Lack of incentives discourage firms from going public

Lack of incentives discourage firms from going public

Rendi A. Witular, The Jakarta Post, Jakarta

Lack of fiscal incentives and unfavorable capital market
regulations have been blamed for the sluggish growth in the
number of companies willing to sell their shares to the public by
listing themselves on a stock market, an association says.

Such a situation makes it difficult for the local bourse to
become a major source of financing, outside of banks and other
investment tools, said chairman of the Indonesian Publicly Listed
Companies Association (AEI), Airlangga Hartarto, on Thursday.

"The government is giving the same treatment to publicly
listed firms as it is to those that are not listed. This
discourages more firms from improving their corporate governance
by going public," said Airlangga after meeting Vice President
Jusuf Kalla.

Airlangga said Indonesia was lagging behind neighboring
countries in luring more companies to the stock market, which to
some extent, limits the participation of investors in the market.

The absence of incentives has led the Jakarta Stock Exchange
(JSX) to lower its ambitious target for the registration of new
listed companies this year from 30 to just 15.

From January to September, there were eight new companies
listed on the JSX, with another seven expected to follow soon.

At present, there are 333 companies listed with the bourse.

There are also concerns that several of the existing listed
companies will buy back their shares from the public and become
private companies, in part because being a listed company means
more costs.

In order to attract non-listed companies, AEI suggested the
government provide fiscal incentives in the form of a tax
clearance facility and an income tax break ranging from 5 percent
to 10 percent.

In the tax administration sector, the association demanded the
government allow public accountants to audit the taxes of
publicly listed companies without having to go through another
audit by the Directorate General of Taxation.

AEI also appealed to the vice president to drop plans to tax
mutual fund proceeds, as included in the proposed amendment of
the tax laws, which are currently being deliberated upon by the
House of Representatives.

In the regulation sector, AEI urged the Capital Market
Supervisory Agency (Bapepam) to reduce an effective approval for
an initial public offering (IPO) and for other forms of capital-
raising from 45 days currently to 30 days.

Airlangga said publicly listed companies should also receive
easier processing when trying to acquire certain operational
approvals or licenses, as well as a smooth procedure for export
and import activities.

"With preferential treatment provided for publicly listed
companies, we expect that their performance will be improved and
they could pay more taxes to the state because these companies
already have good corporate governance," said Airlangga.