******************************************************* Masyarakat Transparansi Indonesia The Indonesian Society for Transparency Jl. Ciasem I No. 1, Kebayoran Baru Jakarta Selatan 12180 Telp: (021)724-8848 ; 724-8849 Fax : (021)724-8849 email: [EMAIL PROTECTED] http://www.transparansi.or.id ******************************************************* Keynote Speech to CCLE (Center For Comercial Law and Economics) Workshop By Mar'ie Muhammad (Chairman of The Indonesian Society for Transparency) Bali, 20 March 2000 Ladies and Gentlemen: Thank you very much to the organiser, Center for Commercial Law and Economics (CCLE) for inviting me to this forum. Indonesia now is in the process of nurturing infant democracy under the leadership of President Abdurahman Wahid who is democratically elected. The previous crisis has proven that undemocratic political and economic processes lead to unfair competition, inefficient investment, fragile banking sector, highly speculative business behavior and lack of transparency and accountability. This phenomena is a reflection of bad governance in the areas of political, corporate, regulatory, and banking sector. It is completely unfair just to blame Indonesia and other countries in the region since beside internal weaknesses, this phenomena is also a reflection of weak global governance. Democratic decision and process will grant check and balance system between government and non-government institutions within formal structure. Furthermore, democratic system will encourage check and balance system between formal structure and civil society (non-formal structure). Democratic system will enhance the building of political and regulatory governance, adequate transparency and disclosure for corporate governance. A political governance will facilitate: Law enforcement and impartial judiciary system The process of public policies making are transparent Public institution, banking and corporate sector are exposed to effective control by stakeholders and society A fair playing field for business community can be established In essence a good political governance can reduce to a minimum level the potential of abuse of power and such abuse of power can be contained at early stage. Ladies and Gentlemen: Allow me now to ask your attention concerning the general observation on corporate governance and financing in some countries in the region: Korea, Malaysia, Thailand, Philippine and Indonesia based on ADB' study. Firstly, there are significant variations in the quality of corporate governance and financing across the five countries. Overall, Malaysia scores higher than the other four countries, which appears to be consistent with experiences of these five countries during the financial crisis. The relatively good performance of the Philippines appears to have been the result of prudent banking practices set in place after the financial crisis of the early 1990's in this country. Secondly, especially in Malaysia, but also in the other four countries, even before the outbreak of the Asian crisis, the governments initiated some measures to strengthen and modernize the regulatory framework for the corporate sector and markets. The basic regulatory structure for the corporate sector in these countries appears to be in place, although there are gaps and loopholes, and some areas need to be modernized. The major problem in the legal and regulatory framework appears to be that of poor enforcement. The poor enforcement might have been caused by a number of factors, including the problem of general governance (e.g. the existence of widespread corruption in some countries), ineffective judiciary system, the lack of trained and qualified personnel for legal enforcement, and to some extent, the preferences for private negotiation and out-of-court settlement by concerned parties in disputes. Ladies and Gentlemen: Indonesia should take a lesson from this observation in addressing the issue of corporate governance. The country now is in the process of restructuring the business and industry to regain its confidence and competitiveness in the global sphere. To achieve this objective the attention should focus on: Improving the productivity of the assets (SOE's, IBRA, medium enterprises, etc.) Building competitive advantage through corporate governance Diversified conglomerates Improving management and technical skills Empowering medium and small scale business As a final remark, I do apologize that I can not talk a lot concerning regulatory aspect since it is not my background. Anyhow, according to National Corporate Governance Committee some areas are needed for reforms including: company law, company registry, accounting standard, disclosure requirements, securities regulation and shareholders protection (in particular minority shareholders). I understand this topic will be discussed further in panel discussions. Thank you for your kind attention. ******************************************************* Masyarakat Transparansi Indonesia The Indonesian Society for Transparency Jl. Ciasem I No. 1, Kebayoran Baru Jakarta Selatan 12180 Telp: (021)724-8848 ; 724-8849 Fax : (021)724-8849 email: [EMAIL PROTECTED] http://www.transparansi.or.id *******************************************************
