The House passes Capital Market Bill

The House passes Capital Market Bill

On Monday (Oct. 2, 1995) the House of Representatives passed
the Capital Market Bill. Once it is enacted into law by the
president, it will replace the 1952 Bourse Law which does not
provide enough protection for investors in Indonesia's fast
growing capital market.

To enhance investor involvement, we must provide a reliable
legal platform for investors, ensure that listed companies going
public adhere to disclosure requirements, and maintain periodic
communication between the various associations of professionals
involved. Close monitoring of international markets for
opportunities to attract capital to Indonesia and to improve the
knowledge of local investors is imperative.

"Stock exchanges in emerging markets must guard against
insider trading to avoid becoming 'casinos' shunned by potential
investors," was the warning given by Hasan Zein Mahmud, president
director of the Jakarta Stock Exchange. This unfair practice will
destroy public confidence, creating a stock market which is
"worse than a casino, where investors' money can be looted by
insiders," he added.

Currently Indonesia has two stock exchanges, the JSX in
Jakarta and the Surabaya Stock Exchange (SSE) in Surabaya, East
Java. To protect investors the new bill will require any company
wishing to float shares on stock markets to disclose its real
circumstances. Any company with more than 300 shareholders is
automatically subject to the transparency requirements.

In countries like Indonesia, where many large companies are
traditionally family-owned, some firms equate complete disclosure
with interference in management prerogatives. He stated that we
should arrive at the right balance, adding that "too rigorous
disclosure could drive away companies, while failure to be
rigorous will tarnish the reputation of the bourse."