,000 employees worldwide. So, almost 10% of our workforce is in this region.
Our global network and reach is a key advantage and if you are an Indonesian company who wants to export to Africa, or Europe, there’s no better choice than us if you’re looking at transaction banking, global trade solutions and cash management services.
Obviously, one of the aspects is also foreign investment where today we are one of the largest bond houses in the world. Whenever a local company wants to issue bonds in Euro, in [Japanese] yen, in US dollar, or international currencies, we can give them access to investors on a worldwide basis and support their capex investment. So it goes from trade, export, finance, bond, equity raising on a cross border basis.
What are the opportunities for your bank in Indonesia?
It was interesting that Indonesia took the opportunity during the G20 and the B20 summits in Bali [in November 2022], to talk about its ambition to develop full value chains for key commodities. Indonesia doesn’t want to just export the raw commodity, for example nickel. The country wants to process it here – this is why mining companies are building smelters to process the raw material.
Processed nickel also presents opportunities down the value chain in terms of battery and EV manufacturing and can make Indonesia an attractive destination for battery makers and automakers to set up operations here.
For us, these factors represent business opportunities that are very strong because we’re talking about building the full ecosystem from raw material to processing to batteries and electric vehicles, but also charging stations, recycling.
Including the supply chain for electric vehicles in Indonesia?
Yes, that’s very important. I mean, the automotive industry value chain is extremely complex. In order to convince international companies to operate here, you have to show them that you are able to support not just their operations, but also support all of their suppliers and their clients in order for them to make those investments – and that too, sustainably.
Do you think Indonesia’s goal for net zero emissions is doable?
I think the strong political wish to achieve net zero objectives is encouraging. The leadership of the country has shown the direction. What I believe is very interesting is that during the G20 Summit, there was a major announcement – the JETP, Just Energy Transition Partnership, where international countries, the US, Japan, the European Union, committed US$20 billion (public sector pledge of US$10 billion and US$10 billion from private sector financial institutions) in order to support the energy transition of Indonesia. Some people estimate that if you want to switch all of the fossil fuel energy production in Indonesia to renewable, you’ll need US$ 200 billion. I don’t know the exact figure, but clearly US$ 20 billion is the first step. And what is interesting is that in exchange for this commitment with those other countries, Indonesia is also willing to improve its targets, stating that it will be net zero by 2050 instead of 2060. Overall, this is moving in the right direction.
How do you envision Indonesia in 2030?
One of the most striking projections that I’ve seen recently is from The Economist, which said that by 2050, Indonesia would be the 6th largest economy in the world. What I think is interesting is that by then, Indonesia would economically be bigger than Japan, and France, and just below the UK and Germany. It is projected to be one of the top economies in the world.
I expect that we are going to see a lot more vehicles with blue registration plates in Jakarta. There is going to be a lot more local industry also in this electrical value chain. And for Indonesia, the most important opportunities that will come to fruition by 2030 are the two Cs. The first C is commodity, especially with the down streaming, and the other C is the consumer. Today, when we look at the business opportunities in this country for us, 90% of those are around the two Cs.
So let me elaborate on that more. The commodity for example, is supporting the electric vehicle value chain that the government is building and requires a strong infrastructure ecosystem. But obviously, there’s a lot more than just ‘commodities’. With the right infrastructure setup, a sustainable value chain can be created for commodities such as nickel.
As for the consumer, Indonesia has a very favourable demographic trend. First, we have a large population. Second, this population is growing. Third, it’s young. And fourth, income per capita is increasing. These demographic dynamics are going to support a lot of sectors. There are many industries that are consumer-related, digital businesses, such as the e-commerce platforms and fintech, and services such as food and beverage and retail. This is going to be a huge business opportunity. I do expect that anything that is consumer-related is going to have a strong development in the next decade or so.
What has been the biggest highlight of your life and career so far?
When I was Head of Aviation and Shipping, APAC, I was managing a team looking after traditional bank loans, but I also led a team of investment bankers whose remit included M&A and IPO [initial public offering] transactions and so on.
I must say that those M&A and IPO transactions are probably the most fulfilling for a banker because when you help to take a business to the public market, it is a very defining moment for the company. There is a great sense of responsibility to walk them through the process and explain to them how it works.
As their banker, we need to help the company to develop the future equity story of the business. I have been fortunate to work on a few IPOs like that, and they have been the most fulfilling transactions that I’ve done.
In Indonesia, do you also help companies to do IPOs?
Of course, we have the capability to offer our expertise and our services to Indonesian clients, who want to go public. Most recently, we are one of the Global Coordinators for the Harita Metals IPO, Indonesia’s biggest this year.
What’s the next step for your company here in Indonesia?
