Wed, 31 Mar 1999

Government to boost power of indigenous businesspeople

JAKARTA (JP): The government has stated its intention to increase the economic power of indigenous Indonesian entrepreneurs through an investment program, according to State Minister for the Empowerment of State Enterprises Tanri Abeng.

Tanri said on Tuesday the government hoped that the planned PT Permodalan Nasional Madani (PNM) would emulate the success of Permodalan Nasional Berhad in Malaysia, which helped raise the value of assets owned by indigenous people from 5 percent in 1970 to over 30 percent now.

"This has given us motivation to improve the welfare of (indigenous) Indonesian people, and also deal with the problem of the socio-economic gap in a similar way," Tanri said at a seminar on PNM.

To achieve the goal, Tanri said PNM would at first establish venture capital to be used by small and medium enterprises (SMEs).

PNM's second priority would be to establish an alternative financial institution to channel the government's subsidized credit funds to SMEs, cooperatives and farmers.

According to the government's letter of intent to the International Monetary Fund, the government will reinstate risk sharing by channeling subsidized credits, especially for small farms, with financial intermediaries to ensure prudent lending practices.

The third priority of PNM, Tanri said, would be the so-called "widespread ownership program", through the establishment of mutual funds and the public sale of SME shares.

Tanri, however, did not say that the programs would favor Indonesia's indigenous people.

Indigenous Indonesian businessmen have frequently been left behind by their ethnic-Chinese counterparts, who have for decades dominated the country's economy.

There have been repeated calls on the government to follow Malaysia's affirmative policies toward indigenous entrepreneurs.

Sofyan A. Djalil, a senior staff member at Tanri's office, said that through PNM the government aimed to realign the economic structure, now dominated by big conglomerates, to include more smaller-scale businesses

"The economic structure inherited from (former president) Soeharto's New Order is such that we have a very few extremely strong big businesses, while most businesses, that is, small and medium businesses, are very weak," he said.

"We also have to correct the imbalance in the country's wealth distribution through efforts that are in line with the market mechanism."

PNM, therefore, should get wide support from the people, he said.

PNM will have an authorized capital of Rp 1.5 trillion (US$170 million), of which Rp 300 billion will be allocated from the 1999/2000 state budget.

PNM's paid-up capital would theoretically increase in line with the growing number of participants in the programs offered.

Aries Muftie, the Bank Muamalat director who has been active in the preparation of PNM, said the programs would basically fall into two classifications, namely, the "entrepreneur program" and "widespread ownership program".

In the entrepreneur program, Muftie said, PNM will select potential individuals in microbusinesses to receive subsidized loans of up to Rp 500 million from PNM's soon-to-be-established alternative finance institute.

PNM would give equity participation between Rp 500 million and Rp 10 billion at prospective SMEs, Muftie said.

For the widespread ownership program, PNM will help the government divest 20 percent of shares in listed state companies to selected individuals, SMEs or cooperatives.

Muftie said that for the sake of a wider economic interest, the government would sell its strategic assets to as many "deserving people" as possible.

"Assets in the economy should not be in the hands of only a few people. The more people possess the asset, the better for the economy," Muftie said during the PNM programs introduction seminar at Hotel Mulia. (02)