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."