JSX gets new chief

The Jakarta Stock Exchange (JSX) shareholders meeting which elected new boards of directors and commissioners (supervisors) on Monday is seen by many analysts as reflecting the stronger influence and intervention of the Capital Market Supervisory Agency (Bapepam) in the private company which owns and operates the JSX.

The previous management, headed by Hasan Zein Mahmud, was replaced two years ahead of the expiry of its term not because that team performed poorly, but because the election was required by a Bapepam ruling. It was, thus, not called for by the JSX shareholders as is normally done in a limited liability company.

The Bapepam ruling, issued in January along with more than 85 other regulations to implement the new capital market law, sets out new requirements for the JSX directors and new procedures for their election. Outstanding among the new procedures are the stipulations that candidates for the board of directors and commissioners have to be approved by Bapepam and that they must be nominated in a team and not as individuals to ensure a good working mechanism.

Obviously it is too early to fairly assess whether the management and supervisory teams elected under the new procedures will perform better than the previous ones. We feel comfortable, though, that the management team and supervisory board which were elected are comprised mostly of competent professionals who are well apprised of the developments at JSX.

Cyrill Noerhadi, the new president director, has been involved directly in the stock market development in his capacity as the president of the Securities Clearing Depository. Two other directors -- Felia Salim and Mas Achmad Daniri -- were members of the previous management board under Hasan. The other one, Edwin Stambul, is a director of a securities company.

Still more encouraging was the election of Tax Director General Fuad Bawazier as the chief supervisor. Fuad was the expert in charge of capital market development on the finance minister's staff in 1991 and 1992. As the tax director general since 1993, he has also directly monitored the developments on the JSX. The stock exchange needs a supervisor of his official caliber in dealing with Bapepam.

Despite the positive results, Bapepam's ruling to require JSX to hold another election for its board of directors within one year is still raising questions relating to the manner and rationale with which Bapepam may further exercise the stronger power now vested in it by the new capital market law.

The majority of analysts, most notably the foreign ones, were deeply impressed with the integrity and technical competence of Hasan's management team. And although nobody seems to doubt the competence of Cyrill's team, this group has yet to prove its integrity, which is a very crucial requirement for the management of the JSX, whose capitalization has now reached Rp 177.5 trillion (US$76 billion).

However, the new management will not likely be able to build up a high degree of integrity and autonomy, if Bapepam does not limit its intervention to the fundamentals needed to stimulate sound market growth and to protecting the interests of the investing public.