Cooperatives, SMEs remain neglected

Rendi A. Witular and Yuli Tri Suwarni, The Jakarta Post, Bandung

The country's cooperatives and small-medium enterprises (SMEs) remain underdeveloped and commitments to assist their financing by the government, banks and corporate business has not materialized.

The sluggish development of the sector, which played a key role in cushioning the impact of the late 1990s financial crisis on the nation's economy, was of great concern, said State Minister of Cooperatives and SMEs Suryadharma Ali.

"Lack of access to financial resources, poor bargaining power against the corporate sector, and an inability to increase production capacity are some of the key problems currently facing the sector," he said.

Suryadharma made his remarks during a launching ceremony for micro financing year on Tuesday in conjunction with National Cooperatives Day. The ceremony was also attended by President Susilo Bambang Yudhoyono.

In his speech, Suryadharma emphasized the need for the business community, including state enterprises, to immediately realize their promises to assist in nurturing the cooperative and SME sector.

"Lending for these small businesses is still hard to get. Not to mention the high interest on loans as well as burdening collateral if they manage to secure them. State-controlled and privately owned banks are still difficult and cannot be relied upon," he said.

The central bank and the government have ordered local banks to allocate a total of some Rp 60.4 trillion (US$6.20 billion) in lending this year for cooperatives and small-medium businesses. The figure is lower than last year's lending realization for the sector worth about Rp 75 trillion.

In response to the lack of commitment by state-controlled banks in assisting small businesses, Coordinating Minister for the Economy Aburizal Bakrie said banks could not be blamed for the problems since their focus was to seek higher profits for the state.

"The government cannot not force banks to channel more of their loans to small and medium businesses. They should calculate their lending based purely on business considerations and in order to bring in more profits for the state," said Aburizal.

At present, there are 130,000 cooperatives and 4.5 million SMEs throughout the country. The government has targeted the number of cooperatives to soar to as many as six million by 2009.

Meanwhile, President Susilo acknowledged that there were still numerous problems confronting the country's small and medium businesses, but the government was upbeat the sector would grow significantly with the intense involvement of other parties.

"We understand that the development of the sector is not yet maximal. But we are heading toward improvement," said Susilo.

Susilo said that the government was now focusing on improving availability to financial resources for the sector, as well as its management, worker productivity, marketing, and partnership with the corporate sector.

During the ceremony, Susilo also witnessed the disbursement of loans worth Rp 443 billion from state-controlled banks, financial institutions, cooperatives and corporations, to 49 cooperatives and 6,900 SMEs.

Susilo said the funds were expected to help accelerate their development.