Limited firms ordered to publish financial reports

JAKARTA (JP): The government has issued a regulation requiring Indonesian businesses to publish their annual financial reports, in a move to improve the country's much-criticized lack of corporate public disclosure

Improving transparency is also part of the medicine prescribed by the International Monetary Fund (IMF) to help the economy recover from the current crisis.

According to the new regulation, which was issued on Feb. 14 and effective immediately, all limited companies which have assets of Rp 50 billion (about US$5.5 million) or more, and those which raised funds from the public through the issuance of bonds or other debt notes, are obliged to publish their annual financial reports containing profit/loss statements, cash flow records, equity compositions and the position of their accounts' receivables and liability.

The requirement to issue financial reports for companies which are not included in the above categories will be stipulated by the Ministry of Trade and Industry.

"The annual reports must be audited by public accountants," said Minister of Finance Mar'ie Muhammad, when announcing the regulation at a hearing with the House of Representatives Friday.

Disclosure requirements were previously applied only to public companies, banks and financial firms.

Mar'ie said that foreign investors had strongly criticized the lack of public disclosure of Indonesian companies, including publicly listed entities.

He said this had caused investors to make guesses when valuing Indonesian companies. "The effect is that foreign investors tend to take the worst-risk scenario," he said.

Analysts have said that the country's current financial crisis, which saw the rupiah plunge to as low as Rp 17,000 to the U.S. dollar in January, has been partly caused by the poor transparency of the Indonesian economy, and corporate sector in particular.

They stress that to help restore confidence in the economy, transparency must be improved.

The IMF reform programs, agreed upon by the government last month in return for a US$43 bailout, include the abolition of monopolies and collusion, and promotion of market competition, are expected to boost disclosure in the economy.

Questions about such commitments, however, heightened last week when the government seemed committed to implementing a currency board system (CBS), in a bid to stabilize the rupiah by pegging it to a certain exchange rate of an anchor foreign currency.

The IMF and several other leaders of developed nations have criticized the CBS plan. The former has threatened to withdraw its bailout if Indonesia implements the currency peg.

But Mar'ie said that Indonesia would remain committed to the IMF reform programs.

The latest developments on the CBS, however, may lead to a postponement in the plan's implementation.

Vice presidential candidate B.J. Habibie said no decision had been taken to fix the rupiah through the use of a CBS.

"The decision about a fixed currency has not been taken. That would only be an emergency step in case speculation against the rupiah continued," Habibie told Der Spiegel magazine in an interview published in Bonn Friday. (08)