RI's business structure changes<\/p>\n
By Christianto Wibisono<\/p>\n
JAKARTA (JP): There have been tremendous changes in the
\nIndonesian economic and business topography this decade.<\/p>\n
The role and position of the government and state-owned
\nenterprises have gradually been reduced. The government has
\nevolved into a regulating and facilitating agency instead of
\noperator and executor. It has ceased to be a direct provider of
\ngoods and services and hence no longer holds a monopoly over
\ncertain public utilities or strategic commodities.<\/p>\n
It is ironic that state-owned banks which thus far have been
\nthe \"godfather\" of private conglomerates are now struggling to
\nmaintain their dominant position vis-a-vis private banks.<\/p>\n
In 1994, the sales of the top 300 conglomerates at Rp 169
\ntrillion (US$71.2 billion) almost doubled those of state-owned
\nenterprises of Rp 85 trillion. In terms of assets, state-owned
\nfirms controlled Rp 285.9 trillion compared to conglomerates' Rp
\n271 trillion.<\/p>\n
During the later half of the 1980s, deregulation in banking
\nand the stock market catapulted the private sector into its
\npresent growth.<\/p>\n
These deregulations have been exploited to the optimum by the
\nprivate sector to restructure companies' financial positions to
\nimprove their debt to equity ratio and to diversify their
\nbusinesses. Seven years after the stock market liberalization,
\nthe number of listed firms has increased tenfold from a mere 24
\nto 238 companies.<\/p>\n
Most business empires are still managed by their founders.
\nSome, however, have relegated authority to the \"crown princes\"
\nwith the founders still having the final say in strategic
\ndecisions.<\/p>\n
Indonesian business empires date back to the New Order
\ngovernment. Only a handful of them are third generation
\nbusinesses. The most prominent is Sampoerna. Two medium-sized
\nempires are the herbal medicine (jamu) factories Jago and Nyonya
\nMeneer. The latter is beleaguered by a family feud between its
\nsecond generation and third generation owners.<\/p>\n
The adages that most family fortunes and business entities can
\nnot survive beyond third generation did not originate in China.
\nIt has been a fact ever since the Jews dominated European
\nbusinesses and Wall Street and their Western entrepreneurs
\nduplicated their Jewish mentors. It is a universal character.<\/p>\n
Now Indonesian Chinese tycoons have learned the futility of
\nnepotism. Too much power given to the sons and daughters of a
\ntaipan will have serious consequences as Summa and Astra have
\nshown.<\/p>\n
They now send their children to study in the best schools in
\nthe United States or Europe. They hire managers from India, the
\nPhilippines, Singapore and the West.<\/p>\n
The present trend of Indonesian tycoons is to aggressively
\npenetrate the global market. Their companies have made
\nacquisitions and floated their financial debt instruments in
\nLuxembourg, Hong Kong, Tokyo, Singapore and on Wall Street.<\/p>\n
They are aggressive in the corporate game in Singapore. This
\napplies to both indigenous tycoons such as Sudwikatmono, Bambang
\nTrihatmodjo and Endang Utari Mokodompit (daughter of Ibnu Sutowo)
\nand tycoons of Chinese descent like Henry Pribadi, Johannes Kotjo
\nand Sukamto Sia.<\/p>\n
The Indonesians play their game in the same manner as Carl
\nIcahn and KKR made their raids on Wall Street in the late 1980s.<\/p>\n
After the financial restructuring and utilization of low
\ninterest offshore loans, as well as professionalization and
\ninternationalization of their management conglomerates, their
\nreal power and growth was demonstrated through the Jakarta Stock
\nExchange.<\/p>\n
The Charoen Pokphand group led the ranking of the fastest
\ngrowing firm in 1995 with its tenfold growth of sales. It was
\nfollowed by Lippoland despite rumors of a troubled Lippo Bank and
\na property recession. Altogether there are a dozen companies with
\na growth rate of more than 100 percent. The retail giant Matahari
\nalmost doubled its sales from Rp 800 billion to Rp 1.4 trillion.<\/p>\n
The World Economic Forum ranked Indonesia 33rd among 48
\ncountries surveyed in the Word Competitiveness Report 1995. It is
\nnot bad considering the country was judged the most corrupt
\ncountry by the Transparency International or number three by
\nPERC.<\/p>\n
The World Economic Forum survey, made in collaboration with
\nIMD management institute, is a more mature assessment.<\/p>\n
However, we should look into the allegation of a high cost
\neconomy which pushes up inflation and interest rates in
\nIndonesia.<\/p>\n
Indonesian producers and exporters will never emerge winners
\nin export competition with the high cost price per unit of
\nmanufacturing products. The resource-based industries can only
\ncompete in the global market while labor intensive industries are
\nchallenged by countries with lower paid workers.<\/p>\n
Right from the start the private sector understood the
\nchallenges facing the Indonesian economy, the cost of funds, and
\nutilized various methods to restructure their financial
\ndependence on local loans.<\/p>\n
Next on the agenda will be their consolidation into core
\nbusinesses and improvement their efficiency in facing the
\nchallenge of market liberalization. With the coming of the ASEAN
\nFree Trade Area in 2003, Indonesia will have to open its market
\nto ASEAN competitors.<\/p>\n
Whether we will be ready for liberal competition will not only
\ndepend on bureaucratic protection, but also on the efficiency of
\nthe business entities themselves.<\/p>\n
The writer is director of the Indonesian Business Data Center,
\nJakarta.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/ris-business-structure-changes-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}