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Shallow market incites capital outflow: OJK
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Financial Services Authority (OJK) chairman Muliaman D. Hadad (center) alongside President Joko Widodo (left), and Indonesia Stock Exchange (IDX) president director Tito Sulistio, exult after opening the IDX's first trading session of 2016 on Monday. (Kompas)
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mid the government’s plan to repatriate assets worth trillions of rupiah abroad through tax amnesty, the Financial Services Authority (OJK) has acknowledged that the problem of a shallow market deters investors from keeping their money in the country.
Indonesia's financial markets were still very shallow that any unfavorable market sentiment would have a devastating impact, said OJK chairman Muliaman Hadad on Thursday.
"[Hence] we need to develop a climate that will not only invite capital into portfolios, but also foreign direct investment to suppress the [negative] sentiment," he said during the 2015 Indonesia Economic Report (LPI) launched by Bank Indonesia in Jakarta.
Over the last few years, Muliaman said, Indonesia faced the same issue of how the financial market was very easily affected by negative sentiments in the global market, leading to capital outflows.
"Because similar incidents have been repeated several times, it is time for us to allocate stronger efforts to prevent similar experiences from repeating," he went on.
Earlier, BI governor Agus Martowardojo said structural reforms in the financial market needed to support development with a sustainable financing capability. In this context, Indonesia faced the challenge of strengthening financing sources, especially long-term ones.
"Reformative policies are needed to improve the availability of long-term financing domestically and from abroad, as well as the deepening of financial markets," he underlined. (ags)
