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BEI INSIST TO STEP UP EMITENTS’ COMPETENCE IN FACING MEA 2015

The Indonesia Security Exchange [BEI] stat­ed that the capital market industry in Indonesia was ready for the implementation of Asean Community Market in 2015 next. President of BEI Ito Warsito said that in terms of technology, BEI was more ad­vanced than some stockmarkets in Asean, i.e. the technology applied to support transaction at the do­mestic^-capital market.

So far BEI had been applying the "Straight Through Processing" [STP] which was an integrated processing mechanism system based on automated transaction process from the beginning till the end. "All transactions at the domestic stockmarket was processed by electronic starting from ordering, trans­action execution, clearing, confirmation until comple­tion of transaction at PT KSEI" he said in Jakarta [3/6].

The process of stock transaction at the stock­market, he said, was run automatically without any manual intervention or repeat input of data. Emitent's wise, Ito Warsito said that of the 9 share sectors at the Indonesia stockmarket, generally all had positive performance.

As regulator of the capital market, BEI was in no condition to help listed companies/emitents to face the MEA 2015. "We could not help them in terms of human resources development for emitents of the respective sector or in capitalizing. Such must be prepared by the emitents themselves, we are only helping them in facilitating venues for transactions," he said.

However, Tito said, BEI had made some anticipative steps long before MEA 2015. This was ap­parent in some regulations to be issued this year "We are preparing authority of BEI which was already ap­proved by OJK, like notification of the latest regula­tion made, CGC roadmap, and we hope that in not too distant future miner companies who still booked loss or not being productive could run IPO," he said.

According to Ito, today there were 3 aspects which indicated development of the stockmarket, i.e. supply side [emitents] demand side [investors] and the system [including infra structure] in facing MEA 2015. Previously the Board of Commissioners of OJK, Stockmarket Controlling Division Nurhaida was expecting national companies to benefit from the stockmarket to step up performance toward MEA 2015.

"By benefiting from the stockmarket compa­nies would be healthier as they could improve capital structure, increase credibility and Good Corporate Governance [CGC]" Nurhaida was quoted as saying.

Implementation of CGC at Indonesia stock­market would be synchronous with global standard so emitents could compete with foreign companies when MEA was in effect in 2015.

OJK was expecting that national companies could benefit from the capital market to step up performance in facing the MEA 2015. "By benefiting from the stockmarket companies would be healthier as they could improve the capital structure, strengthen credibility and enhance Good Coorporate Governance," this was stated by the Board of Commissioner of OJK Stockmarket Controlling Division Nurhaida. CGC application in Indonesia Stockmarket would be synchronized with global standard so local emitents would be ready to compete against foreign companies in MEA 2015. The point was that in AEC companies were demanded to be healthy and now it was right time for local companies to grab opportunities from the stockmarket. With good understanding of the role of capital market, the number of listed companies would increase.

To strengthen competitiveness of companies in facing AEC, BEI and OJK were striving to jack up performance of Indonesia’s stockmarket. The objective was to strengthen competence of Indonesia stockmarket in facing AEC.

Nurhaida explained that the year 2014 was an important year for Indonesia stockmarket, because in 2015 there would be Fee Flow Capital. Indonesia would draw foreign investors if the market could promised good return investment.

“The first homework is to increase the number of our emitents which now numbered 493 emitents. We are left way behind. Even Malaysia had 1,000 emitents, Singapore has more than 760 emitents and Thailand nearly 500 emitents. If our emitents increased in number, the market could be more liquid.” Nurhaida concluded. (SS)

Business News - June 6, 2014

LIQUIDITY IS MORE IMPORTANT THAN CAPITAL ADEQUACY RATIO OF BANKS

Budi Atmaka, Controller of OJK disclosed that in critical time, liquidity was more important than Capital Adequacy Ratio [CAR] of a bank.

"In critical time, to anticipate the undesirable, the controller was constantly monitoring liquidity, since liquidity is more important than existing capital.", Budi Atmaka stated to Business News 12161.

Budi's statement was related to the court ses­sion of Bank Century with Budi Mulya as the accused. "When a bank had good CAR or high capital and sud­denly there was rush, the bank would die instantly."

Budi elaborted his "theory" by comparing with the experience of BCA during the crisis of 1 997­ 1998, which was trusted by the public at that time for their excellent health. But since the sutuation was chaotic, the moment rush stormed BCA the bank col­lapsed instantly.

Budi, with background as ex controller in Bank Indonesia saw sameness in customers restlessness in certain period of banking. The connection between li­quidity and CAR was: liquidity handled banks finance for the short term, while car was related to capital as the soul of banks.

"As a bank had a problem in low liquidity, bank's asset could serve as solution, but in the event of rush, it could erode capital."

