Businessmen see bright future for local stock market

Businessmen see bright future for local stock market

JAKARTA (JP): The Indonesian capital market is in for a bright
future due to the government's commitment to realigning the
market's rules and management, foreign business leaders say.

"As representatives of the foreign investors in the country,
we welcome very much the Indonesian government's efforts to
introduce a new ruling on the capital market, which I believe
will encourage many more foreign investors to come to Indonesia,"
Tan Soo Nan, executive vice president of the Development Bank of
Singapore told The Jakarta Post here yesterday.

"I should honestly say that Indonesia has tremendous potential
to develop its capital market and even will probably become a
leading market in the Asian region, thanks to the stability of
its economy and politics," he said.

Indonesia will likely post a significant growth in gross
domestic product (GDP) of seven percent this year, compared to
6.5 percent last year and 6.3 percent in 1992, Tan noted, saying
this kind of growth is a key economic indicator.

Tino Tratschin, vice president of the Union Bank of
Switzerland, concurred that Indonesia, one of the leading
economies in the region, is now increasingly aware of the key
role of the capital market.

Tratschin and Nan were among the participants in the two-day
Euromoney conference on the capital market opened at Shangri-La
Hotel yesterday.

The conference, which was opened by Secretary General of the
Ministry of Finance Jusuf Anwar was jointly sponsored by Bank
Niaga/Niaga Securities, Lippo Securities, Morgan Stanley Asia,
Union Bank of Switzerland, Gadjah Tunggal DBS Securities/DBSBank
and PT Semen Cibinong.

Meanwhile, Charles L. De Queljoe, president of Lippo
Securities affiliated with the diversified business conglomerate,
Lippo Group, said that the Jakarta stock exchange has grown
robustly, demonstrated by its high capitalization and the number
of listed companies.

He noted that the trading volume on the JSX , for instance,
reached Rp 19.28 trillion last year, up from Rp 7.93 trillion a
year earlier and only Rp 5.78 trillion in 1991.

Expectations

Queljoe, while praising the new legislation to strengthen the
powers of the Capital Market Supervisory Agency (Bapepam),
however also asked for clarifications about the capital gains
tax.

"As you know, in some countries such as Singapore and Thailand
there is no capital gains tax on securities transactions," he
said.

Queljoe expressed concern that the capital gains tax might be
one of the causes for the recent drop in domestic investment on
the exchange.

He estimated that domestic investors account for only between
10 to 15 percent of the transactions on the stock markets.

"I think, the capital gains tax has been further discouraging
domestic investors from the capital market," he pointed out.

But the foreign investors have some advantages because they do
not have to pay capital gains tax on profits that they make at
the JSX, he argued.

He also expressed concern about the restrictions imposed on
pension funds.

"Only about 10 percent of the total pension funds are invested
in the stock market," he added.

He noted that the Indonesian capital market's capitalization
last year reached only $34 billion compared to $150 billion in
Thailand and $230 billion in Malaysia.

Stock market capitalization accounted for only 23 percent of
Indonesia's GDP.

Commitments

Minister Mar'ie Muhammad noted in a written speech to the
conference that the government is now on the right way to develop
the country's capital market.

"Today we see a nation characterized by low inflation, a
growing agricultural surplus, a dynamic manufacturing sector, and
rapid export growth," he said.

"One of the main functions given to Bapepam, for example, is
to be a vehicle through which foreign investment can be
effectively channeled to help meet the significant levels of
financing required to achieve our growth targets," he added.

In addition, the board should provide small- and medium-sized
companies with easy access to a viable alternative source of
capital.

He concluded that the government is fully committed to putting
in place a permanent legal and regulatory framework that is
consistent with international standards and practices. (fhp)