Interview: Inarno Djajadi

How would you evaluate the performance of the capital markets during 2018?

INARNO DJAJADI: Indonesia’s economy is quite stable. GDP growth was above 5% in 2018, while the inflation rate was around 3.5% and the interest rate was at 6%. Indonesia also boasts solid investment grades from credit rating agencies Fitch, Standard & Poor’s, and Moody’s, which is quite remarkable. Our goal is to increase the financial literacy and inclusion of the Indonesian people through 30 representative offices across the archipelago.

In 2018 the number of single investor IDs increased to 853,576, which is a 36% year-on-year increase. The number of daily active investors also increased by 28% to 40,000. Moreover, 2018 saw the highest number of new listings since the IDX’s privatisation in 1992, with 619 companies listed on the exchange as of December.

In addition, in 2018 we reached an average of 380,000 trading transactions per day, which is not only 24% higher than in 2017 but is also among the highest in South-east Asia. Furthermore, we successfully implemented the T+2 settlement cycle, which mandates a two-day settlement period for transactions. Additionally, Indonesia has joined the ranks of Vietnam, Thailand and Singapore in implementing this standard, and daily trading values have increased substantially as a result.

What strategies encourage initial public offerings (IPOs) of state-owned enterprises (SOEs)?

DJAJADI: Certain challenges stem from the fact SOE listings have to be approved by Parliament. However, the subsidiaries of SOEs do not require this government approval. Our strategy has therefore been to approach SOE subsidiaries. In 2018 four such subsidiaries were listed on the IDX: the insurance provider Asuransi Tugu Pratama; the shipping service company Indonesia Kendaraan Terminal; the pharmaceutical company Phapros; and the sharia-compliant retail bank BRIS yariah. As numerous multinational corporations retain substantial assets and operations in Indonesia, what are the prospects for boosting dual listings?

DJAJADI: We are working closely with the Financial Services Authority to establish a better regulatory environment for Indonesia’s capital market industry. Currently, if a foreign company with assets and revenues wishes to list at IDX, it has to list through the Indonesian Depository Receipt. Many international companies operate in Indonesia, but their legal entity is based abroad, which poses some bureaucratic challenges. Telecommunications service provider Telkom and mining company ANTAM are two major companies that are already dual listed. Indonesia’s four unicorn companies are also prospective candidates. Naturally, we want them to list on the IDX, but this is made more challenging by the fact that many shareholders are foreign companies.

What steps are being taken to improve the level of transparency in the capital markets?

DJAJADI: We are always looking to improve transparency in the IDX. Fortunately, Rule No. 1A, which concerns listings of shares or stocks and equity-type securities other than stocks issued by the listed company, has been amended. Our aim now is to ease requirements, shorten the licensing process and increase investor protection. Furthermore, our focus for 2019 is e-registration, which should prevent duplications from IPO candidates.

For the sake of transparency, in December 2018 we also implemented a special notation system, by which notes are issued reporting financial performance, material information and the compliance of a company. This sends a clear signal to investors that the companies they invest in are transparent.