Meanwhile observer of Law and banking Pr­adjoto said that change of requirement in the exten­tion of Short Term Loan IFPJP] by BI to Bank Century had been in accordance with the effective Law.

"Is the change of requirement in FPJP extention in a day against the law ? The change in FPJP stems from Perppu Law No 2/2008 and the Law had is underlying philosophy the 1945 Constitution which clearly stated that in case of emergency the President could adopt a policy based on Perpu," Prad­joto told Business News [2/6].

What was meant by 'emergency' was an oc­currence like Financial Crisis, when banks was hav­ing low liquidity amidst global financial crisis. "The FPJP requirement standard was changed in a day. It was not how long change was made but how fast the action to solve problem. So was the policy of the Board of Governors legally accountable?

Every high official being authorized to take action on the basis of Law, the authority was by na­ture attributive and generally protected by the Law and the policy could not be sanctioned based in the principle that the policy was adopted with good in­tention and was no disadvantage to the country. "An official cannot be punished in making decisions"

Pradjoto explained that if a state official had bad intention and take advantage in making a Law it could be called abuse of power. "At that time the choice was limited, why limited ?

Pradjoko also referred to the fact that on No­vember 1997 16 banks were closed at the moment when the CAR of Bank Century on September 2008 was critical. The 16 banks in 1997 did not have sys­temic impact, not even any of them But at that time there was no blanket guarantee in Indonesia so the choice to close 16 banks was inevitable, causing ex­tremely high turbulence. "The historic fact of 1997 was undeniable." (SS)

Business News - June 6, 2014

PRESIDENTIAL CANDIDATES STILL NOT FIRM ABOUT SUBSIDIZED OIL PRICING

The Professor of Faculty of Technique of the University of Indonesia Iwa Garniwa had not heard any firm statement by two Presidential Candidates about energy policy and APBN State Budget. The two subjects were closely related, both anchored on price of subsidized oil. “There is not any Candidate who had spoken firmly. What to do about price of subsidized oil? Let there be no grey statements” Iwa disclosed to Business News [3/6].

The related problem was oil-gas infra structure. Building of one oil refinery plant needed cost of Rp60-70 trillion per plant. the cost was for normal production capacity. Meanwhile APBN State Budget [APBN-P] allocated extra subsidy of Rp100 trillion, so there could be one and a half additional plant. national oil production was also highly reliant on mew plants. “But new processing plants would not produce until 2016 or 2017. We are still in deficit an must constantly import oil. Besides oil subsidy, we also had to face procure subsidy for electricity and fertilizers.” Iwa remarked.

Meanwhile the Success Team of two opposing candidates claimed they had set up the best Mission-Vision for national energy resilience. Even Dradjad Wibowo of Subianto candidate explicitly praised firm attitude not to sign the contract extention of PT Freeport Indonesia.”Hatta Rajasa strongly and daringly objected President SBY’s order to sign the Freeport contract. Brother Hatta openly refused to sign the Freeport extention agreement by reasoning it’s too early and too soon” Dradjad said.

They [the Freeport renegotiation team] had met the Ministry of Finance. Hatta Rajasa refused to sign because it’s too soon to do so. “I like Hatta’s firm attitude” Dradjad disclosed to Business News sometime ago.

Dradjad also underscored that the oil fuel pricing program was aimed at the rich. The mechanism was through program. Hatta Rajasa as Vice President candidate of the Prabowo-Hatta Team fully understood that oil subsidy was unhealthy for the application of APBN State Budget, while Cash Aid for the Poor only bring short term benefit to the poor people. “Subsidy remains to be given, but oil price is increased. Only the rich will be hit”

Meanwhile members of the Jokowi – JK Presidential candidate supporting team recommended cheap energy program for the poor people. The present Government had been struggling with oil sub­sidy problem. In fact the root of problem was that the Government had failed in controling effort. "The present Government was having head ache in silving the oil fuel problem. The had failed in the application of subsidy" Darmawan Prasiojo, Jokowi-JK supporter told Business News [3/6].

Failure of the present Government had begun ever since their first 5 year period of office. Even State Owned Enterprises like Pertamina oil-gas company, give up. "Failure of the subsidy program was loud and clear. There is conflict of interest so infra structure development including oil and gas pipelining became target. The Rp 12 trillion project for popelining in Bontang was kept hostage. It seemed the mistake would be repeated by Prabowo-Hatta. We can smell it out, they plan to give away chairs, including a position of Prime minister". (SS)

Business News - June 6, 2014

TO RAISE CAPITAL THROUGH FRONT END SECURITIES FINANCING

Financing at the capital market was getting more varied. Very soon PT KPEI would offer facilities to harness fund through securities Financing. The clearing authorities would invite clearing members to do security exchange transaction the bilateral way.

