Indonesia has doubts over single market integration
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Indonesia's Financial Services Authority (OJK) said the country would need time to improve its capital market infrastructure before joining the integrated capital market to be developed as part of the 2015 Asean Economic Community (AEC).
The agency’s deputy commissioner, Sardjito, said Indonesia would only agree to open its capital market when all its infrastructure and companies were ready.
According to him, the country has not set any target or timeframe for joining the integrated capital market, known as the Asean Trading Link. So far, only three countries – Thailand, Singapore and Malaysia – have joined the Asean Trading Link.
“It wouldn’t be a beneficial agreement if it only enriched others. We need time to improve our infrastructure and our companies, because we are a very big market,” Sardjito said recently.
In a single integrated market, investors and companies in Asean countries will be able to freely trade securities in any market at competitive prices.
Despite pressure from some Asean countries with more “advanced” market infrastructure, namely Malaysia, Singapore and Thailand, Indonesia still doubts the market-integration plan.
One of the reasons is that the depth of Indonesia’s capital markets and the regulatory framework are not at par with the rest of the region. Therefore, Indonesia is not yet ready to fully embrace the AEC framework.
“[We will be] ready when our brokers are at the same level, for competition. We need to be sure that we will have reciprocal situations,” Sardjito said.
Separately, Djisman Simandjuntak, an economist with the Centre for Strategic and International Studies (CSIS), said the stock markets in Indonesia and the rest of Asean countries are already very open.
“Second, linkages exert greater pressure on improving good governance, [an area] in which Indonesia has a lot to catch up on.
Despite progress, no Indonesian company is found on the list of the best-governed companies in Asean. Linkages are good for Indonesia. As for securities other than stocks, we have to be cautious.
The higher the volatility, the more cautious we should be,” Djisman told the Post.
OJK data shows that 60 per cent of the capital market is dominated by foreign investors while domestic players account for a much smaller share. The number of listed firms is far below other states. Indonesia has only 489 listed firms, compared to Malaysia with 906, Singapore (767) and Thailand (587).
