chapter  5
38 Pages

Capital Market Reform

This chapter describes one major scandal may have played a significant role in triggering the panicked withdrawal of funds from the market that occurred in mid-1990. Prior to the mid-1980s, the government had imposed a range of regulatory controls on capital market activity that had severely limited the capital market's ability to mobilise mobile equity capital for investment purposes. Preparation Team under the Governor of Bank Indonesia, the main function of which was to make recommendations to Bank Indonesia concerning the development of money and capital markets. The redistributive purpose of the capital market was clearly reflected in many of the government's initial policies in the market. The effect of these reforms was to trigger a dramatic boom in the capital market. The politico-bureaucrats at Danareksa were keen to retain this monopoly because it provided them with a substantial source of revenue and one that was likely to increase as the capital market developed.