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ndonesia must boost its market capitalization so it can compete with Malaysia ahead of the 2015 ASEAN Economic Community (AEC), says the Financial Services Authority (OJK).

Indonesia's market capitalization came third in ASEAN, after Singapore and Malaysia, OJK chairman Muliaman Hadad said on Tuesday.

While Indonesia's market capitalization was still low, especially compared to Japan and Hong Kong, he said he was optimistic that in the future the archipelago could get on par with them.

'Market capitalization in Indonesia only reaches to around US$400 billion, but the likes of Japan or Hong Kong can reach up to $3 trillion. Indonesia can become like them because it has the potential,' Muliaman said during the Indonesian Publicly Listed Companies Association's (AEI) meeting at the Grand Hyatt Hotel in Jakarta.

One positive feature of Indonesia, he said, was the number of investors in its capital market that was less than 1 percent of its total population, leaving big opportunities to explore.

Indonesia, however, still trailed Malaysia, where investors accounted for 12.8 percent of its total population, he said.

He also said Indonesia now only had 493 publicly listed companies, still far behind Malaysia, which had 907.

The bright side was that the average growth of publicly listed companies in Indonesia was the highest among other ASEAN countries, he said.

'Indonesia recorded 5 percent growth, while in Singapore the growth is stagnant although its market capitalization is the highest in ASEAN,' Muliaman said.

In an attempt to boost Indonesia's market capitalization, he said any barriers to access funds from the capital market had to be reduced.

The OJK, he said, would discuss the matter with the AEI, so that the growth of publicly listed companies in Indonesia could be boosted to 50 companies per year from 30 at present.

He also said Indonesia needed to strengthen its domestic investors, for example, by educating potential investors and students.

'We need to [take forward such education] together as it is impossible if this is done alone by the government,' Muliaman said.

Market deepening, he said, also had to be conducted by widening the capital market's product varieties.

Also, all the capital market participants had to strengthen capital market infrastructure, he said, while companies in Indonesia were required to have a strong commitment to applying good corporate governance practices. (ask)