Of course there was requirements and mechanism before enjoying this facility. In accordance with the regulation of the authorities, this facility was available through clearing member as borrower, or clearing member as lender, and custodian bank.

Investors, individuals or institutions, could contact clearing member or custodian to borrow or lend security. Long term investors, who so far only keep their security, had the opportunity to make profit by lending security through clearing member for a percentage of lending fee.

Meanwhile traders could transact more actively by borrowing security for short selling transaction if transaction if price of share was predicted to drop. Short selling transaction by benefiting from PME facilities could only be done by agreement. Meanwhile guarantee by underwriter could be used for preventing failure in stock transaction. The same was with application of Alternate Cash Settlement [ACS] or the process of exchange of share into money.

So far, shares which permitted for transaction as PME facilities were only shares included in LQ45 group and shares which belonged to margin and short selling facility. The shares must be listed in C-BEST [deposit and clearing system] which so far had been managed by PT Kustodian Sentral Efek Indonesia [KSEI]. The shares included in PME securities must be owned by at least 300 shareholders.

Shares which deserved to be listed in PME facilities must fulfill minimum daily transaction of at least 500,000 shares in the past 6 months, with average daily transaction frequency of at least 20 times over the same length of time. KPEI also set requirement for clearing members who could obtain PME facilities i.e. clearing member must be already listed 2014. In the end, there was deficit in trade balance amounting to USD 1.96 billion.

The big deficit was on account of deficit in oil gas trading amounting to USD 1.06 billion. Also non oil-gas trading which had been normally surplus was now in deficit of USD 901.5 million. And yet last March non oil-gas trading posted surplus of USD 2.04 billion. Accumulatively trade balance from January to April posted deficit of 894 million.

For information, previously BI predicted trade balance in April would post deficit. The main cause of deficit was swelling import. Be informed that trade balance in the past 2 months, i.e. February-march posted surplus of USD 785.3 million and USD 673.2 billion respectively.

Pressures on trade balance also came from export of raw mineral which shrunk significantly. As known, the Government only permitted export of processed or according to Law No 4/2009 on Mineral and Coal Mining [Minerba].

As Indonesia’s overseas debt expanded while financial resources for repayment was suppressed, in the future it was necessary to make sure that foreign debt was under control. GOOD NIGHT. In Government’s policy there were some directions on how to manage overseas debt among others the need to be gradually set free from dependency on overseas debt. The objective was to reduce debt.

It was also necessary to run an integrated system in managing overseas and local debt so it was possible to run swap between overseas and domestic debt toward attaining minimum cost and risk.

Considering its complexity, foreign debt should be managed more intensively by a special body. The objective was among other to develop primary and secondary market of Government’s bond to lessen debt burden especially those originating from abroad. Development of Government’s bond market was expected to promote private bond market; while interest rate of Government’s debt [SPN] could serve as benchmark for all monetary and fiscal policy.

Debt Management included the following steps:

Firstly, to monitor and analyze risk in the existing debt structure, and to recommend correction on debt structure of the future. The debt and risk was expected to be synchronous with cash flow, to avoid risk of failure in fulfilling obligations.

Secondly, maintain transparence and public accountability. To ensure transparence and public accountability, there must be openness in the debt management aspects as well as information on Government’s financial condition, Government’s asset and obligations and auditing of all debt management activities.

Thirdly, to underscore the new paradigm that overseas debt was only complementary or second alternative in state’s income in APBN State Budget so the Government still had to rely on main income resources. i.e. tax and non-tax income [PNBP].

In the next period, policy should be focused on efforts to step up efficiency in debt management by still observing risk indicators the measurable way. Such could be scheming up policies for debt management whether through SBN State Promissory Notes or loan. In managing SBN policy was focused on increasing liquidity and absorption of domestic SBN, whilst in relation to credit instrument, policy was focused on various efforts supportive to promoting quality of management.

In view of the widening scope of discussion of Government’s debt management in the future, various current issue had been accommodated in the concept, among others asset and liability management, contingtent liability, coordination and communication with stakeholders of debt management.

The strategy was schemed up as guideline for state’s debt, whether in the form of security or non security, in cash loan related to Ministrial or BUMN activities/regional governments through continued credit but not inclusive of policy on contingency obligation.

Debt management in the form of loan for activity was not fully exercised by debt manager unit considering there were various institutions which played the role some stages of debt management. Debt in the form of security consisted of conventional bonds and Syariah whether in the form of Rupiah and foreign currency, while non security debt was in the form of loan which could originate from internal or external resources.

Businessworld of the private sector must have strategy related to their overseas debt so there would be no serious problem in the future. It would be all right for national corporation to borrow money from abroad provided they market their products also abroad there would be natural hedging and producers would avoid currency mismatch. (SS)

Business News - June 4, 2014