Business recovery scheme initiated in Surakarta
SURAKARTA, C. Java (JP): The government has launched a multi- billion rupiah program to reconstruct business in this historical city which was severely damaged during two days of mass looting and arson one week before the end of Soeharto's 32-year rule in May.
Minister of Finance Bambang Subianto, Minister of Industry and Trade Rahardi Ramelan and Minister of Defense and Security/Armed Forces Commander Gen. Wiranto symbolically presented Rp 266.5 million (US$20,500) worth of venture capital to seven small-scale entrepreneurs over the weekend.
"Venture capital financing is the most feasible and effective funding scheme through which to rehabilitate the hundreds of small and medium-scale business establishments devastated here in May," Bambang said.
Bambang said state-owned PT Bahana Artha Ventura, which provided the venture capital, would recoup its investments under a profit-sharing scheme.
"Bank loans are out of question because they are hard to arrange and come at unaffordably high interest rates," Bambang said during the simple ceremony.
Surakarta's Mayor Imam Sutopo earlier recounted that on May 13 and 14 about 310 commercial buildings, department stores and factories, 261 cars and 400 motorcycles were totally destroyed during a complete breakdown in law and order.
"The orgy of looting and burning caused around Rp 457 billion in material losses, left 11,400 workers jobless and caused the death of 29 people in this city of 530,000 people," Imam added.
"Let us work together to heal our wounds," Bambang said at the ceremony held on the blackened, charred remains of what was formerly a major shopping center in this city. Most other major shops in Surakarta suffered a similar fate.
Gen. Wiranto said he was stunned that Surakarta had been the worst affect of several towns and cities hit by riots in May.
"This is not the Surakarta I knew, where I was born and raised in a pleasant environment of patient, hospitable and law-abiding people," Wiranto said somberly.
Bambang said the program in this city would be a model for financing the rehabilitation of business in Jakarta and Medan in North Sumatra, which were also badly damaged during massive unrest in May.
Industry and trade minister Rahardi said he viewed business reconstruction as crucial to reviving economic activity because most of the establishments damaged during the riots were shops and trading outlets, both vital links in the distribution system.
Bahana's president Hafiz Arief estimated that about 600 small and medium-scale entrepreneurs in Surakarta badly needed venture capital to reconstruct their businesses.
"Funds are not a problem because we have received aid from Japan's Export and Import Bank and several other international institutions. But we need time to assess the commercial viability of candidates," Hafiz added.
He said Bahana's financing scheme for businesspeople here was not a standard venture capital scheme under which investments were converted into equity shares.
"Most of the businesses we are helping are either small shops or family-owned firms which do not have the necessary capital structure and incorporation status for equity participation by outside investors," Hafiz added.
Bahana would therefore provide them with venture capital to be repaid in installments under a profit-sharing scheme, Hafiz said.
Bahana is cooperating with the Surakarta-based PT Sarana Solo Ventura, a three-year old venture capital company owned jointly by Bahana and several big investors, including former president Soeharto's son Hutomo Mandala Putra. (vin)