Business partnership

The basic principles and operational directives outlined by President Soeharto for the National Business Partnership program set up a strong foundation and provide economic viability for the development of business ties between big companies and small firms on a sustainable level.

The President asserted at the launching of the program on Wednesday that business partnerships should run on the basis of mutual benefit and equality. That means the driving force of big companies to develop business tie-ups with small firms or cooperatives should not be compassion. The compelling factor should be the rationale that a broad-based economic growth is a prerequisite for the political, social and economic sustainability of conglomerates.

Mutually-beneficial business partnerships also mean the ties between big and small enterprises will not exact unreasonable costs on the partners. Otherwise the efficiency of the economy as a whole will be affected and whatever benefits accrued from such relations will be nullified.

The President's directives convey a clear but sensible message of caution to small firms and cooperatives that they should not expect preferential treatment from big companies, nor should they expect an immediate injection of easy money. Small firms will be given assistance under the partnership program, but the aid is not in subsidies or grants but entrepreneurship and managerial training through learning-by-doing business with big enterprises. They will learn how to do business the hard way.

The message for big companies is that they should practice a lot of patience in enhancing the skills and capacities of small firms. However, they are not expected to accept lower-quality products from their small-business partners. Accepting less from small firms than they would from other medium-scale or big suppliers would kill the spirit of entrepreneurship and business competence. It would also instill an unrealistic sense of acceptable business practices.

Moreover, as the President warned, since the products to be made by the business partnerships will be sold to domestic and international markets, the products should be competitive in terms of both quality and price. Turning out inferior products will not only edge the businesses out of the market, but also will make the whole economy inefficient.

The experiences of countries which have succeeded in developing a large base of reliable, competitive small enterprises show that enhancing business ties with small firms exacts a learning cost on big companies, although the eventual payoff is quite big. Since the program involves training and requires a change in attitude on the part of the managements of small businesses, big companies should think long term.

However, to facilitate the smooth implementation of the business partnership program, the government needs to issue rules to protect the interests and rights of small firms from abuses by large companies and to ensure fair transactions between partners.