Interview: Jemmy Paul Wawointana
Where can technology accelerate growth among Indonesia’s capital markets?
JEMMY PAUL WAWOINTANA: Financial technology (fintech) companies have been growing exponentially since 2015. The total number of Indonesian capital market investors grew by 53% over the course of 2019. Interestingly, 78% of mutual fund investors were fintech companies. In a short period of time we have seen very encouraging developments. Admittedly, young investors may account for a smaller percentile in terms of total wealth in Indonesian capital markets. However, as their income grows, so too will the capital markets. Moreover, a young, middle-class population coupled with enormous technology potential will lead to a growth in the profitability of fintech companies. The segment needs clear regulations and ample support from authorities. This will enable the sustainable growth of technology firms and lead to greater return on investment.
What can be done to cultivate a culture of responsible investment in Indonesia?
WAWOINTANA: Responsible investments are crucial to the continued development of capital markets, for this segment is fundamentally based on trust. In 2019 we saw a number of high-profile cases of major companies suffering losses as a result of irresponsible investments. While one could take comfort in the fact that there was a steady rise in the number of investors, there is no denying that such cases are causes for concern. The industry has taken heed of this, and many measures have been implemented to build investor confidence. The country’s investment scene is admittedly still in the developmental stages, and it is understandable that investors demand transparency and accountability. Players across the industry must be on the same page, and those exploiting the system must be held accountable. We will reap the benefits if sufficient effort is made to educate investors and brokers about responsible investment. The regulators must be clear about what is required from the financial services industry, and players must have a correct understanding of these requirements. This will benefit not only the major stakeholders, but all Indonesians who stand to gain from growth in our capital markets.
Which areas are ripe for greater collaboration between banks and asset management firms?
WAWOINTANA: Indonesians’ level of trust in banks is high, and rightfully so. Our banking system has performed remarkably well compared to some other countries. This is thanks to a high level of supervision from various authorities. Given the high level of trust, it is understandable that the majority of assets under management come from bank wealth management funds. As our banks remain stable and liquidity grows, these channels will continue to grow at a fast pace. Some major banks are targeting double-digit growth for wealth management in 2020, and we believe technology-based collaboration will provide the most efficient and fruitful results for both parties. Through the advantages of technology, investors will be actively involved in managing their funds due to easier comparisons between mutual funds and subscription processes.
How can foreign participation in Indonesia’s capital markets be eased and better regulated?
WAWOINTANA: Indonesian net foreign direct investment inflows as a percentage of GDP have fallen from 2.82% in 2014 to 1.92% in 2018. To remedy this, we need to better diversify the economy and become less dependent on commodities. This can also shield us from global market shocks. One of the most effective paths to diversification will be through more conducive capital markets. A sweeping regulation revamp will be signed in 2020 and will address concerns like rigid labour laws and state-owned entity reforms. Additionally, we are currently seeing greater focus on the implementation of economic reform packages than we have in the past.
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