Venture capital, OTC could narrow gap
Venture capital, OTC could narrow gap
JAKARTA (JP): Economists suggested here yesterday that the
country further develop venture capital businesses and the Over-
the-Counter (OTC) stock market in a bid to narrow the gap between
large and small companies.
They also called for the establishment of an independent body
to help small- and medium-scale companies locate financial
sources outside the banking system and the capital market.
Marzuki Usman, the chairman of the Association of Indonesian
Economists, said narrowing the ever-widening gap between small
and medium companies on the one hand and conglomerates on the
other should be more pragmatic.
"Pragmatic approaches, such as giving more of a push to the
development of the venture capital and the OTC markets, will be
more effective in financing activities of small- and medium-scale
companies," he said.
Speakers at yesterday's business seminar included Bacelius
Ruru, the chairman of the Capital Market Supervisory Agency
(Bapepam), Hafiz Arief, the director of the state-owned PT Bahana
Artha Ventura, and Mahfud Jakile, the head of the monetary
department of the Indonesian Chamber of Commerce and Industry
(Kadin), Hasan Zein Mahmud, the president of the Jakarta Stock
Exchange (JSX), and Tito Sulistio, the president of the OTC stock
market.
Mahfud, however, said that developing OTC and venture capital
would not be enough if no agency is assigned to improve their
management and marketing.
He said that most small- and medium-scale companies have
failed to obtain bank loans not only due to lack of collateral
but also because of their poor business administration.
Improvement
If there is no improvement in their administration systems
such as in managing financial reports, the companies will still
face the same handicaps in raising funds outside the banking
system, said Mahfud, the former president of the state-owned Bank
Tabungan Negara (BTN).
"No investors will be interested in their shares if their
financial reports are not audited or if their operations have no
legal bases," he said.
The government has introduced a number of instruments over the
past few years to help financially weak companies, but most of
the approaches do not run as expected. Many banks, for example,
still fail to meet the central bank's requirement to provide at
least 20 percent of their loans to small and medium companies.
State-owned companies, which are also obliged to set aside
between one to five percent of their net profits for small- and
medium-scale companies, also face difficulties in channeling
their funds.
Critics say that the gap continues to widen as the financial
institutions prefer providing loans to big companies because
lending costs are generally lower than when providing loans to
small- and medium-scale firms.
Mahfud said that an immediate solution, such as utilizing
billions of rupiah of funds raised from the contribution of
state-owned companies, is needed.
"The solution could be the creation of an independent body to
specifically handle the funds and distribute them to a feasible
company," he said, adding that the body should also be
responsible fro providing the company with management and
marketing skills.
Tito Sulistio said a number of approaches are being hammered
out to make the OTC a more affective financial instrument for
small- and medium-scale companies.
"The trading system will be improved to make shares more
liquid," Tito, the newly appointed president of the OTC.
He said that the face value of the shares will be reduced to
around Rp 500 from Rp 1,000 to attract retail investors.
Tito expects the new trading mechanism to make the market more
attractive for both the investing public and share issuers. (hen)