We have a robust product offering here in Indonesia and we want to be part of Indonesia’s low carbon transition. It is an absolute priority for us to make sure that we accompany our clients in the oil and gas and natural resources sectors in their low carbon transition. For me personally, this is very important.
The biggest challenge is managing the pace of this change. As a European bank and as a leader in sustainable finance, we have made a very strong commitment in our loan portfolio. We are part of what we call the Net Zero Banking Alliance which, commits us to managing our loan portfolio to finance a net-zero economy. These commitments are very strong and our pace of transition as an institution is moving quickly.
For us, the main task at hand is to help our clients with the transition and to make sure that at the same time we stay as much in sync with the economy as we can.
Accompanying our clients’ ESG journey, the ones who have seen that the world is changing and are focused on a transition themselves are the ones who are most proactive for change. For example, one of Indonesia’s largest state-owned enterprises is well on its way in its low carbon transition and they have a lot of projects to increase their renewable energy production.
They invest in geothermal, solar panels, they want to invest in hydrogen production. Among the state-owned enterprises, I think it is the most aligned to global developments because they buy fuel from global players, sell bonds to international investors and work with international banks and so as quite exposed to the transition story. They have seen that many big oil and gas companies are transforming themselves to more sustainable energy groups, and that is a motivating factor.
What is your positioning in the market?
It’s interesting and challenging at the same time. We believe we have a good position here because if you look at 2022, for instance, we are the number one bank for green bonds in the world. When we speak to local clients in Indonesia, we are very well positioned to show them what their peers are doing internationally. And most of them are very curious and very interested to understand that and to see how they can match this trend, how fast they can go, what is the cost involved, whether their own consumers are interested or not. This dialogue that we are having with the local corporations is something that they value a lot because of international experience we bring to the discussion.
During your experience in Indonesia, what was one challenge or obstacle you found in the Indonesian market and how do you face that challenge?
Indonesia is a big and complex country. The economic situation differs from island to island. For us, one of the challenges that we face sometimes is to make sure that we have a full understanding of our clients’ operating environment.
How do you and your company contribute to the Indonesian market and its people?
Today, BNP Paribas is the largest bank in Europe. Our contribution is in giving Indonesian businesses access to international markets, but also to give them access to international investors. As a bank, there’s two ways that we contribute to the country and to the Indonesian people. Firstly, by channelling Foreign Investments, which is very important as the country needs the capital inflows.
And, secondly by bringing expertise, that is our people. We make sure that they develop the expertise with training and short-term overseas assignments
We also share the knowledge with our clients and especially global trends that we observe, what their peers are doing, what the best practices are in sustainable finance, and also in other types of financial products.
So on one side, there’s the investments, the capital, the foreign investments; and on the other, the expertise, the skills of our people and the knowledge for our clients – these are the way in which we contribute to the Indonesian economy.
Any advice for foreign companies who wish to set up their businesses in Indonesia?
Our advice is that this is a big complex country, where the way of doing business can be quite different from the country where they are headquartered. When we have clients who are coming here, one of our biggest pieces of advice, usually depending on the industry they’re operating in, is to find a good local partner, especially for medium-sized companies, as the partner will help you navigate the complexities of doing business in Indonesia. However, for a well-established international brand, a local partner may not be necessary as it probably has the means to proceed independently.
What’s one thing you can keep talking about for hours?
Sustainable finance. I’ve only spoken a little bit about it (laugh), but there’s so much more to talk about and to do. Finance can be a very powerful lever of action to reach sustainable development. I think this is a topic that I like a lot.
What is the quality you most admire in a person?
I am impressed by intelligent reasoning, by people who have a clear and clever mind, but not just IQ, also EQ. I find that quality is admirable.
If you could have dinner with three people living or deceased, who would they be?
This is an important one (laugh)… Albert Einstein, Cleopatra, and Marie Curie. Einstein and Marie Curie were both scientists who invented something completely new and I would love to understand their thought process. That would be very interesting. Cleopatra was a woman of power and would probably have some useful insights for our pursuit of gender equality.
What type of art do you find most interesting?
Sculptures or paintings for me are very interesting. Of course, I like theatre, cinema, and music, but they are performing arts and not tangible in that the same way as visual arts. When you have a nice picture or a painting in your home, you can appreciate it every day with a different light, with a different mood, and with your friends. This is the type of art that I like quite a bit, but I’m not an expert in it.
Do you believe in fate?
I don’t actually. We don’t all start with the same chances in life. However, we all do as best as we can. I’m more of an optimist. I think when one relies on fate, then one is giving up one’s sense of agency and unable to control what’s happening. I believe that in some aspects of our life, we have agency and are in control of our lives – that we can make a change for ourselves.
