Maintaining Confidence to Keep Indonesia Investable

Confidence has tangible economic value. When investors trust the quality of information, the fairness of trading and the certainty of protection for their rights, companies have a greater chance of securing financing at a reasonable cost. Conversely, when confidence weakens, the costs can spread from the trading floor to companies delaying expansion, suppliers losing orders and workers facing fewer employment opportunities. It is in this context that Indonesia needs to consider MSCI’s proposal to change the classification of its equity market.

On 15 October 2026, MSCI announced a consultation on a proposed reclassification of Indonesia from an emerging market to a standalone market, with a final decision scheduled no later than the end of June 2027. The concerns raised include a lack of clarity over share ownership structures and alleged coordinated trading. Reforms announced by the authorities need to be accompanied by consistent implementation and evidence of impact that investors can assess. The status of the proposal must be communicated accurately: the consultation is under way and no final reclassification decision has been made.

This distinction matters to ensure that our response is proportionate. Equity-market classification is different from a country’s credit rating. However, its potential impact on access to capital must still be taken into account. If reclassification proceeds and Indonesian shares are removed from the relevant benchmark indices, funds tracking those indices will need to adjust their portfolios. Active investors have greater discretion, but will also assess liquidity, investment mandates and market risk.

For businesses, changes in investor behaviour can have consequences far beyond daily share-price movements. Weaker liquidity makes it harder to absorb large transactions without affecting prices. Lower valuations can mean that a company must sell a larger stake to raise the same amount of capital. Some share offerings, production-facility construction plans or business expansions may ultimately be reconsidered. The scale of the impact will depend on the final decision, the implementation timetable, global conditions, and the policy and corporate response.

I therefore see this as an agenda for financing national growth. Indonesia needs long-term capital to strengthen industry, build digital infrastructure, expand energy supply and raise productivity. Its considerable economic potential will be more readily translated into investment if investors can understand who controls a company, how important decisions are made and whether shareholders’ rights are treated fairly.

We are entitled to scrutinise the methodology and proportionality of assessments by international index providers. Critical dialogue is necessary to ensure Indonesia’s market characteristics are fully understood. However, Indonesia will be in a stronger position in that dialogue if it can demonstrate evidence of improvement. Objections to external assessments should go hand in hand with a willingness to address shortcomings that genuinely undermine investor confidence.

In this situation, KADIN has a concrete role to play. As a business organisation, it can bring together companies’ financing needs, investor expectations and the authorities’ reform agenda. This requires sustained technical work: gathering concerns, setting priorities, encouraging change among member companies and assessing progress. Enforcement remains the responsibility of the relevant authorities, while businesses are responsible for improving their corporate practices.

One practical first step would be to establish a small working group with a 90-day mandate. It should involve specialists in capital markets, investment, governance, technology and digital transformation. Its tasks would be to map the obstacles facing investors, confidentially identify financing vulnerabilities among members, and prepare evidence-based recommendations. Dialogue with the Financial Services Authority (OJK), the Indonesia Stock Exchange (BEI) and the Indonesian Central Securities Depository (KSEI) should produce a clear list of issues, identify who is responsible for addressing each within their authority, set deadlines and specify the evidence needed to assess results.

At company level, ownership transparency should be a priority. Investors need to understand ultimate beneficial owners, affiliated relationships, related-party transactions and the shares genuinely available for public trading. This information must be consistent and updated when material changes occur. The quality of disclosure also depends on how easily investors can understand the information, ask questions and receive adequate answers.

KADIN can invite member-listed companies to form an initial group for voluntary improvement, with commitments that can be evaluated. Companies with strong governance can share good practices and help establish realistic implementation standards. For companies with remaining gaps, support programmes can target specific issues. The credibility of this initiative will depend on a willingness to disclose both progress and unfinished work.

As part of the digital transformation agenda, I see an opportunity to improve the quality of market data. Scattered ownership and affiliation information that is difficult to compare or inconsistently updated makes oversight more difficult. Data integration, consistent entity identification and audit trails could assist regulators and market participants, subject to their respective access rights. Analytics could also help detect trading patterns requiring further investigation. Their effectiveness would still depend on data quality, investigative capacity and accountable follow-up.

At the same time, companies need to prepare for financing resilience. Members with substantial capital requirements, foreign-currency liabilities or debt coming due in the near term should test the resilience of their cash flow under several scenarios. KADIN can facilitate dialogue with banks, strategic investors and providers of long-term capital. This preparation can help companies preserve their options as market conditions change, without assuming that all investors will leave Indonesia or that all foreign direct investment will stop.

Strengthening domestic investors should also be a long-term priority. A market with a diverse investor base will be better able to absorb changes in capital flows. However, the development of pension funds, insurers and domestic institutional investors must continue to prioritise good governance and the interests of those whose money they manage. Public confidence must not be sacrificed to support market prices in the short term.

Ultimately, the success of Indonesia’s response should be measured by verifiable changes: clearer ownership information, more effective investor protection, market integrity and more resilient access to financing. Index movements remain important to monitor, but they are influenced by many factors and are therefore not enough, on their own, to measure the success of reform.

The consultation period offers an opportunity to act before a final decision is made. The government, market authorities and business community need to use this time with a clear division of responsibilities. For KADIN, the most meaningful contribution is to help ensure that Indonesian companies become more trustworthy and financeable. Confidence built through transparency and consistency will strengthen our ability to turn economic potential into productive investment and jobs.