Antimonopoly law will open businesses to all<\/p>\n
By Ronald Nangoi<\/p>\n
JAKARTA (JP): The planned introduction of an antimonopoly law
\nin the near future is likely to satisfy demands for measures
\nagainst business monopolies and oligopolies in Indonesia.<\/p>\n
When the planned law is enacted, more people will have fair
\naccess to do business and the currently high level of industrial
\nconcentration will be reduced.<\/p>\n
The law could also ensure the application of business ethics;
\nunethical business practices are to be blamed for the current
\nsocioeconomic disarray.<\/p>\n
An antimonopoly law is desperately needed, since monopoly and
\noligopoly, along with the growth of conglomerates, have been
\nwidespread.<\/p>\n
In the absence of an antimonopoly law, some conglomerates with
\nclose ties to the authorities have been protected to maintain and
\ndevelop their dominance over the country's businesses. They have
\nbrought the Indonesian industry to a high level of concentration,
\ncausing inefficiency and uncompetitiveness, which in turn have
\ninhibited domestic industrial firms from entering the global
\nmarket.<\/p>\n
Controversy has long surrounded the introduction of an
\nantimonopoly or antitrust law. Despite the clear disadvantages of
\nmonopoly, several conglomerates have a vested interest in
\nopposing the introduction of such a law. They have profited from
\nthe opportunity to grow big and gain profits by applying
\ndiversification and integration strategies even in unrelated
\nsectors.<\/p>\n
Yuri Sato's study in The Developing Economics (December 1993)
\non Salim Group, known as a prominent conglomerate not only
\ndomestically but also in Southeast Asia, is a good illustration.
\nSato pointed out the reason for the group's rise to preeminence
\nin Southeast Asia was the high degree of business diversification
\nand the monopolistic and oligopolistic positions it held in so
\nmany businesses.<\/p>\n
But it is true that an antimonopoly law, as strictly practiced
\nin the United States, is not aimed at attacking conglomeration
\nbut upholding fair business practices.<\/p>\n
Big firms have argued that enlarging the sizes of companies is
\nnecessary for pursuing the economies of scale for a competitive
\nedge.<\/p>\n
Although it may be incompatible with the antitrust
\nlegislation, mergers aimed at enlarging a company's size are
\ncommon in developed countries, including the United States and
\nEurope, such as entered into by Boeing and McDonnell Douglas as
\nwell as Daimler-Benz and Chrysler.<\/p>\n
Besides expansion, the application of competitive technology
\nand marketing is among the efforts of major firms to gain
\neconomies of scale as the main source of their competitive
\nadvantage and reach a dominant position.<\/p>\n
The idea behind the BCG matrix as a business portfolio
\nmeasurement, for instance, suggests the importance of a dominant
\nposition in business. Maintaining its \"star\" or \"cash cow\"
\nposition implies that a company should have the largest market
\nshare. It is follows as a natural instinct for businesses to
\npursue a dominant power, especially in the absence of an
\nantimonopoly law.<\/p>\n
While it is not proven that absence of an antimonopoly law is
\nunrelated to the growth of conglomeration in Indonesia, it is
\nobvious most Indonesian conglomerates have striven to enlarge the
\nsize of their companies through business diversification.<\/p>\n
Some even practiced interlocking directorates and cartels,
\nwhich are incompatible with antitrust principles. Of course, it
\nis irrelevant to blame them but question their business ethics
\nconsidering there is no legal restriction, such as an
\nantimonopoly law.<\/p>\n
Practices of conglomeration in countries, regardless of
\nwhether they have an antitrust law, are not alike. The first
\nmight be based on pure competition, encouraging companies to rely
\non technological, management and marketing strengths.<\/p>\n
They allow a few (American) firms to dominate the market and
\nalso serve as a springboard for entering foreign markets (Thomas
\nHorst, 1978). But the latter is founded on government protection
\nand tends to foster business in a monopolistic market.<\/p>\n
Hence, it is common that most domestic conglomerates are best
\nat home, and just a few of them are expanding their businesses in
\nforeign markets. This has limited their ability to gain economies
\nof scale for a competitive edge, as Michael Porter viewed that
\n\"economies of scale are best gained through selling globally, not
\nthrough dominating the home market\". Today's economic crisis may
\nprove the uncompetitiveness of domestic firms.<\/p>\n
The introduction of an antimonopoly law, although not the only
\npanacea for the economic crisis, could promise the strengthening
\nof domestic businesses. To survive or grow, domestic companies
\nshould better increase their competitive edge rather than rely on
\nthe government's protection.<\/p>\n
By having such a law, they tend to be posed with legal-
\noriented questions, not necessarily those on ethics. They will be
\nconstrained from expanding in illegal and unethical ways.<\/p>\n
On the contrary, they are enforced to build good corporate
\ngovernance, ensuring the betterment of business, as stated by
\nPorter: \"A strong antitrust policy, especially in the area of
\nhorizontal mergers, alliances and collusive behavior, is
\nessential to the rate of upgrading in an economy.\"<\/p>\n
Thus, domestic firms have a chance to enhance their
\ncompetitiveness so they have easier access to the global market.
\nThe planned antimonopoly law would enable the unprotected
\nIndonesian business society to be more accepted in the
\ninternational community so they are displeased with any forms of
\nbusiness protection.<\/p>\n
It is worth noting that in the era of trade liberalization,
\nprospects for the Indonesian economy rely on the successful
\nintegration of domestic businesses into the global economy.<\/p>\n
The writer is a lecturer at Tarumanagara University in
\nJakarta.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/antimonopoly-law-will-open-businesses-to-all-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}