The Role Of The Indonesian Financial Sector Needs To Be Improved In The Next Five Years

Illustration. (Photo: Unsplash)

JAKARTA - President Commissioner of Sucor Sekuritas Lindrawati Widjojo stated that the business world views that the role of the financial sector needs to be increased in the next five years (2024-2029) to support Indonesia's economic transformation.

"In 2022, the financial sector (Indonesia) will reach 120 percent of GDP (Gross Domestic Product) with an M2 ratio (money supply) to GDP of only around 45 percent. This figure is still below the average developed country, where financial sector share reaches 300 percent of GDP, while the ratio of M2 to GDP in Malaysia reaches 112 percent and Thailand 110 percent," he said in the Dialogue on Investment Policy and Capital Market Direction 2023-2029, in Jakarta, quoted from Antara, Monday, January 8.

Looking at the market capitalization side of the Indonesia Stock Exchange (IDX), it is still in the range of 48.5 percent of GDP in 2022. This figure is lower than Thailand's 121 percent and Singapore's 189 percent.

Bond issuance by non-bank institutions is also still relatively small, namely at the level of 0.5 percent of GDP and long-term sources of insurance and pension funds decreased from 11.3 percent to 7.3 percent in 2022.

The numbers I mentioned earlier illustrate a little bit that opportunities for deepening the financial sector for funding sources from capital markets and non-bank institutions can still be pushed further. This is considering the various potentials contained in the capital market, "said Lindrawati.

Throughout 2023, the Indonesian capital market grew positively, marked by a combined stock price index (JCI) which closed at the level of 7,303, an increase of 6.62 percent from the close of trading in 2022.

In addition, there is a new record recorded during 2023, namely the highest market capitalization and the highest daily transaction volume in history.

According to him, the high potential of the Indonesian capital market requires solid regulatory and institutional support. A number of existing regulations are considered to still limit the progress of financial institutions, including non-bank banking and financial industry (IKNB).

"For example, one of the suggestions for priority in the implementation of Law Number 4 of 2023 concerning Financial Sector Development and Strengthening (P2SK) is the expansion of long-term funding sources such as pension, insurance and mutual funds, so that they can be a complement to bank loans and support the deepening of funding sources through the capital market," he said.

Therefore, the Indonesian Employers' Association (APINDO) and Sucor Group held the event which is expected to be a discussion event for business actors and the 2024 2029 Presidential Candidate/Candidate Economist Team who participated in the General Election (Pemilu) contestation to create a better capital market ecosystem.

"By looking at the potential and positive developments of the Indonesian capital market, as well as how the central role of the government, in this forum we will see how each representative from the Presidential Candidate (Candidate) team, designed the direction of investment policies and capital markets in the next leadership period," said Lindrawati.