National market capitalization ratio at only 48%: minister

Neighboring countries that are more developed, such as Malaysia, Thailand or Singapore, can have a market capitalization ratio of up to 100%.

Jakarta (ANTARA) – The national market capitalization ratio of 48% indicates that the scope of the contribution of the national financial sector to the economy is rather small compared to ASEAN countries, said Minister of Finance Sri Mulyani Indrawati .

“Neighboring countries that are more developed, such as Malaysia, Thailand or Singapore, can have a capital market capitalization ratio of up to 100%,” Indrawati remarked during the event titled “LIKE IT: Sustain Habit in Investing, Invest in Sustainable Instruments,” accessed here Friday.

Thus, the Minister believes that Indonesia has the opportunity to continue improving the capital market as a financial sector which could become a good productive intermediary.

Additionally, she observed that there were other challenges in the domestic financial sector, such as its tendency to lean towards short-term fund accumulation.

This condition was certainly very difficult when development or economic needs often require long-term sources of finance, for example, for infrastructure development.

“The development of infrastructure usually requires very large funds and the ability to restore it also requires a long period of time. Let’s say 20 years. It could even be 30 years,” she pointed out.

Therefore, Indrawati was convinced that the ability of the domestic financial sector to raise long-term funds was crucial, especially now that the Indonesian financial sector was still dominated by the banking sector.

About 80% of financial sector assets were in the banking sector, and the majority was in the form of short-term deposits, or less than five years old. In contrast, sectors that accumulate funds over the long term, such as the insurance industry and pension funds, only contributed 14%.

This has become one of the tasks of the Financial System Stability Committee (KSSK) to test its ability to form a financial sector capable of raising and using long-term funds in a solid and credible manner.

“Of course, this is not an easy task to do. Moreover, the community still needs to be improved, not only their level of literacy, but also their confidence in the financial system, financial instruments and financial institutions” , concluded Minister Indrawati.

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Sallie R. Loera