Keynote Speech from Chairman of OJK Board of Commissioners on Economic and Capital Market Outlook 2016

Nov 19 2015



Financial Services Authority, Jakarta, November 19, 2015: Current global economic condition still moves dynamically due to gradual economic improvement in developed countries (United States, European countries and China) and economic deceleration that is still occurring in developing countries. Economic indicators in U.S. still show deceleration until today, while economy in Europe has a limited recovery process. In Asia region, China still needs to deal with uncertainty about global and domestic economic conditions, including strong pressure against government. As for Japan, economic recovery is still hampered by low inflation rate as global oil price decreases.

Economic development in the America, Europe and Asia is estimated to remain shadowing global economic development until end of this year. Organization for Economic Co-operation and Development (OECD) has revised its forecast for global economic growth from 3.1 percent to 2.9 percent and Indonesia`s economic growth from 4.9 percent to 4.7 percent due to weakening trade and decelerating global economy.

Nationally, Indonesia`s economy indicates quite positive development amid moderation of global economic growth. In third quarter of 2015, economic growth increased by 4.73 percent compared to second quarter of the same year, which was at 4.67 percent. Other economic indicators also show positive progress in average. Inflation rate tends to decline and trade surplus tends to increase. However, we need to anticipate increase of open unemployment rate that has reached 6.18 percent.

In the matter of external debt obligation, Indonesia`s foreign debt growth until third quarter of 2015 tended to decline. The dynamics of Rupiah exchange rate that is still weakening has stimulated companies to restrain themselves from adding new external debt.

Domestic economic development, which is now quite positive, is also indicated by increase of Business Tendency Index (ITB) and Consumers Confidence Index (IKK), although the figures were still below optimistic level. Such condition portrays that business practitioners remain confident to run their businesses as consumers` level of trust that economic condition in 2016 will be strengthened continues to increase.

In effort to face various future challenges and economic development projections, Indonesian government continues to carry out a series of structural reformations, aiming to create bigger and sustainable economic growth. In general, the structural reformations include:

  1. Infrastructure development;
  2. Focus on priority sectors;
  3. Reallocation of fuel subsidies; and
  4. Financial market deepening.

The groundwork of all those reformations is the principle that state budget allocation alone is not enough to fulfill the whole needs of infrastructure development in our country. Therefore, financing support from various parties is necessary, both support from private sector financing and public-private partnership.

Meanwhile, Financial Services Authority (OJK) in performing its authority continually increases its contribution to government`s economic development agenda by adapting countercyclical approach in effort to accelerate economic growth and at the same time to maintain national economic stability. Specifically in June and October 2015, OJK has issued 52 stimulus policies in financial services sector. Those policies are not only intended to boost increase of public consumption, but also in effort to help government in financing infrastructure development programs.

As for the matter of financial market deepening, particularly in capital market sector, OJK also continues to develop infrastructures that support industrial development in capital market. Provisions on repurchase agreement (repo) transactions will be imposed in 2016. There will also be bond trading through organized Options Trading Permit (OTC) or Equity Trading Permit (ETP) market, with a hope that it will increase liquidity in bond trading.

Mutual fund industry is also expected to constantly enhance its roles in economy, mainly in supporting infrastructure development. In November 2015, government provided tax incentives for collective investment contract (KIK) in property development named Real Estate Investment Trust (DIRE). In effort to support medium enterprises development, OJK will resume its program on trading board development for medium enterprises. It is expected that this effort will not only increase the number of issuers in capital market, but also expand financial access for all business levels.

Furthermore, development efforts in the matters of supply, demand and comprehensive socialization in order to raise domestic investors` participation will continually be carried out. Indonesia Stock Exchange recently launched Yuk Nabung Saham (Let`s Invest in Stock) program aimed at raising domestic investors` participation in Indonesia`s capital market.

Additionally, OJK has planned in the fourth quarter or 2015 to launch Financial Services Sector Masterplan. Through this masterplan, OJK will introduce a series of policies and initiatives targeted to realize three main pillars of financial services sector development in Indonesia, namely:

  1. Supporting economic development;
  2. Resilience and stability;
  3. Financial inclusion and equalization.

"Amid moderation of global and domestic economic development that we are still experiencing today, I hope my optimism on national economic development and financial services industry in the future can help us to anticipate opportunities and upcoming challenges," said Chairman of OJK Board of Commissioners Muliaman D. Hadad in his speech to open a seminar themed Economic and Capital Market Outlook 2016 in Jakarta.

As the regulator of financial services sector, OJK expects that the whole series of policies and initiatives to be launched, especially the Financial Services Sector Masterplan, will improve OJK`s and financial services sector`s contribution in supporting government`s development programs, which will eventually improve social prosperity.

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