Finance Minister Sri Mulyani has turned her gaze to the paltry role and contribution of financial markets to supporting economic growth. This is not ideal because while the economy slows, the financial industry and the capital market continue to grow.
This year is Indonesia's capital market 39th year of operations. At such a young age, the industry has plenty of opportunities to deepen its market by releasing new investment products, which would boost stock market growth.
She hopes that the capital and financial markets can boost the economy and improve people's welfare. Sri Mulyani also hopes that capital markets and financial institutions can be an effective channel to absorption of labour in the real sector. "That way the economy will become a growth engine (from the capital market)," she said when attending the Indonesian capital market's 39th anniversary at the Indonesia Stock Exchange (IDX) building in Jakarta, Wednesday (10/8).(Read: Repatriated Funds Can be Invested in Property, Gold Bars)
Development efforts are necessary due to the capital market's negligible contribution to the economy. Sri Mulyani highlighted the agricultural sector's negative growth and weak trading activities at a time when the financial sector is recording growth.
"There is a handful (of people) in the financial sector who are benefiting from the real sector while ordinary people are left behind. It's nice for them, but it's bad for the economy, and that is not sustainable," she said.
That is why she is asking financial market players and markets to help the economy grow, including by creating investment instruments or regulations that encourage higher funds under management (AUM). The assets can be used for infrastructure development.
According to the minister, the government first came up with this initiative 10 years ago when she first became Minister of Finance. The goal is to allow the government and the private sector to co-develop the infrastructure sector under a public-private partnership (PPP) scheme. (Read: Finance Minister Issues Technical Rules on Repatriating Funds to Real Sector)
That way, the State Budget will only be spent on building basic infrastructurein both urban and rural areas. Other infrastructure facilities can be built under the PPP scheme. The expected result would be sustainable economic growth that creates jobs, alleviates poverty, and reduces inequality.
"It would be this country’s best story. It would be a remarkable and powerful story because many countries are struggling, "she said.
She added that funds repatriated using the tax amnesty program could also be used to finance infrastructure development. Financial market and capital market players can encourage potential investors to bring home their assets through various instruments.(Baca: Widodo Projects Inflow of Tax Amnesty Proceeds in August)
"I'm very happy. If (financial institutions) would meet me, I’d get many tax amnesty participants and tens of trillion rupiahs to manage. If it’s (only) a few trillions, don’t bother seeing me; it's not in your class. Especially if you only have billions of rupiahs," she said.