JSX wants govt to rejuvenate stock market

JSX wants govt to rejuvenate stock market

Rendi A. Witular and Zakki P. Hakim, The Jakarta Post, Jakarta

The Jakarta Stock Exchange (JSX) hopes that the new government
will promote the further development of the country's stock
markets by offering incentives and clear cut policies to attract
more companies and domestic retail investors to the local
bourses.

JSX president director Erry Firmansyah told The Jakarta Post
recently that increases in market capitalization and the
participation of more retail investors were crucial to boosting
the role of the stock market in the country's economy.

"The local bourses still need the support of the government so
that they can serve as effective funding sources for the business
community, investment alternatives for the public, and tools for
creating good corporate governance in local companies," said
Erry.

Despite the astounding increase in transaction volume, the
contribution of the local stock markets to pushing economic
growth remains low compared to others markets in the Southeast
Asia region.

According to the JSX report, market capitalization (the rupiah
value of all shares listed) of the local bourses only accounts
for 26 percent of gross domestic product (GDP), far lower than
the 68 percent in the Philippines, 81 percent in Thailand, 156
percent in Malaysia and 241 percent in Singapore.

Erry expected that market capitalization would increase to 39
percent of GDP over the next couple of years if there was a
commitment from the new government to providing incentives and to
adopting the necessary policies for encouraging more firms to
list their shares on the bourses.

"Our proposal for developing the market has been included in
the business roadmap drawn up by the Indonesian Chamber of
Commerce and Industry (Kadin). The roadmap is scheduled to be
submitted to the new government for consideration," he said.

Included in the proposal is the need for the government to
privatize more state-owned companies by selling their shares to
the public via the stock market.

At present, only 13 state firms are listed on the stock market
out of around 150 firms. These state firms account for some 34.1
percent of market capitalization.

Another proposal, which has been proposed on a number of
occasions to the government, is the provision of tax exemptions
for stock transactions, and a reduction in income tax for listed
companies to attract non-listed ones to take out listings.

At present, the treatment of both listed and unlisted firms is
more or less the same, despite efforts by listed firms to apply
good corporate governance as evidenced by increased transparency
in publishing financial reports for the investing public.

According to the proposal, the transparency of listed
companies would eventually help reduce tax fraud as around half
of tax reports issued by non-listed companies are fictitious and
do not reflect the true amount of their tax obligations.

The proposal also urges the new government to protect listed
firms from being easily declared bankrupt. The proposal will
include the sort of protection that is contained in the
bankruptcy bill currently being deliberated by the House of
Representatives.

Another change that is necessary to help boost the
participation of retail investors is a revision of the existing
Banking Law to allow the banking sector play a key role in the
stock market. The involvement of the sector would help depositors
to easily switch their investment portfolios to stocks using the
facilities provided by banks.

The proposal projects that with the various measures it
suggests, the number of retail investors would increase to at
least 1 percent of the country's total population over the next
couple of years, as against 0.03 percent at present.