30% of GDP comes from 10 largest companies

JAKARTA (JP): Indonesia's conglomerates, of which the 10 largest contribute 30 percent of the nation's gross domestic product (GDP), may continue to be major economic players in the country, a study shows.

Christianto Wibisono, director of the Indonesian Business Data Center, said that a study conducted recently by the center revealed that the contribution of the country's top 10 conglomerates to the GDP increased from 15.2 percent in 1988, to 18.2 percent in 1992.

In 1992, the top 10 conglomerates' turnover totaled Rp 46.65 trillion (US$20.48 billion), as compared to the country's GDP of Rp 256.5 trillion.

In 1993, Indonesia's top 300 conglomerates recorded a total turnover of Rp 144.4 trillion, or 48.1 percent of the GDP, while their assets reached Rp 227.3 trillion, or 75.8 percent of the GDP which, at that time, stood at about Rp 300 trillion.

The total turnover of state enterprises reached only Rp 82.38 trillion, or 57.04 percent of the total turnover of the 300 conglomerates in 1993, but their assets reached Rp 267.1 trillion, or almost 90 percent of the GDP.

"This means that Indonesia's economy is greatly influenced, first, by the ups and downs of conglomerates, and only second by state enterprises and other economic groups," Christianto said in a seminar on Reconstructing the Goals of Our Republic last week.

He said that such a situation, plus the fact that a large proportion of the conglomerates are controlled by non-indigenous business people, could easily spark social envy, which would, consequently, lead to racial conflicts.

"The rapid expansion of certain economic groups can generate rumors that their growth has been made possible through favorable credit approvals and facilities made largely, or solely, for them," he said.

Christianto said the disclosure of a number of bad debts over the last couple of years has further strengthened such a suspicion.

"Ideally, all groups in the business sector should have the same level of access (to credits and facilities), according to their respective capacities and potentials," he said.

Christianto noted that there was a tendency for state firms to have a decreasing role in Indonesia's economy.

Over the last six years, he cited, sales of conglomerates have grown by an average of 16.1 percent annually and their assets by 35.1 percent. State companies' sales and assets have only grown by 15.9 percent and 16.7 percent, respectively.

During that period of time, he said, Indonesia's conglomerates grew with five main characteristics -- they had tendencies to engage in "mega projects" (projects costing more than Rp 200 billion for domestic investments and more than $100 million for foreign investments); to go public; to expand operations internationally; and to establish second-generation businesses.

There has, lately, also been an increasing number of businesses operated by the children of government officials, or former officials, he said.

Christianto said that mega projects, which are usually concentrated in upstream industries, are attractive because there are greater possibilities of obtaining protection and favorable facilities.

The largest conglomerates operating in mega projects are the Salim Group, with Rp 4.8 trillion in domestic investment projects and $3.67 billion in foreign investment projects; the children of President Soeharto, with Rp 4.46 trillion and $6.44 billion; and the Barito Pacific Group, with Rp 3.99 trillion and $1.6 billion.

Christianto contended that the conglomerates' efforts to go public have not helped cut back their debts, but have instead encouraged them to seek bigger loans.

He said publicly-listed companies affiliated to conglomerates, for example, had a combined debt of Rp 90.78 trillion, or 93.1 percent of the total debts of all 159 firms listed on the capital markets as of June. (pwn)