Govt credit scheme repeats past mistakes, say analysts<\/p>\n
JAKARTA (JP): Analysts again criticized the government's
\npolicy to provide heavily subsidized loans to small- and medium-
\nsized companies and cooperatives.<\/p>\n
They said the government's program to provide Rp 10.8 trillion
\n(US$1.27 billion) in heavily subsidized loans was merely
\nrepeating past mistakes.<\/p>\n
Economist Faisal H. Basri said the program, launched by
\nMinister of Cooperatives and Small Enterprises Adi Sasono, would
\nfail just like the previous schemes.<\/p>\n
\"The program is highly vulnerable to corruption and failure if
\nadequate institutional capacity as well as competent and highly
\ndedicated personnel are not in place to manage and oversee the
\nprogram.<\/p>\n
\"And we all know, given past experiences with similar
\nprograms, that it takes some time to create such preconditions,\"
\nhe said in a discussion on the monetary and banking system for
\nsmall-scale businesses held by the Institute for Development of
\nEconomics and Finance (INDEF).<\/p>\n
The government has promised to allocate Rp 10.8 trillion
\n(about US$1.2 billion) in heavily subsidized loans for small
\nbusinesses and cooperatives.<\/p>\n
The loans aim to finance 17 credit schemes with interest rates
\nranging from 6 percent to 16 percent, compared to current
\ncommercial interest rates of more than 40 percent.<\/p>\n
The government has so far disbursed around Rp 4 trillion of
\nthe loans.<\/p>\n
Former president of the state Bank Rakyat Indonesia (BRI)
\nKamardy Arief, said the biggest challenge for the program lies in
\nthe assessment of the business viability of those who will be
\ngiven the subsidized loans.<\/p>\n
\"Learning from BRI's experience in providing rural credit,
\nthis is not a simple process, given the different characteristics
\nof the many business areas in which small and medium enterprises
\n(SMEs) operate and the scattered locations of the target
\nbeneficiaries.\"<\/p>\n
Kamardy said the government should undertake comprehensive
\nsurveys and research before launching new microcredit schemes.<\/p>\n
The program was launched to boost the number of small and
\nmedium-sized enterprises by 3.1 percent and 3.9 percent
\nrespectively, to 43,999 small-sized firms and 46,353 medium-sized
\nfirms by 2000, compared to the current 42,678 and 44,854 firms.<\/p>\n
Faisal believed the huge funds disbursed by the government to
\nhelp people in the informal sector would hamper the country's
\neconomic growth, given the low productivity of the sector.<\/p>\n
\"No country in the world can have sustainable economic growth
\nwith the majority of the population working in the informal
\nsector,\" he warned.<\/p>\n
Faisal said the number of people working in the informal
\nsector in a country should decrease following an improvement in
\nthe country's economy.<\/p>\n
\"So don't be proud to say that the number of small scale
\nenterprises is increasing due to the disbursement of the loans.
\nThis move (to boost the number of people working in the informal
\nsector) may be useful for the short term, but for sure it could
\nnot become a system we could rely on in the future.\"<\/p>\n
INDEF's director Didik J. Rachbini, said Adi's plan to rely on
\ncooperatives as a locomotive to lift the country's economy was
\nunviable.<\/p>\n
\"There is no place in the world where cooperatives have
\nsucceeded in becoming a locomotive in a nation's economy.
\nCooperatives can only become a leading sector in improving the
\nrural economy.\"<\/p>\n
Economist Tony Prasetiantono cited the improvement of poor
\npeople's access to credit as more important in Indonesia than
\nproviding heavily subsidized loans.<\/p>\n
\"No matter how good the scheme is, if it is managed without
\nany business sense, for sure it will fail,\" he said.<\/p>\n
Kamardy said Adi's program was not an entirely new concept
\nwithin the government's economic development program. Former
\npresident Soeharto launched several programs in the late 1980s
\nand 1990s designed specifically to bolster the role of
\ncooperatives and SMEs.<\/p>\n
However, these programs, similar to previous schemes, faltered
\nafter a short while, as a result of collusive and corrupt
\ninterventions. Due to a lack of transparency and accountability
\n(as well as institutional capacity), the funds allocated for
\nthese programs flowed largely to officials, middlemen and big
\ncompanies, abandoning the target beneficiaries.<\/p>\n
Faisal warned that pushing ahead with the program, despite the
\ncomplete lack of vital preconditions cited above, would succeed
\nonly in temporarily dissipating funds, then the program would die
\nout, just like previous schemes, leaving behind new trails of bad
\ncredits. (gis)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-credit-scheme-repeats-past-mistakes-say-analysts-1447893297",
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