Interview: Tito Sulistio
What is the outlook for the Indonesia Stock Exchange, and where does it stand against other exchanges in the region?
TITO SULISTIO: If we look at the market capitalisation to GDP ratios of other Asian nations, the figure is sometimes over 100%. Although the same ratio only stands at 40% in China, this percentage doubled in just a year. We don’t have many listed companies, despite the fact that Indonesia has the highest number of firms with the potential to be listed. At the moment, we have 380 fewer listed companies than Malaysia, and if we garner an average of 30 new initial public offerings (IPOs) a year, it is going to take us 13 years to reach Malaysia’s level; this is too long for us. In the past five years, the number of listed companies in Singapore and Malaysia has decreased by 1% and 3%, respectively, while Indonesia has seen a 23% increase.
The question is how long it will take us to become the biggest stock exchange in the region. With the current ratio, we will need around 10-11 years; however, we want to accelerate this process.
If we look at the market, we are growing in local currency, but due to the depreciation of the rupiah we are falling against the US dollar. In China market capitalisation is around 25% that of the US, although their trading value is just 40%. This change took place in just one year after measures such as the relaxation of the market and the reduction of interest rates. Meanwhile, the Korea Exchange has already outgrown New York’s in terms of the trading frequency of the two.
Asian capital markets are growing, and we want to be part of this growth by becoming a competitive stock exchange in the region. We aim to develop a resilient and strong capital market within five years. Indonesia’s potential is great, particularly as 57m companies could be listed if we include small and medium-sized enterprises (SMEs) in the mix.
How can the number of IPOs be increased?
SULISTIO: We have four basic steps to increase the annual number of IPOs. The first involves adding companies that should already be listed on the Indonesia Stock Exchange. Foreign companies exploring natural resources in Indonesia need to be listed on our exchange. According to Article 33 of the constitution, when natural resources are not controlled by the state and when foreign players have a mandate to explore them, the Indonesian public must receive a return from the business of these non-domestic enterprises. The second step is to persuade the entrance of state-owned enterprises and large Indonesian companies that are not yet listed by illustrating the benefits of going public to them. This can be achieved through the third step, which is education. To raise awareness and deliver information about capital markets, we have joined an initiative to educate the members of the Indonesian Chamber of Commerce and Industry, we have more than 160 investment galleries in universities, and we conduct 3000 seminars and workshops for companies and potential shareholders every year. Finally, we need to make going public easier. Due to fiscal policy and surveillance, it currently takes around 20-30 weeks to become listed. We are aiming to reduce this to 11-15 weeks. It is a burden for companies outside Java to be listed, since they have to personally come to Jakarta to carry out the procedure, thus curbing the potential involvement of companies based in regions like Sulawesi, Kalimantan or Papua.
To overcome this issue we will open a branch in Surabaya and are working with the Indonesia Financial Services Authority to increase efficiency and speed up the IPO process. We are also improving access for SMEs, for whom legal and administrative barriers act as impediments to listing. We expect to see 35 companies listed in 2016.
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