Confidence has tangible economic value. When investors trust the\nquality of information, the fairness of trading and the certainty of\nprotection for their rights, companies have a greater chance of securing\nfinancing at a reasonable cost. Conversely, when confidence weakens, the\ncosts can spread from the trading floor to companies delaying expansion,\nsuppliers losing orders and workers facing fewer employment\nopportunities. It is in this context that Indonesia needs to consider\nMSCI\u2019s proposal to change the classification of its equity market.<\/p>\n
On 15 October 2026, MSCI announced a consultation on a proposed\nreclassification of Indonesia from an emerging market to a standalone\nmarket, with a final decision scheduled no later than the end of June\n2027. The concerns raised include a lack of clarity over share ownership\nstructures and alleged coordinated trading. Reforms announced by the\nauthorities need to be accompanied by consistent implementation and\nevidence of impact that investors can assess. The status of the proposal\nmust be communicated accurately: the consultation is under way and no\nfinal reclassification decision has been made.<\/p>\n
This distinction matters to ensure that our response is\nproportionate. Equity-market classification is different from a\ncountry\u2019s credit rating. However, its potential impact on access to\ncapital must still be taken into account. If reclassification proceeds\nand Indonesian shares are removed from the relevant benchmark indices,\nfunds tracking those indices will need to adjust their portfolios.\nActive investors have greater discretion, but will also assess\nliquidity, investment mandates and market risk.<\/p>\n
For businesses, changes in investor behaviour can have consequences\nfar beyond daily share-price movements. Weaker liquidity makes it harder\nto absorb large transactions without affecting prices. Lower valuations\ncan mean that a company must sell a larger stake to raise the same\namount of capital. Some share offerings, production-facility\nconstruction plans or business expansions may ultimately be\nreconsidered. The scale of the impact will depend on the final decision,\nthe implementation timetable, global conditions, and the policy and\ncorporate response.<\/p>\n
I therefore see this as an agenda for financing national growth.\nIndonesia needs long-term capital to strengthen industry, build digital\ninfrastructure, expand energy supply and raise productivity. Its\nconsiderable economic potential will be more readily translated into\ninvestment if investors can understand who controls a company, how\nimportant decisions are made and whether shareholders\u2019 rights are\ntreated fairly.<\/p>\n
We are entitled to scrutinise the methodology and proportionality of\nassessments by international index providers. Critical dialogue is\nnecessary to ensure Indonesia\u2019s market characteristics are fully\nunderstood. However, Indonesia will be in a stronger position in that\ndialogue if it can demonstrate evidence of improvement. Objections to\nexternal assessments should go hand in hand with a willingness to\naddress shortcomings that genuinely undermine investor confidence.<\/p>\n
In this situation, KADIN has a concrete role to play. As a business\norganisation, it can bring together companies\u2019 financing needs, investor\nexpectations and the authorities\u2019 reform agenda. This requires sustained\ntechnical work: gathering concerns, setting priorities, encouraging\nchange among member companies and assessing progress. Enforcement\nremains the responsibility of the relevant authorities, while businesses\nare responsible for improving their corporate practices.<\/p>\n
One practical first step would be to establish a small working group\nwith a 90-day mandate. It should involve specialists in capital markets,\ninvestment, governance, technology and digital transformation. Its tasks\nwould be to map the obstacles facing investors, confidentially identify\nfinancing vulnerabilities among members, and prepare evidence-based\nrecommendations. Dialogue with the Financial Services Authority (OJK),\nthe Indonesia Stock Exchange (BEI) and the Indonesian Central Securities\nDepository (KSEI) should produce a clear list of issues, identify who is\nresponsible for addressing each within their authority, set deadlines\nand specify the evidence needed to assess results.<\/p>\n
At company level, ownership transparency should be a priority.\nInvestors need to understand ultimate beneficial owners, affiliated\nrelationships, related-party transactions and the shares genuinely\navailable for public trading. This information must be consistent and\nupdated when material changes occur. The quality of disclosure also\ndepends on how easily investors can understand the information, ask\nquestions and receive adequate answers.<\/p>\n
KADIN can invite member-listed companies to form an initial group for\nvoluntary improvement, with commitments that can be evaluated. Companies\nwith strong governance can share good practices and help establish\nrealistic implementation standards. For companies with remaining gaps,\nsupport programmes can target specific issues. The credibility of this\ninitiative will depend on a willingness to disclose both progress and\nunfinished work.<\/p>\n
As part of the digital transformation agenda, I see an opportunity to\nimprove the quality of market data. Scattered ownership and affiliation\ninformation that is difficult to compare or inconsistently updated makes\noversight more difficult. Data integration, consistent entity\nidentification and audit trails could assist regulators and market\nparticipants, subject to their respective access rights. Analytics could\nalso help detect trading patterns requiring further investigation. Their\neffectiveness would still depend on data quality, investigative capacity\nand accountable follow-up.<\/p>\n
At the same time, companies need to prepare for financing resilience.\nMembers with substantial capital requirements, foreign-currency\nliabilities or debt coming due in the near term should test the\nresilience of their cash flow under several scenarios. KADIN can\nfacilitate dialogue with banks, strategic investors and providers of\nlong-term capital. This preparation can help companies preserve their\noptions as market conditions change, without assuming that all investors\nwill leave Indonesia or that all foreign direct investment will\nstop.<\/p>\n
Strengthening domestic investors should also be a long-term priority.\nA market with a diverse investor base will be better able to absorb\nchanges in capital flows. However, the development of pension funds,\ninsurers and domestic institutional investors must continue to\nprioritise good governance and the interests of those whose money they\nmanage. Public confidence must not be sacrificed to support market\nprices in the short term.<\/p>\n
Ultimately, the success of Indonesia\u2019s response should be measured by\nverifiable changes: clearer ownership information, more effective\ninvestor protection, market integrity and more resilient access to\nfinancing. Index movements remain important to monitor, but they are\ninfluenced by many factors and are therefore not enough, on their own,\nto measure the success of reform.<\/p>\n
The consultation period offers an opportunity to act before a final\ndecision is made. The government, market authorities and business\ncommunity need to use this time with a clear division of\nresponsibilities. For KADIN, the most meaningful contribution is to help\nensure that Indonesian companies become more trustworthy and\nfinanceable. Confidence built through transparency and consistency will\nstrengthen our ability to turn economic potential into productive\ninvestment and jobs.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/maintaining-confidence-to-keep-indonesia-investable-1792140653", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }