Not only the Indonesian government - through its tax amnesty program - but also the Indonesia Stock Exchange (IDX) offers incentives. Tito Sulistio, General Chairman of the IDX, said initial listing fees are scrapped for those companies that conduct an initial public offering (IPO) before 31 March 2017. It is no coincidence that this incentive is valid until 31 March 2017 (the same day Indonesia's tax amnesty program expires). The Indonesian government and market regulators all seem on the same page: attract capital inflows, deepen capital and financial markets, and - more generally - boost Indonesia's economic growth.
Currently, a total of 531 companies are listed on the Indonesia Stock Exchange, while the number of active investors stands at 134,000 per month. Compared to its regional peers, the number of Indonesia's listed companies is low. For example, Malaysia's stock exchange has 904 publicly listed companies, followed by Singapore (766), and Thailand (644). Considering that Indonesia is the largest economy in Southeast Asia, the Indonesia Stock Exchange (IDX) is eager to have this leading position reflected in the number of publicly listed companies.
One strategy to encourage companies to conduct an IPO on the IDX is by temporarily scrapping the initial listing fee. Prior to this incentive, depending on its market capitalization, a company needed to pay between IDR 25 million (approx. USD $1,900) and IDR 250 million (approx. USD $19,000) to be added on the local bourse. Whether this will indeed boost demand for IPOs is arguable. A more attractive way to lure companies would be to cut the time it takes to go public. Many companies complain that the process is too time-consuming (as well as costly). On average, it is estimated to take about six months before a company sees its name listed on the IDX.
However, IDX Director of Corporate Listing Samsul Hidayat says this incentive comes in addition to a potentially huge inflow of funds on the back of the government's tax amnesty program. As usual, IPOs in Indonesia are popular among traders, and tend to be oversubscribed. Stocks being one of the investment instruments used to absorb excessive liquidity caused by the repatriation of offshore assets, will enable companies that conduct an IPO on the IDX to set a higher initial offering price.
Besides scrapping the initial listing fee, the IDX also offers other incentives, including discounts for the usage of transaction facilities at the IDX.
In June 2016, foreign investors bought IDR 56.58 trillion worth of Indonesian shares, while selling IDR 47.77 trillion, implying a net buy of IDR 8.81 trillion (approximately USD $673 million). Foreign net buying in June is more than double the net buy of IDR 4.3 trillion that occurred in the first five months of the year, combined. In late June and at the start of July foreign net buying accelerated even more as Indonesia's House of Representatives (DPR) passed the tax amnesty bill into law.
Do you think that Indonesia's tax amnesty program will be a success?
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