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.