President vows to strengthen capital market

JAKARTA (JP): President Soeharto pledged here yesterday that the government will further develop the country's capital market into a more attractive and efficient financing alternative.

Speaking at the opening of a two-day international conference on the capital market, the President said that revitalizing the capital market is essential to supporting the country's growing economic activities.

Indonesia needs fresh investment funds of at least Rp 660 trillion (US$315 billion) to maintain the projected economic growth of 6.2 percent per annum during the sixth Five Year Development Plan (Repelita VI) period, which began in April, the President said.

"The operation of capital markets is, therefore, increasingly important in meeting the country's economic target since 73 percent of the required investment funds should come from the private sector," he told around 1,500 foreign and domestic executives.

The conference, sponsored by the Capital Market Supervisory Agency (Bapepam), the Jakarta Stock Exchange (JSX), the Jakarta office of the U.S. Agency for International Development (USAID) and the PACAP Research Center at the University of Rhode Island, features noted world economists, including Merton H. Miller, the 1990 Nobel Laureate, Mitsuo Sato, the president of the Manila- based Asian Development Bank, and Richard W. Roll, a professor of insurance and finance at the University of California at Los Angeles.

An exhibition featuring activities of capital-market supporting agencies and listed companies is also being held in conjunction with the conference.

Soeharto acknowledged that the country's capital market is still infant as compared to capital markets in more developed nations.

"We feel encouraged, however, that it has shown quite rapid growth and the people are more aware about the importance of the capital market for long-term investments," he said.

Soeharto said that the government will continue to develop the capital market more rapidly in the future and to further encourage private companies and state-owned firms to raise investment funds through the capital market.

Finance Minister Mar'ie Muhammad said he was upbeat that the country's capital market will become one of the largest, if not the largest, capital market in Southeast Asia, considering the strength of the country's economy.

New measures

Mar'ie said a number of measures have been set forth to further develop the capital market, from securities trading mechanisms to its legal infrastructure.

A new capital market law, soon to be submitted to the House of Representatives (DPR), will hopefully be enforced early next year to replace the outdated Capital Market Law of 1952, he said.

Mar'ie said significant advances have also been made in securities trading activities, including the computerization of share clearing and settlement activities as well as the construction of a new stock market building.

Hasan Zein Mahmud, the JSX president, said trading automation will be introduced as soon as the exchange occupies its new building, which is now under construction on Jl. Sudirman in South Jakarta.

"We expect to be able to also introduce a scripless trading system early next year," he said, adding that the introduction of the new system and the enforcement of the new capital market law will mark a breakthrough in the country's capital market history.

Trading automation will be also introduced on two other stock exchanges, the Surabaya Stock Exchange and the Over-the-Counter market.

As many as 220 companies have so far tapped the capital market potential to raise funds for their investment projects and, according to Bapepam, funds raised by both share and bond issuers already hit a spectacular figure of over Rp 25.59 trillion (US$12.18 billion) as of May. Trading volume has also significantly increased in the last three years.

The daily trading turnover on the JSX, for example, more than doubled to over Rp 77.6 billion in 1993 from Rp 30 billion in 1990. Market capitalization soared by over 558 percent to Rp 69.3 trillion as of the end of 1993 from a mere Rp 12.4 trillion as of the end of 1990. (hen) Holdings -- Page 10