IFC’s Corporate Governance Advice Helps Strengthen Indonesia’s Financial System
Photo: World Bank
As one of the world’s largest and most dynamic emerging countries, Indonesian companies are rising to the challenge of competing in the global market place by upping their corporate governance standards.
Indonesian enterprises are increasingly looking to external sources for equity and loans to finance and expand their operations. Potential investors want assurances that the companies they invest in comply with international corporate governance standards, in the belief that compliant companies perform better. According toa 2002McKinsey survey, most institutional investors would pay a premium to own shares in well-governed companies.
Indonesia’s financial services authority, Otoritas Jasa Keuangan, recognizes that a fair, transparent, and accountable financial sector encourages economic growth and attracts investment, and is working with IFC to strengthen the country’s financial governance.
“Indonesia needs to have a fundamentally sound and sustainable financial system that is capable of protecting the interests of consumers and society,” said Muliaman D. Hadad, chairman of OJK. “To achieve that objective, OJK has initiated strategic initiatives to enhance corporate governance in Indonesia, such as the introduction of the Annual Report Awards. IFC’s support to OJK will help us further raise the transparency and competitiveness of Indonesian public companies going forward.”
IFC will advise and support OJK in developing a Corporate Governance Road Map to identify and resolve gaps in Indonesia’s regulatory framework. The road map will cover areas such as shareholder rights, protection of minority shareholders, corporate board practices, and disclosure and transparency.
With IFC support, OJK will also produce a Corporate Governance Manual for Indonesia, similar to those developed by IFC in other countries, to provide best practice guidelines for financial services practitioners, board members and policymakers.
IFC launched its corporate governance program in Indonesia in June 2012 and so far has conducted 10 seminars and conferences, including a forum for women leaders, training for family businesses, and several university lectures. IFC also advises private firms on how to improve their operational and financial efficiency and strengthen their risk governance.
Globally, IFC has contributed to the development of 48 corporate governance codes in 32 countries. In East Asia and the Pacific, IFC produces an annual corporate governance scorecard for large Vietnamese listed companies. It has also partnered with the Shenzhen Stock Exchange in China to enhance corporate board performance.