Capital Opportunities for Indonesia

Asian Legal Business, which is owned by Thomson Reuters and is a leading legal publication in Asia-Pacific and the Middle East, recently published a report on the outlook for Indonesia's capital markets. SSEK partner Fahrul S. Yusuf was quoted extensively in the report.

Fahrul says that Indonesia requires deeper capital markets for greater stability. Deeper capital markets will help Indonesia gain a firmer footing in facing global economic turmoil, he says.

The number of Indonesian investors in the Indonesian capital markets is unbelievably low compared to the entire population of the country. More local investors means more financing in the local currency for the primary market, such as export-import, working capital and infrastructure. It also means more liquid secondary markets, which will also help keep the money flowing in the region and promote better protection, particularly from external events like U.S. tapering.

Fahrul says one of the main impediments to domestic companies listing on the Indonesia Stock Exchange (IDX) is regulatory compliance. Before a company can go public and be listed, initially a registration statement must be submitted with an 'approved' by the OJK (Financial Services Authority), he says.

This process can be very daunting and difficult given the scrutiny from the OJK, which is understandable considering the inadequate disclosure system, mainly caused by poor enforcement and lack of appropriate technology. However, Fahrul  says the OJK is planning to simplify the IPO registration process by allowing e-registration and also trying to improve the information disclosure system by promoting an e-reporting system.

To read the full report, click here.

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