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OJK goes all out for market funding for real projects
As the government struggles to support President Joko “Jokowi” Widodo’s infrastructure drive amid a rising budget deficit, the Financial Services Authority (OJK) has declared a commitment to throw all it has at directing funding from the capital markets to support the cause
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As the government struggles to support President Joko “Jokowi” Widodo’s infrastructure drive amid a rising budget deficit, the Financial Services Authority (OJK) has declared a commitment to throw all it has at directing funding from the capital markets to support the cause.
In the short term, the OJK, which recently elected a new board of commissioners, will revise several regulations on the capital markets to expedite infrastructure companies seeking public financing through more diverse capital market instruments.
“The OJK is in the process of compiling intermediate and long-term targets. We are preparing more [regulations on] capital market instruments to increase liquidity in the market,” said OJK chairman Wimboh Santoso at the 40th anniversary celebration of the Indonesia Capital Market in Jakarta |on Friday.
The main target, he explained, would be the completion of a series of regulations regarding the issuance of new instruments in the capital markets, such as perpetual bonds and rupiah-denominated global bonds.
“The initiative for perpetual bond instruments is currently under review. Hopefully it can be completed soon,” OJK capital market supervision commissioner Hoesen said.
Besides perpetual bonds, the OJK is also revising several regulations on rupiah-denominated global bonds, which will allow local issuers to sell rupiah-denominated bonds abroad. “If the bond is issued overseas under rupiah denomination, the costs will be lower,” he said.
“The OJK will create working groups that will be in charge on the development of those capital market instruments,” Wimboh said.
Additionally, he pointed out the importance of creating a centralized central clearing counterparty (CCP), as Indonesia has separate clearing and settlement houses. The Indonesia Stock Market Clearing House (KPEI) acts as the domestic clearing operator while the Indonesian Central Securities Depository (KSEI) is the settlement body.
The existence of the CCP is crucial to reduce systemic risk through its function as a clearing operator, transaction guarantor, as well as the organizer of the risk-management process in the financial market.
Previously, the OJK issued three regulations on capital market instruments in Aug. 10 to accelerate the infrastructure-development process, leading to a total of Rp 12 trillion (US$898.34 million) disbursed to infrastructure projects such as toll-road, airport and electricity projects.
Earlier on July 20, the OJK issued a regulation on DINFRA, a mutual fund dedicated to infrastructure in the form of collective investment contracts. Under the rule, investment management companies may issue DINFRA, which must have at least 51 percent of their assets under management invested in infrastructure projects.
It has also been pushing stakeholders to use available capital market instruments such as infrastructure investment funds with asset-backed securities in the form of collective investment contracts (KIK-EBA) and private equity funds (RDPT).
Furthermore, in order to encourage small and medium enterprises (SMEs) to conduct an initial public offering, the OJK also released two regulations allowing SMEs with minimum assets of Rp 50 billion to go public with simpler accounting standards.
