Biggest asset owners

Biggest asset owners

Much has been said and discussed previously about the
increasingly high concentration of asset ownership and market
power in the hands of large business groups in Indonesia and the
implications for economic efficiency and even political
stability. But the debates have rarely attracted mass media
headlines, nor have they elicited comments from influential
analysts or opinion makers. However, the reaction has been
strikingly different in the wake of the recent comments on the
issue by Sumitro Djojohadikusumo, the country's most senior and
perhaps most respectable economist.

There is actually nothing completely new in Sumitro's
observation. The difference lies in the personality and stature
of Sumitro himself. Moreover, most mass media seem to assume that
carrying Sumitro's observations or analyses, however critical
they might be of the government, is "safe".

Despite the absence of supporting empirical evidence, we are
all aware of, or can feel, the higher tendency toward
concentration in economic asset ownership. Some estimates put the
contribution of the 200 large business conglomerates to the gross
domestic product at about 35 percent, of which around a third was
accounted for by the five largest groups. We are not sure about
the reliability of the figures, but we think the degree of
concentration is relatively high and that it may potentially
become a source of instability in the future.

There are, we think, two major factors that make the
inequality in the asset ownership more apparent to the general
public. One is the increasing number of big companies going
public. The disclosure requirement has forced them to reveal
their financial data through the mass media. The size of the
various groups has become even more glaringly clear following
what many analysts see as "greedy" intra-group asset
acquisitions, whereby listed companies have acquired their own
subsidiaries in order to raise more cheap funds from the public.

The other factor was the circulation last year of a long list
of suspected delinquent bank debtors. The list showed how
enormous was the exposure of almost all major banks, including
state banks, to the big business groups. Even though the list has
been rejected as inaccurate, later developments have proved that
the list did contain some truth.

These developments further strengthen the suspicions among the
people that the conglomerates have preferred access to cheap
financial resources. They also raise questions about the
astronomical growth of some groups within so short a period of
time. Further down the line, these questions cause doubts among
the people about the government's willingness and determination
to develop small-scale and medium-sized businesses.

We are greatly concerned that the pace of business
conglomeration has further increased as a result of the
accelerated process of deregulation in the various sectors of the
economy. In the absence of clear-cut legislation, or rules, on
fair market competition, acquisition, merger and market monopoly,
and the extreme lack of transparency in the privatization of
state companies, the seemingly legal conglomeration spreads
across the whole spectrum of economic activities.

Scanning the economic or business pages of the newspapers, one
can see how almost every major new project announced is owned by
the few big conglomerates who seem to have strong political
connections. These groups seem to possess endless, huge streams
of cash flows and to own many big cash cows. Their business
tentacles are spreading everywhere.

We do not have to be a seasoned political analyst to be able
to detect potential threats from such anomalies to our national
stability and unity. Sumitro's warning is not meant for any
personal political interests. His strong appeal to the government
to seriously address the issue was prompted by his great concern
for the future of the nation and the country.

Hopefully, the government will indulge in some meaningful
retrospection on the great dangers of the unchecked, astronomical
rate of business conglomeration and will push ahead with a
stronger determination to implement all the theoretically sound
programs it has formulated to develop small-sized and medium-
scale businesses.