Limited firms ordered to publish financial reports

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)