Closing trade: Vice President Jusuf Kalla, accompanied by OJK chairman Muliaman Hadad (first left), Indonesia Stock Exchange (IDX) president director Tito Sulistio (second left) and Bank Indonesia Governor Agus Martowardojo (right), offers some remarks during the closing bell ceremony of 2015. (thejakartapost.com/ Wienda Parwitasari)

The Indonesia Stock Exchange'€™s (IDX) mechanism for inviting small and medium-sized enterprises (SMEs) to sell shares via an initial public offering (IPO) is ineffective, as problems associated with the mechanism have yet to be solved. Consequently, very few SMEs have joined the market in the last eight years.

Choirul Djamhari, the finance deputy at the Cooperatives and Small and Medium Enterprises Ministry, said that since SMEs had been allowed to enter the market, only seven SMEs had listed themselves on the stock market.

Okansa Capital was the first in 2003. Hortus Danavest, Yulie Sekurindo, Sanex Qianjiang Motor International followed a year later. Panca Global Securities joined in 2015, Okansa Persada in 2006 and Laguna Cipta Griya in 2007.

"The discussion of listing SMEs on the stock market has been stuck on technical and non-technical problems that continue to exist until now," Choirul said on Thursday in Jakarta.

The technical problems exist on the regulatory side, he said. Since the raised funds are not significant, regulators suggest that SMEs invest, instead of issue, in the market.

The nontechnical problems exist on the side of the SMEs. They have yet to embrace a transparency culture, and are thus reluctant to expose their financial data publicly. They are also often concerned about losing control of the company.

"The obligation for listed companies to have a PT [limited company] status is also a problem. Some SMEs were about to enter stock market, but then canceled the plan due to this requirement," Choirul said.

In the closing bell ceremony of 2015, Vice President Jusuf Kalla called for a new board to facilitate SMEs next year in order to entice more SMEs to sell shares to the public through IPOs.

President director of the Indonesia Stock Exchange (IDX) Tito Sulistio explained that companies with Rp 5 billion in assets have actually been able enter the market and list on the development board since 1996.

However, adding a new board to facilitate SMEs would be ineffective without the market makers to actively trade the SME shares.

Choirul said that the listed SMEs had not performed well in the market to date. (ags)

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