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Jakarta Post

State firms need leeway in stake transfer

  • Anggi M. Lubis

    The Jakarta Post

Jakarta   /   Fri, October 16, 2015   /  05:56 pm

In an attempt to draw more companies into the bourse, Indonesia Stock Exchange (IDX) president director Tito Sulistyo has proposed to the House of Representative a privatization law to help state-run firms to go public, arguing that the current procedures are too encumbering.

Tito, in a hearing with the House about the IDX'€™s contribution to the country'€™s economy, told House Commission XI overseeing finance that the existing 2003 law on state-run enterprises was too confining, and a new law was needed to ease transfer of ownership from state to public.

'€œTo be honest, 13 articles concerning privatization in the 2003 law are impeding. There are 25 stages that a state-run firm has to go through in order to go public,'€ he said in the hearing.

The stages, according to data presented by the IDX in the hearing, involve '€” among others '€” a proposal to be included in the state budget, a recommendation from the Finance Minister and sessions with the House.

'€œUp to five years are needed for state-run companies to have an IPO [initial public offering], while the stock market is ever-changing and the market conditions might have changed by the time they'€™re ready,'€ said Tito.

According to the bourse'€™s data, for instance, national flag carrier Garuda Indonesia needed four years to go public, while cement maker Semen Baturaja took five years and six months and construction firm Waskita Karya needed four years and 11 months before finally floating its shares to the public.

Tito said that the procedures needed to be cut to around one year, and a new, separate law was needed to serve as a basis to privatize state-run firms. More than 70 countries in the world, he said, had a similar law, and many in fact had no laws at all regulating state-owned enterprise entry into the bourse.

Tito, who took office in June, has been aiming to bring more state-run companies into the IDX to boost stock market liquidity and market capitalization. The IDX has been looking to increase its average daily transactions to Rp 15 trillion by 2020, from a current figure of Rp 6 trillion.

There are 20 state-run companies and two state-run enterprise subsidiaries listed on the IDX, compared with the country'€™s total 119 state-owned firms and more than 700 subsidiaries.

According to IDX documentation, state-run firms dominate 24 percent of the bourse'€™s market capitalization, despite their numbers making up less than five percent of 517 companies listed on the bourse.

Tito also argued that by divesting shares of state-run firms and listing them on the bourse, it would also make their operation more transparent and accountable.

House members said that the idea was positive and would be reviewed in a work meeting with the Financial Service Authority (OJK) once the capital market regulator submitted a formal request.

'€œToday is only a hearing, but it'€™s a good idea to help boost the IDX'€™s function. We agree that it is necessary to slim down the procedures,'€ Commission XI chairman Fadel Muhammad said.

'€œWe are going to wait for a formal proposal from the OJK to further discuss it in a working meeting.'€

Tito said that the IDX would make a formal proposal through the OJK in the next two to three weeks.

Budi Frensidy, a stock market expert from the University of Indonesia, said that although it was necessary to shorten the privatization process, there was no urgency to create a privatization law.

'€œFurthermore, it takes around two to three years to pass such a law. It would be better to simplify the procedures through other kinds of regulation.'€

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