Capping share ownership

The controversy and confusion caused by Minister of Cooperatives Subiakto Tjakrawerdaya's remarks, after a meeting with President Soeharto, about the need to limit share ownership in listed companies should be a good lesson for officials, and everybody else, to be more careful about what they say to newsmen.

The political and business schemes of things in Indonesia are such that appeal, observation, hints or subtle words attributed to the President can easily be taken for legally-binding rules. In fact, remarks by anybody, be they officials or private citizens known to be close to the President, could immediately set off official actions beyond what was intended.

Take for example recent remarks by Bambang Trihatmodjo, chairman of the Bimantara group, about his plans in the Jonggol housing estates near Bogor. His remarks were immediately taken by many as an official policy statement. Although the statement's essence was later denied, the remarks alone forced several ministers to issue clarifications and even to make field checks.

Having said that, we do not mean to negate immediate reactions or responses to, nor the great influence, of whatever is said by or attributed to the President. That reflects the quality of Soeharto's leadership. Problems could, however, crop up unintentionally if those emerging from Soeharto's Bina Graha office or Jalan Cendana residence misinterpreted or could not fully comprehend the right perspective or meaning of what they just learnt. The more adverse would be the impact if the President's callers deliberately steered the real meaning of the messages they got for a particular business group's interests.

President Soeharto's remarks, as quoted by Subiakto, on the need to promote more equitable share ownership in listed companies, were not completely new. They only reaffirmed the President's perseverance, sometimes to the point of obsession, to develop equity within the country's economic development. But we think Subiakto was out of line when he explicitly said the President wanted to have share ownership by an individual or a business group limited to 15 percent. The latter remark--again given the head of state's power and influence--could have been interpreted that such regulatory restriction was imminent.

Subiakto blamed the Jalan Cendana correspondents for quoting him out of context but his press briefing transcript proved his remarks about share ownership were correctly and accurately presented.

Further confusion ensued because Subiakto's statement about such an important and complex matter was quite summary. Since most private companies listed on the domestic stock exchanges remain controlled by their founders who are the majority shareholders, these businessmen were confused as to whether they would soon be forced to divest. The most devastating impact was the perceived inconsistency with regard to the rules of the game on the stock exchanges which actually have been stipulated clearly in the Capital Market Law.

It is quite encouraging, though, that President Soeharto has acted immediately to stop all the fuss and confusion. He summoned Minister of Finance Mar'ie Muhammad on Thursday evening to his residence who later issued a statement to reaffirm that the Capital Market Law still governs the stock exchanges' mechanisms.

The quick move once again showed Soeharto's full understanding of the importance of accurate information, rule of law and policy consistency. This is especially crucial for stock exchanges where information is a vital factor in price forming forces. The speed in which the President acted also demonstrated his great awareness of the important role of the capital market in fueling economic development. The Jakarta Stock Exchange, which now lists around 250 companies with a total market capitalization of Rp 176 trillion (US$75 billion), has indeed been assuming an increasingly pivotal role in the country's economy.