30% of GDP comes from 10 largest companies

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)