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Jakarta Post

Govt expects new agreement to entice hundreds of companies to go public

  • Made Anthony Iswara

    The Jakarta Post

Jakarta   /   Wed, January 29, 2020   /   08:30 am
Govt expects new agreement to entice hundreds of companies to go public Visitors take pictures of the Indonesia Stock Exchange (IDX) trading board in Jakarta on Monday, Dec. 30. (JP/Dhoni Setiawan)

The government has pinned its hopes on a new agreement that is expected to encourage thousands of companies to list their shares on the local stock exchange.

The Investment Coordinating Board (BKPM) and the Indonesia Stock Exchange (IDX) signed on Tuesday a memorandum of understanding (MoU) that will enable the bourse to guide both foreign and domestic businesses to conduct initial public offerings.

The agreement could also provide an alternative funding method for small and medium companies that lack the capital to expand, BKPM head Bahlil Lahadalia said. In turn, such growth will create new jobs, he added.

“This is the right step with our current economic growth rate stuck at 5 percent. A strategic move needs to be made. The key to economic growth is investment. Thus, we will guide 26,000 companies to publicly list their businesses in Indonesia,” Bahlil said. “[The MoU] aims to build trust. Business is about trust.” 

He said companies in the mining, infrastructure, plantation and tourism sectors, among other industries, were expected to list their shares on the IDX.

The step could strengthen the government’s efforts to attract investment to Indonesia as President Joko “Jokowi” Widodo seeks to increase the economic growth rate above the 5.02 percent recorded in the third quarter of last year, the slowest rate in more than two years.

Around 668,228 registered companies operated in the country as of December 2019, comprising 642,309 domestic companies and 25,919 foreign companies, according to the BKPM’s Online Single Submission licensing system. Bahlil said he aimed to lure 1 to 2 percent of the nearly 26,000 foreign companies with the agreement.

From January to September 2019, overall realized investment totaled Rp 601.3 trillion, a 12.3 percent increase year-on-year (yoy), BKPM data show. Domestic investment increased 17.3 percent to Rp 283.5 trillion, while foreign direct investment rose 8.2 percent yoy to Rp 317.8 trillion, during this period.