Helping small firms<\/p>\n
The government is going full steam ahead to accelerate the
\ndevelopment of small enterprises. In addition to the numerous
\nsmall business development programs already underway, a special
\nregulation is now being drafted which will oblige big companies
\nbidding for government procurement contracts to partner with
\nsmall firms. The number of small businesses or cooperatives in
\npartnership with big companies will be stipulated as one of the
\nrequirements to be fulfilled for winning government procurement
\ndeals.<\/p>\n
But we wonder how the upcoming regulation, which is to be
\nsigned by the President, will be more effective than
\nPresidential Decrees No.16\/1994 and No. 24\/1995 regarding the
\nsame matter. State Minister of Cooperatives and Small Enterprises
\nSubiakto Tjakrawerdaya acknowledged many government procurement
\ncontracts, which by regulation should have been awarded to small
\nfirms, were often given to big enterprises. He said many tenders
\nfor government contracts had been deliberately engineered so that
\nthey would go to particular companies. Despite these blatant
\nviolations, officials are rarely taken to court on charges of
\nabusing government contracts.<\/p>\n
Governments often use preferential treatment under the state
\nbudget spending as a tool to help develop small firms. Even the
\nSmall Business Administration in the United States, known for its
\nfull-blown liberal economy, provides preferential treatment to
\nsmall enterprises bidding for government procurement contracts.
\nThe program in that capitalist country has been successful in
\ndeveloping small firms to become medium-sized ones and incubating
\nmicro-enterprises to become competitive small businesses.<\/p>\n
Indonesian government procurements of goods and services
\ncould contribute to accelerating the development of small
\nbusinesses. For the current 1997\/1998 fiscal year, government
\nprocurements of goods and services have been allocated Rp 8.8
\ntrillion (US$3.5 billion) of the operating budget, up 35 percent
\nfrom Rp 6.5 trillion last year.<\/p>\n
The concept of the programs in the U.S. and Indonesia is by
\nand large similar in that small firms are given price preferences
\nand more lenient payment terms, compared to those imposed on big
\nbidders. But the big difference lies in the implementation or,
\nmore importantly, in the quality of the executors, meaning good
\nand effective governance. And this, as Subiakto himself
\nacknowledged, has been the very factor missing from the
\nenforcement of previous regulations favoring small businesses.<\/p>\n
In fact, the annual findings of the Development Finance
\nComptroller and Supreme Audit Agency have shown that malfeasance
\nin government procurement contracts has been one of the most
\nfrequently committed violations of the state budget procedures.
\nSo pervasive has corruption been within government procurements
\nthat a former director general of state companies once said that
\nthe first thing one should do to improve the public sector's
\nefficiency was thoroughly audit procurement contracts and examine
\nthe suppliers to government offices and state enterprises.<\/p>\n
Judging by the failure of the previous rulings, the new
\nregulation would be effective only if the government is more
\nvigorous and consistent in ensuring a transparent mechanism for
\nawarding contracts and in dealing firmly with officials who abuse
\nthe tendering procedures. If the enforcement continues to be void
\nof malfeasance, the new regulation would benefit mostly fly-by-
\nnight small firms which are sponsored by politically influential
\npeople or officials in charge of government procurements.<\/p>\n
The government should also see to it that the business tie-
\nups between big companies and their small-business partners
\nshould be based on long-term operations and not on ad hoc
\narrangements simply to win particular contracts. Of no less
\nimportance, despite the noble objective of developing small
\nenterprises, is to ensure that contracts are always awarded on
\nthe basis of economic criteria. If not, government procurements
\nwould be rendered grossly inefficient and ineffective in
\nnurturing competitive small businesses.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/helping-small-firms-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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