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ABSTRACT
This article revisits the notion of governed interdependence to examine the knowledge practices that have underpinned the expansion of debt capital markets in Southeast Asia, with a focus on Indonesia and Malaysia. It identifies two types of communities of practice – one of planners/policymakers, one of market practitioners – as central to the production of capital market knowledge and traces the emphasis placed on them by state actors through consecutive capital market development plans. The article then moves on to examining how both countries have sought to implement regimes for the training and licensing of capital market professionals in the wake of the financial crisis of the late 1990s. It argues that these knowledge practices bestow capital markets with legitimacy which makes the practices of investing in and borrowing from debt capital markets socially acceptable, if not even a key developmental objective. This is in the context of both the Asian crisis and more recent crises repeatedly showing the dangers of speculative portfolio investment as well as Islamic stipulations against speculative finance in these two Muslim-majority countries.
Disclosure Statement
No potential conflict of interest was reported by the author.
Notes on contributor
Lena Rethel is Associate Professor of International Political Economy at the University of Warwick.
Notes
1 This article focuses on developments in two of the founding members of the Association of Southeast Asian Nations, Indonesia and Malaysia.
2 Malaysia began to develop its domestic bond market in the late 1980s. However, at the onset of the Asian crisis, the market was largely dominated by a small number of politically well-connected and/or state-linked companies. The single biggest issuer of bonds after the government was Cagamas, the national mortgage corporation, which is 20 per cent owned by the central bank.
3 This is not to say that specific firm actors have not been pivotal to driving capital market development in both countries. Particularly noteworthy in this regard are the roles of Malaysia’s national mortgage corporation Cagamas (Salleh Harun Citation2016) and sovereign wealth fund Khazanah (Lai Citation2012b) in pioneering new financial structures and the putative impact of Indonesia’s new Board for the Management of Pilgrimage Funds, Badan Pengelola Keuangan Haji, on reforming investment practices. Further important firm actors also include a number of capital market supporting institutions such as credit rating agencies in both countries - RAM and MARC in Malaysia, Pefindo and PT Fitch Indonesia in Indonesia, as well as the bond pricing agencies Bondweb Malaysia and Indonesia Bond Pricing Agency (see also Rethel and Sinclair Citation2014). Indeed, many of the market professionals engaged in conversations as part of this research project over time had been employed at various capital market and capital market supporting firms.
4 One of the stated aims of the ASEAN Economic Community, officially launched in late 2015, is to increase the mobility of skilled labour. Indeed, many of the (especially higher ranking) regulatory officials and market practitioners I talked to for this research travelled far and wide across the region and beyond, among other things to attend capital market conferences and other business meetings.
5 This typically sets financial regulators in Southeast Asian countries apart from their Anglo-American counterparts more frequently discussed in the literature. However, it is not uncontested. For example, IMF and World Bank criticise in their most recent assessment of the Indonesian financial sector that the mandate of the two main financial regulatory bodies does ‘not give clear primacy to financial stability over developmental objectives’ (IMF and World Bank Citation2017, p. 2).
6 See, for example, BNM (Citation2017, p. 32). The 2018 Global Islamic Finance Forum was held at the central bank’s Sasana Kijang complex, 3–4 October 2018; its motto was ‘Value-Based Intermediation – Beyond Profit’.
7 There has been some limited reception of this approach in the IPE literature, see e.g. Broome and Seabrooke (Citation2015).
8 Interview with credit rating analyst, April 2014.
9 Two earlier capital market blueprints had been published, whose recommendations were drawn together in this masterplan (Bapepam Citation2005, p. 8).
10 These structures are explained in more detail in Maybank Islamic (Citation2013).
11 Conversation with investment banker, Euromoney AEC conference, April 2014; conversation with legal counsel, WIBC Asia Summit, May 2016.
12 Interview with credit ratings analyst, April 2014.
13 Unlike in the Malaysian case, to obtain accreditation as Shariah capital market expert, licensees also require the endorsement by the National Shariah Board of the Indonesian Council of Ulama in addition to the relevant certification.
14 Note, however, that this recommendation is not included in the report as published on the IMF website.