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On 2nd December 2013, APINDO hosted a policy dialogue with Mr Muliaman D. Hadad, the Financial Services Authority’s (OJK) Chairman of the Board of Commissioners. Over the course of the event, which was titled CEO Gathering, Mr Hadad elaborated upon the duties and function of his agency and discussed the potential challenges faced by companies in Indonesia’s financial sector. The event also served as a forum for policy discussion and was attended by business players from a host of different industries.
In his introductory remarks, APINDO Chairman Mr Sofyan Wanandi reiterated his expectation that Indonesia will face more challenging economic circumstances in 2014 and predicted that economic growth may well fall below the government’s projection of 6%. More specifically, Mr Wanandi warned of the potential destabilizing effect of tighter monetary policy on financial industries, and explained that the OJK has a significant role to play in carrying out its overseeing duties to ensure that smaller banks do not run into difficulties over the next year.
In keeping with Mr Wanandi’s views, Mr Hadad also predicted that 2014 would be marked with continued economic slowdown, given the present state of the global economy as well as domestic structural reforms not yet fully implemented. At the same time, however, he expressed optimism in regards to the outlook for Indonesia’s financial industry, which he expects to continue to grow. In illustrating the scope for continued growth, Mr Hadad pointed to Indonesia’s low credit to GDP ratio of 30% that is considerably lower than that of Malaysia or China, which both have ratios in excess of 100%. Morever, the penetration of insurance in Indonesia still stands at only 1.5% of GDP and the growth of the capital market remains far below its potential.
“The immediate challenge that must be addressed is thus understanding how to establish a platform from which financial industries can achieve mutual growth driven by a synergizing of their individual needs,” said Mr Hadad. “Insurance and pension funds, for example, have long term funds that could be used for investment in capital markets. To date, Indonesia’s financial industries have been self reliant in achieving growth and we have not seen high levels of cooperation between them.” To better promote cross-industry synergy, Mr Hadad advocates for a regulatory environment that eliminates the segmentation currently prevalent in the sector.
As Chairman of the OJK, Mr Hadad is tasked with finding the right balance in overseeing Indonesia’s financial sector and aspires to provide the widest possible space for it to grow and thrive while at the same time ensuring that it is managed professionally and with integrity. Mr Djohan Emir Setijoso, President Commissioner of Bank BCA and APINDO Board of Trustees member, at the event put forward the idea that OJK could best achieve these goals by prioritising education and consultation over supervision, and called on the banking industry to proactively deliver feedback in regards to OJK regulations that need to be revised. Similarly, Mr Wanandi voiced the need to avoid the enactment of overly stringent requirements to becoming a public company in the capital market, as this type of regulation has the tendency to inhibit the entry of much needed capital into Indonesia.
In addition to discussing issues directly related to the role of the OJK, Mr Hadad also fielded questions from attending APINDO members, which focused on topics such as rising interest rates in the property industry, the readiness of the local financial industry as it approaches the introduction of the ASEAN Economic Community in 2015 as well as the protection of bank customers facing rising interest rates on deposits. Furthermore, in closing the dialogue, Mr Hadad assured attendees that his agency would establish clearer lines of communication with businesses prior to issuing regulations.
APINDO - 2nd December 2013
Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)
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