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Indonesia's family businesses could be a gold mine if mindsets change
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The Indonesia Stock Exchange (IDX) opening ceremony takes place on Jan. 3, 2022. (Courtesy of IDX/-)
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any businesses in Indonesia remain under family control, but investment bankers say the segment offers ripe pickings for corporate action including initial public offerings (IPOs) once a new mindset – or a new generation – takes hold.
Indonesia has a low stock market capitalization-to-GDP ratio when compared to other countries, even in ASEAN, meaning less of the country’s economic productivity is reflected in the stock market.
The increased participation of family businesses in IPOs would contribute to a larger stock market value, says Andry Satrio Nugroho, an economist at the Institute for Development of Economics and Finance (INDEF).
"The lack of family business going public and the limited number of multinational corporations [MNCs] operating in Indonesia are significant contributors to the country's low stock market-to-GDP ratio,” Andry told The Jakarta Post on Friday.
More domestic IPOs would also increase the number of reputable companies for investors, notes Muhammad Harits Zaenal, an investment banker with Sucor Sekuritas: "Therefore, IPOs are theoretically recommended for Indonesian companies."
However, he added, many firms were principally reluctant to the idea of an IPO, sometimes because of their understanding of the IPO concept.
"It is noteworthy that, in family businesses, the relationships are intricate, and not everyone is inclined to trade shares of their company publicly," stated Muhammad.
