RI corporate governance reforms on track
Berni K. Moestafa, The Jakarta Post, Jakarta
In spite of recent negative corporate news, the Asian Development Bank (ADB) sees positive steps being taken by both the public and private sectors to apply good corporate governance, thus helping reform the country's economy.
ADB corporate governance project leader Bernie Carmody said the idea of corporate governance was gaining momentum in Indonesia.
"The government and the private sector are making significant efforts to improve corporate governance," he told The Jakarta Post in an interview on Wednesday.
Good corporate governance, he said, is a company's ability to generate long-term profit in an ethical manner, without disregarding the interest of its stakeholders. They being the employees, the local community, and its creditors.
So far Indonesia's response to this concept had been encouraging, he said.
"Eighteen months ago you didn't have a single NGO (non- governmental organization) on corporate governance. Now there are seven," Carmody said.
On visits to the boardrooms of 30 large private and state companies, he recalled that all had responded positively.
"The question has moved from what is corporate governance to how to implement it," he said.
Carmody said the ADB was working alongside the National Committee for Corporate Governance in implementing the concept.
The ADB project started last February and is one of several sponsored by other donors, such as the World Bank.
Its programs also cover promoting corporate governance reforms at the macro level, such as within the country's legal system.
According to Carmody, a clean state apparatus is vital for ensuring companies apply good corporate governance.
One problem in this regard here is the widespread incidence of corruption, collusion and nepotism, he said.
"How are we supposed to stay clean if we swim in dirty water," Carmody said, recalling a question by a local participant at a corporate governance seminar.
The initiative to reform Indonesia's corporate governance sprang from the 1997 financial crisis. Carmody said the crisis partly stemmed from companies making bad business decisions.
At that time, the government and private companies saw a need to adhere to best practices lest the same mistakes occurred again.
Carmody added that foreign investors regarded corporate governance as a yardstick when they wanted to bet on Indonesian companies.
At this point, a stream of bad corporate news had further dampened their interest in Indonesian assets.
The latest example of this was the liquidation of the publicly listed Unibank.
The Capital Market Supervisory Agency (Bapepam) suspects the bank's former owner may have illegally stripped his stake in the bank to escape liability.
Monday's closure of the bank followed hot on the heels of a survey last week on the best practices of 45 leading firms listed on the Jakarta Stock Exchange (JXS).
Out came names like PT Astra International, PT Unilever, PT Bank NISP, PT Bank Universal, PT Bank Niaga, and state-owned firms such as PT Tambang Timah and PT Aneka Tambang.
The survey found that these companies were practicing acceptable corporate governance standards. Carmody called this a positive sign.