Airlangga Reveals President Prabowo's Order to Strengthen the Capital Market

JAKARTA - Coordinating Minister for Economic Affairs Airlangga Hartarto revealed a number of President Prabowo Subianto's directions that focused on efforts to improve the domestic stock market.

Airlangga said President Prabowo gave strategic directions related to structural transformation at the Indonesia Stock Exchange (IDX) in line with the dynamics in the capital market.

"The president has been monitoring the development of the capital market due to what MSCI has done and also by rating agencies such as UBS and Goldman Sachs," he said in a press conference, Friday, January 30.

He emphasized that all the steps conveyed were direct instructions from President Prabowo Subianto.

Airlangga also emphasized that the fundamentals of the Indonesian economy are still in a solid condition.

He added that the coordination of fiscal and monetary policies was considered to be going well, reflected in the movement of the JCI which had strengthened again and moved in the green zone.

Responding to this situation, he conveyed that the government was committed to maintaining national stability and credibility, including the credibility of the capital market, through a number of strategic policies.

Airlangga conveyed the first direction was to accelerate the demutualization process of the IDX which was targeted to start this year.

According to him, this step is considered to minimize conflicts of interest between exchange managers and exchange members, as well as prevent unhealthy market practices.

"The demutualization of this exchange will also be open to investment including from Danantara and other agencies. The stages have been included in the P2SK Law and this demutualization step can be continued with the exchange going public in the next phase," he said.

He added that the second direction relates to strengthening governance and transparency such as improving regulations to increase investor confidence, namely by increasing the free float provision from 7.5 percent to 15 percent.

"OJK and BI are expected to issue rules that increase the free float from 7.5 percent to 15 percent and this was targeted yesterday to be announced by OJK in March this year," he said.

With this policy, Airlangga said Indonesia's free float level would be on par with a number of other countries, even surpassing Singapore, the Philippines, and the United Kingdom, which are still at 10 percent.

"Indonesia or its free float stock exchange yesterday was too low. Compare with Malaysia which is 25 percent, Hong Kong 25 percent, Japan 25 percent, Thailand will be the same as Indonesia later 15 percent. Singapore is still 10 percent, the Philippines 10 percent and the UK 10 percent. So we take a figure that is relatively more open and better governance," he said.

Airlangga conveyed the third direction was an increase in the investment limit of pension and insurance funds in the capital market from 8 percent to 20 percent.

He added that this policy was adjusted to the new regulations referring to the practices of member countries of the Organization for Economic Cooperation and Development (OECD).

"So we are getting closer to the international standards and Indonesia's commitment to adopt these standards so that we can maintain the emerging market standards and of course we hope that our capital market will be stronger, fair, competitive and transparent because this is a signal to the global market, but the fundamental factors of our economy remain strong and the government is not worried about the macroeconomic and fiscal conditions," he explained.