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.