Final approval on futures bill delayed again

JAKARTA (JP): Final approval of the bill on futures commodity trading was canceled for the second time yesterday, as members of the House of Representatives failed to agree with the government on several important issues.

The government-sponsored bill, submitted to the House in December, was scheduled to be approved on April 4 but was postponed. It was delayed again yesterday.

The delay means the bill will not get the House's approval until the next debate session which will be in early July to September this year.

The current meeting sessions will end on April 15.

Sources said yesterday the government and some House members were still divided over the type of commodities to be traded on the futures exchange, the role of the national Commodity Exchange Agency and the validity of the decree issued by Minister of Industry and Trade for the establishment of a special team to prepare the exchange's operations.

Legislators complained that the ministerial decree disregarded the House's role because it was issued before the bill was approved by legislators and before it was ratified by the President.

The bill which will pave the way for the establishment of Indonesia's first futures commodity exchange will provide a legal foundation not only in trading activities but also to exchange membership and trading supervision.

Under the proposed bill, the futures bourse would be run by private companies while the government through a Commodity Supervisory Board, would act only as supervisor.

Many analysts doubt the exchange can operate efficiently or whether it is worth joining, considering that overseas exchanges can be accessed.

Some fear the market will be dominated by big groups such as the Federation of Edible Oil and Fats Association (FAMNI) and the Association of Indonesian Coffee Exporters (AEKI) whose commodities are likely to be the first to be traded on the futures market.

The two associations have been actively preparing the establishment of the futures commodity.

FAMNI Vice Chairman Tarmidzi Rangkuti said FAMNI had no intention of monopolizing the exchange.

In fact seeking members who were willing to be listed as the exchange's founders was not easy, he said.

"Many of FAMNI's members have not decided yet whether they want to join (the futures exchange) or not. They say it's safer to wait and see," he said.

"If FAMNI and AEKI are considered to have a close relationship with the national Commodity Exchange Agency, it is because we were the first to respond to the government's proposal to establish a futures commodity exchange," Tarmidzi said.

Four Indonesian commodities have the potential to be traded on the exchange: coffee, crude palm oil, rubber and cacao.

A feasibility study last year concluded that a futures trading exchange would cost between US$5 million and $10 million to set up and $1.5 million to run each year.

The exchange could reach break-even point in two to four years of operation with fees for each transaction set between $2 and $5. (pwn)