Observer: Capital market reform must be part of national development agenda

Legal and development observer Hardjuno Wiwoho has stated that capital market reform must become part of the national development agenda. As the largest economy in Southeast Asia with a large population, he said, Indonesia has a great opportunity to attract global capital flows. “However, this opportunity can only be realised if the government is able to strengthen transparency, governance, and legal certainty,” Hardjuno said in a statement received in Jakarta on Saturday. He assessed that Indonesia’s potential is very large, but potential alone is not enough because what is needed is trust. Thus, if transparency, legal certainty, and market integrity continue to be strengthened, he continued, Indonesia has the opportunity to become one of the most attractive investment destinations in the region. Conversely, according to him, if governance issues are not addressed, Indonesia risks losing the opportunity for global capital inflows that are crucial for development. Therefore, Hardjuno believes the latest notes from Morgan Stanley Capital International (MSCI) must be seen as momentum to carry out more fundamental reforms of the Indonesian capital market. “MSCI is essentially reminding us that a strong capital market is not built on euphoria, but on trust. Trust is only born from transparency, accountability, and a well-functioning rule of law,” he said. According to him, MSCI’s decision to keep Indonesia in the emerging market group is not entirely encouraging news. In the Market Classification Review 2026, he said, MSCI did not downgrade Indonesia’s status, but still provided a number of notes regarding share ownership transparency, the validity of free float, and allegations of coordinated trading which are considered to affect the investability of the Indonesian capital market. Hardjuno assessed that these notes show the biggest problem in the Indonesian capital market today is no longer about the growth in the number of investors or market capitalisation, but rather the still weak trust in governance and legal certainty. He said MSCI’s attention to share ownership transparency, free float validity, and allegations of coordinated trading should not be viewed as merely technical issues. These three things are considered to concern the main foundation of a modern capital market, namely investor confidence in market integrity. From a legal and development perspective, he continued, the capital market is essentially a market of trust. “Investors do not only calculate potential profits, but also assess whether a country is able to guarantee information disclosure, equal treatment for all market participants, and consistent law enforcement,” said Hardjuno. Therefore, he hopes MSCI’s attention to the allegations of coordinated trading must be used as momentum to strengthen transaction supervision in the capital market. He stated that share price formation that does not fully reflect market mechanisms can create distortions while reducing the credibility of the Indonesia Stock Exchange in the eyes of international investors. He stressed that Indonesia cannot build a large capital market just by increasing the number of investors or encouraging more companies to list on the exchange, because it is more important to ensure the market works honestly, transparently, and reliably. In addition to transaction supervision, Hardjuno also highlighted the importance of disclosure regarding the ultimate beneficial owner of a company. He revealed that ownership transparency has now become one of the main standards observed by global institutional investors because it is directly related to accountability and risk mitigation. He conveyed that if the ownership structure is too complex and difficult to trace, the level of trust will decline. “Global investors today do not only look at financial reports, but also look at the quality of governance and information disclosure,” he said. Hardjuno added that various countries which are now major investment destinations have succeeded in building strong capital markets because they are able to maintain legal certainty. Singapore, for example, he continued, is known for its transparency and consistent rule enforcement. In addition, he said other countries such as South Korea and India also continue to strengthen governance and investor protection as the foundation for capital market development.