What priorities are outlined in the 2010-14 master plan to help Indonesia sustain development?
NURHAIDA: Our five-year plan gives us the opportunity to embark on long-term strategies and ambitious projects. We have identified five major goals as part of our capital market blueprint. One of the main priorities is to see straight-through processing implemented as one of our business process reforms in the Indonesian capital market by the end of 2011.
We would like to see all systems integrated into this technology, along with Single Investor Identity (SID). The implementation of SID will give us access to Know Your Customer (KYC) forms and will avoid market manipulation by providing a single identity for every transaction done by investors. We are also looking at options to increase our monitoring capacity through the development of a data warehouse. Every individual and corporation would have its information registered in this data warehouse, allowing us to better monitor the operations by having every player in the market linked under the same platform. This not only contributes to our ability to monitor the market, but also helps to avoid manipulations, which will remain one of our main challenges over the next few years. Furthermore, as of February 2012, SID implementation – as provisioned in our regulations – will require investors to operate under an SID to make transactions in capital markets.
How can the capital market be further expanded and the sophistication of its products increased?
NURHAIDA: First of all, we should increase the number of domestic investors and find an optimal balance with foreign investors. Our data shows the volume of transactions done by domestic investors until the end of November 2011 reached approximately 82% of the total volume, while foreign investors accounted for the remaining 18%. This is healthy, but we still see room for more domestic investors to enter the capital market. Enhancing communications infrastructure and potential domestic investor awareness on capital markets are the keys to increasing domestic involvement. However, this does not mean we do not care about the participation of foreign investors in our capital market – indeed, they are critical to our success. Fortunately, now that all the fundamentals of our economy are positive, we are very much at the forefront of the international investment community. To meet the demand of foreign investors in the future we will encourage the development of derivative products. These products, given the right conditions, will grow naturally in conjunction with our capital market.
Should investment move from the capital market to the real sector and infrastructure development?
NURHAIDA: Despite what many people have said, the capital market does contribute to the real sector. In early December 2011 Indonesian-listed companies raised a record $2.45bn through initial public offerings of equity and bonds, and much of this will be allocated to, among others, capital expenditure in 2012. This benefits both the country and the real economy. In more developed countries the role of the capital market – as compared to the banking sector – tends to be more balanced. We must therefore protect and develop our capital market as it is a crucial instrument to sustain and even boost economic growth.
In what ways do you intend to improve and enforce reporting standards in the market?
NURHAIDA: Starting in January 2012, all listed companies will be required to fully implement Indonesia-based international financial reporting standards (IFRS).
Under the new regulation, the periodic financial report will be a complete report consisting of a balance sheet, a comprehensive income statement, an equity change report, a cash flow statement, notes of financial statements and a financial position report on the initial comparative period. In the last two years we have adapted over 30 IFRS and we expect the national accounting standards to be 95% compliant with the IFRS by 2012.
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