People's Economy<\/p>\n
The controversial people's economy concept, which Minister of
\nCooperatives and Small Enterprises Adi Sasono has staunchly
\npromoted since last June, has gained endorsement from the quarter
\nconsidered most important for its advancement.<\/p>\n
The International Monetary Fund's Asia-Pacific director Hubert
\nNeiss discussed the issue in a meeting with President B.J.
\nHabibie on Monday. Neiss said that policies under the people's
\neconomy concept -- which will focus on the empowerment of small
\nand medium enterprises (SMEs) -- would be included in the next
\nletter of intent on the economic reform agenda between the
\nIndonesian government and the IMF due to be signed mid-March.<\/p>\n
In fact the program is a not entirely new concept within the
\ngovernment's economic development program. Former president
\nSoeharto -- notorious for his cozy relations with tycoons --
\nlaunched measures in the late 1980s designed specifically to
\nbolster the role of cooperatives and SMEs.<\/p>\n
In 1990, Soeharto directed big business groups to allocate up
\nto 20 percent of their shares at par value to cooperatives. State
\ncompanies were instructed to set aside at least 5 percent of
\ntheir net earnings for helping SMEs. Other special programs were
\nalso set up.<\/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
The controversy and criticism triggered by Adi's initiative to
\nrevive the concept seem to rest more with his promotional manner,
\nhis constant attacks on ethnic-Chinese businesspeople and his
\nconfusing statements about the redistribution of assets. Perhaps
\nthe most damaging aspect of his public-opinion campaign -- and
\nthe reason why his populist pitch remains suspect -- is his
\npolitical lobbying activities together with his close ties with
\nPresident B.J. Habibie. Habibie, despite his unpopularity and
\nlack of legitimacy, is suspected of harboring strong ambitions
\nfor reelection.<\/p>\n
Theoretically, all economists agree that economic development
\nis more sustainable socially and politically if it is broad
\nbased, which means that economic activities are not too heavily
\ndominated by big groups but involve an extensive web of SMEs.
\nMoreover, most studies have proven that SMEs are labor intensive,
\nmore flexible, easily adaptable to market demands and are based
\nmostly on local resources, which make them even more appropriate
\nfor application in Indonesia.<\/p>\n
Adi's campaign -- already questionable due to his background
\n-- has in addition been raising many eyebrows because of the
\ncomplete absence of technical details on how he would manage the
\ndistribution of the Rp 10.8 trillion (US$1.23 billion) in
\nsubsidized loans allocated for the people's economy program.<\/p>\n
His dogged determination to push ahead with the program at a
\nbrisk pace, in spite of what many analysts see as inadequate
\ninstitutional capacity to manage the operations, unavoidably
\nraises the prospect that Adi is dispensing political goodies
\neither for his own or Habibie's popular appeal.<\/p>\n
Unlike the social safety net project, which distributes money
\nto poor people, the people's economy program is a business
\nconcept designed to build up a large pool of SMEs in order to
\neventually form the backbone of the economy. The biggest
\nchallenge then, lies in the assessment of the business viability
\nof those who will be given the subsidized loans. This is not a
\nsimple process, given the different characteristics of the many
\nbusiness areas in which SMEs operate and the scattered locations
\nof the target beneficiaries.<\/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. And we all know, given past experiences with similar
\nprograms in the past, that it takes some time to create such
\npreconditions.<\/p>\n
A gradual approach is especially warranted for ensuring a
\nsmooth execution of the program, because the spread-out location
\nand different characteristics of the target SMEs require the
\ndevelopment of local autonomy and a decentralized organizational
\nstructure to allow for an effective credit-quality control
\nsystem.<\/p>\n
Pushing ahead speedily with the program now, despite the
\ncomplete lack of the vital preconditions cited above, would
\nsucceed only in temporarily dissipating, not solving, the issue
\nof inequalities in the distribution of income and the ownership
\nof economic assets. Then the program would die out after one or
\ntwo years, just like previous schemes, leaving behind new trails
\nof bad credits.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/peoples-economy-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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