Free trade may not hurt small companies<\/p>\n
JAKARTA (JP): Free trade in the next century may not hurt
\nsmall-scale companies as much as is feared as long as they can
\nstill capture the lower market segment, an economist has said.<\/p>\n
National Institute of Sciences' researcher Mahmud Thoha said
\nyesterday that a study he did showed that free trade, due to take
\neffect regionally in 2003, might not affect small companies very
\nmuch, because they would still dominate the lower market segment
\nin the country.<\/p>\n
\"As long as lower-income people still count more than those
\nwith higher incomes, market shares will be dominated by cheaper
\ndomestic products and services, most of which will be produced by
\nsmall-scale companies,\" he said in a seminar.<\/p>\n
Mahmud, a researcher from the institute's economic and
\ndevelopment division, said much of the population had relatively
\nlow incomes and who could only afford cheap shoes, clothing,
\nfurniture and other products.<\/p>\n
This market segment would not benefit large and international
\nindustries, he said.<\/p>\n
He said free trade might even increase the export of small
\ncompanies if exports were through partnerships with large
\ncompanies, and if domestic products were relatively cheap and
\nequal in quality with foreign products.<\/p>\n
Mahmud based his study on a survey of 115 small export
\ncompanies.<\/p>\n
However, he said the companies faced obstacles with the
\nincrease in exports, such as a high interest rate, long
\nbureaucratic procedures and illegal levies.<\/p>\n
He said the interest rate was higher because of the country's
\nhigh inflation.<\/p>\n
\"As long as our inflation rate remains the highest regionally,
\nour banks will not be able to compete with the lower interest
\nrates of other regional countries.<\/p>\n
\"And there goes the chance for our small companies to compete
\ninternationally,\" he said.<\/p>\n
Mahmud said the long, bureaucratic procedures they had to
\nhurdle to export their products impeded their activities and
\nprompted them to pay illegal levies.<\/p>\n
\"There needs to be a regulation which sets the length of
\nbureaucratic procedures, so that officials will not impose
\nillegal levies on exporters due to uncertainty,\" he said.<\/p>\n
Another researcher, Jusmaliani, said yesterday that the
\ncountry's companies not only faced external pressure from the
\nfree trade arrangement, but also from the continuing practices of
\noligopolistic and monopolistic trade at home.<\/p>\n
\"Many industries with monopolistic and oligopolistic
\nstructures cause inefficiency and therefore they lower
\ncompetitiveness in the international market,\" she said.<\/p>\n
This was shown in industries dominated by a single company or
\ngroup, which made it hard for other companies to enter the
\nmarket, she said.<\/p>\n
Jusmaliani said the government needed to establish an
\nantimonopoly law soon, to regulate domestic competition, since
\nmany other countries had already adopted similar laws. (das)<\/p>",
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