From Tapos to Bali

From Tapos to Bali

The business gathering in Bali over the weekend was very
similar to the one at President Soeharto's Tapos cattle ranch in
West Java more than five years ago. The central topic of
discussions at the two meetings was the steep inequality in
income distribution and asset ownership. The participants, the
owners of the largest business groups which account for about 70
percent of the country's economic activity in the private sector,
were almost the same.

Only the format differed. The Tapos meeting in early March,
1990, was led and dominated by President Soeharto and was later
broadcast nationwide by the state TVRI. The 32 participating
businessmen -- all ethnic-Chinese Indonesians except for two --
acted mostly as listeners. The Bali gathering, which featured
several cabinet ministers and the Armed Forces chief as the main
speakers, was characterized by free-wheeling discussions among
almost 100 businessmen. The three-day meeting therefore was
closed to the mass media to allow for frank, vigorous exchanges
of views.

It is unreasonable to expect the Bali gathering to have
produced more than the seven-point declaration it issued on
Sunday. The most important outcome, as stipulated in the
declaration, is the conglomerates' commitment to redressing
existing inequalities.

However, we are afraid that efforts to bridge the inequalities
through the development of small and medium-scale firms and
cooperatives will remain ad hoc in nature if both parties -- the
business community and the government -- do not have the same
perception of the issues.

We sympathize with businessmen Sofyan Wanandi and Eka Tjipta
Widjaya, who complained about the mass media's bashing of
conglomerates as the main culprits whenever the issue of
inequality arises.

While a number of the businessmen began their business empires
with the windfall profits they accumulated from "cash-cow"
businesses, monopolies or preferential procurement contracts from
the government, they should not shoulder all of the blame. They
acted only on the permission of the government, which, due to
sheer ignorance or collusions, must also be held partly
responsible for widening inequalities.

When the government started the industrialization program in
the 1970s, it was right to protect big manufacturing industries
in the infant stages. But it forgot to do the same for small and
medium firms when the massive deregulation program was launched
in 1985 even though the government knew that the capacity of
small and medium enterprises to tap the emerging business
opportunities was much smaller than that of big businessmen who
had at that time accumulated a strong base of capital. Even
worse, government policies or individual officials still tend to
cause market distortions in favor of big businesses.

Unless this misperception is removed, we will never be able to
develop programs to enhance business linkages between the big,
medium and small enterprises. Mutually beneficial business tie-
ups cannot be decreed or instructed. Such linkages are
sustainable only on the basis of normal business concepts and in
an economic climate that allows for fair and open competition.

A business climate of equal partnerships between big and small
and medium enterprises must be established through simple
licensing procedures, for entry to and exit from the business
sector, and supported by regulations designed to ensure fair
market competition to prevent the abuse of market dominance.

The development of small enterprises always exacts learning
costs and these costs cannot be forced entirely down the throats
of big businesses. Instead, the government should set up a
general, but transparent mechanism of incentives and preferential
treatment to encourage big groups to tie up with smaller firms.
Even the United States, whose capitalist concept is somewhat
alien to our economic terminology, has the Small Business Act,
which awards preferential treatment under a fully transparent
system to help small firms survive in the free market. South
Korea and Taiwan enforce dozens of laws and regulations regarding
small businesses.

Our small business bill, which has been in the drafting
process for more than five years now, has yet to be proposed to
the House of Representatives for deliberation.