Foreign issuers will be allowed here next year

JAKARTA (JP): Foreign companies will be allowed to float shares on Indonesian stock exchanges next year, Felia Salim, a director of the Jakarta Stock Exchange (JSX), said yesterday.

Felia told journalists during a break in a seminar on the new stock market law at the Borobudur Inter-Continental hotel that the JSX is currently drafting the ruling on listing procedures for foreign companies.

"However, the draft still needs the consent of the Stock Market Supervisory Agency (Bapepam) before it comes into affect," Felia said.

As an international-level stock exchange, Felia said, the JSX should follow the global trend of equity movement.

She said that neighboring stock exchanges, such as the Kuala Lumpur Stock Exchange and the Thailand Stock Exchange, have moved toward allowing the listing of foreign firms on their markets.

"It will benefit both local and foreign investors if foreign companies are allowed to list their shares here. They will have more choices to buy the best shares," Felia said.

Concurring with Felia, economist Christianto Wibisono said that by allowing foreign companies to enter local markets, the stock market law will help create more competition among share issuers on local markets.

"I fully agree with the entrance of foreign companies into local markets because it could stop the arrogance of local share issuers," said Christianto, who is also chairman of the Indonesian Business Data Center.

Law

According to the explanatory notes on point 15 of article 1 of the new stock market law, both local and foreign companies can conduct public offerings of their shares on local stock markets.

The law was endorsed by the House of Representatives early last week and is expected to come into effect early next year.

While applauding the passing of the new law by the House, JSX president Hasan Zein Mahmud criticized certain articles of the law, which, he said, may cause "set backs" in the country's future stock markets.

He said that the law gives Bapepam excessive control over local stock exchanges. It provides for Bapepam to be involvement in the election of members of the exchanges' boards of management and commissioners and in the preparation of the exchanges' annual budget.

"According to the rule of thumb, the management of the JSX is responsible to Bapepam in relation to its public services, while, in relation to financial responsibilities, the management should be responsible to shareholders," Hasan said.

Point 3 of article 5 of the law stipulates that the stock exchanges' annual budget and the use of its profits have to follow Bapepam's guidelines and have to be reported to the agency.

Another "set back" in the law is that its gives responsibilities to local stock exchanges in managing stock transactions, trading settlements and ensuring efficient flows of deals but does not give them the necessary rights to control professions and institutions involved in those activities, Hasan said.

"Instead, the law extends all the necessary controlling rights to Bapepam," Hasan said. "Thus, Bapepam turns out to be the most powerful institution in the capital market."

A similar criticism of the "powerful" Bapepam was voiced by lawyer Todung Mulya Lubis and economist Rizal Ramli.

Mulya said at an earlier stock exchange law seminar on Wednesday that the law gives excessive power to Bapepam, without conferring full independence on the body.

Supporting Mulya's argument, Rizal, who is chairman of the Econit economic research group, said Bapepam needs a strong group of professionals with good salaries to exercise the agency's control over stock market-related institutions and professions.

"If not, I'm afraid, a number of Bapepam's officials will misuse their power for personal gain," Rizal said. (rid)