In 2015, members of the Association of Southeast Asian Nations (“ASEAN”) are supposed to launch the ASEAN Economic Community (“AEC”). As part of the AEC, member nations are to adopt and improve laws and regulations pertaining to economic activities, including corporate governance as part of regional economic integration. Although ASEAN members Malaysia and Singapore are arguably the standard bearers for the region in corporate governance, it appears Indonesia is taking important steps to develop its corporate governance laws as it prepares for the launch of the AEC.
On February 4, 2014, the Indonesia Financial Services Authority (“OJK”), in cooperation with the International Financial Corporation (“IFC”), announced the launch of the Indonesian Good Corporate Governance Roadmap and Manual. It is reported that this document will focus on five main areas, including: corporate governance framework, shareholders protections, role of stakeholders, information transparency and the roles and responsibilities of the board of commissioners (“BOC”) and the board of directors (“BOD”). As part of the five areas of focus, there are 33 initiatives, one of which will be the requirement for company websites to be in both Indonesian and English.
The development of such a corporate governance roadmap and manual may be one of the more significant changes to come to Indonesia. While the OJK is in its second year as the regulatory authority of Indonesia’s capital markets, it too has recently added an English version of its website. In terms of understanding market practices, this is an important step forward for researchers and investors alike as it will become easier to find and understand notable regulations and any changes that may arise.
As for the roadmap and manual, this may be a time for optimism. Currently, most Indonesian companies regularly practice poor disclosure in preparation for shareholder meetings as highlighted by the near universal practice of not releasing the names of nominees ahead of shareholder meetings. Although there is no set timeline for implementing the roadmap and manual, it is anticipated that of the 33 initiatives, 11 initiatives will be implemented in 2014, 19 initiatives will be implemented in 2015, with remaining initiatives to be implemented thereafter. Hopefully one of the initiatives to be adopted sooner is the requirement for companies to provide shareholder meeting invitations 21 days before an annual general meeting.
While the announcement of the roadmap and manual is significant, the implementation of its initiatives by companies will test the strength of the OJK and its ability to affect change in Indonesian corporate governance. No matter, the roadmap and manual is a step in the right direction for Indonesia for improving corporate governance in the lead up to the launching of the AEC.