History of Bapepam

Old Order Period

Reactivation

Five years after the independence of Indonesia in 1945, the government of the Republic of Indonesia issued bonds. This occasion indicated the reactivation of the Indonesian Capital Market

Preceded by the promulgation of the emergency law no. 13 dated September 1, 1951, later legalized as Law no. 15 concerning Stock Exchange, the government of Indonesia re-opened Stock Exchange in Jakarta on June 31, 1952, after being terminated for 12 years. The management was assigned to the Stock and Financial Trade Association consisting of 3 state banks and several broker-dealers with Bank Indonesia as advisor.

After the occasion the capital market grew fast, despite the stocks traded were stock issued before the World War II. This activity was increasing after the State Bank of Industry gave bond lending in a stretch in 1954, 1955, and 1956. The buyers were dominantly the Netherlands, both individuals and Firms. All members of the exchange were allowed to conduct arbitrary transactions overseas especially with Amsterdam.

Confrontation Phase

However, the condition only endured up to 1958, as came the sluggishness and the decline in the stock market. This was a cause of the confrontation policy by the government of Indonesia to the Netherlands which disturbed the economic relation of the two countries and caused many Netherlands leave Indonesia.

The situation worsened by decline of the relation between the government of Indonesia and the Netherlands on the West Irian issue and the take-over of the Netherlands Firms in Indonesia, in comply with the Nationalization Law No. 86 Year 1958. Also entailed by the instruction of BANAS in 1960, i.e the prohibition for the Indonesian Stock Exchange to trade all Netherlands Firms stocks in Indonesia, including stock with nomination on the Netherlands currency.

The high inflation rate also reduced the public trust on the financial and capital market, also on the rupiah currency which culminated in 1966.

This decline caused the low nominal value of share and bonds, which consequently did not attract the investors.

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> New Order Period

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Source: Retrospeksi Lima Tahun Swastanisasi BEJ