Government urged to stop interventionist approach
Government urged to stop interventionist approach
JAKARTA (JP): The government should stop intervening in the
formation of partnerships between small and medium-sized
enterprises and large companies, according to a survey.
The survey, conducted by the Institute of Social Research and
Economy at the University of Indonesia and the Asia Foundation,
said the government should simply act as a facilitator if it
wished to make the small and large company alliance program a
success.
Citing the results of the survey, the director of economic
programs at the Asia Foundation, Roderick Brazier, lashed out at
the government for overregulating the mechanisms of the
partnerships.
"The government rules who participates in the partnerships and
how to run the cooperation program," Brazier said.
The government has launched a program to partner up small and
large businesses to help develop the country's small and medium-
sized enterprises.
According to the survey, partnerships initiated by the
government rarely were successful.
The survey included 300 companies, each with annual sales of
about Rp 1 billion (US$125,000) in the garment, textile, wood and
agro industries in Java, Bali and North Sumatra.
The majority of the companies have formed alliances with
larger companies for the marketing of their products domestically
and overseas.
The study showed that the main problem facing small and
medium-sized companies in building partnerships with bigger
companies was their lack of knowledge of business contracts.
This resulted in these smaller companies refusing to enter
into written contracts with the larger companies for fear of
being exploited. The smaller companies are also unsure the
country's legal system will be able to protect them from
exploitation.
The survey said the small businesses mostly preferred
"flexible" contracts that allowed them to maintain their
independence. However, as a result they lost the opportunity to
benefit from the transfer of technology and financial support
from their bigger partners.
The survey thus recommended the government improve the country's
legal system and cooperate with third parties such as
universities and non-governmental organizations in educating the
small and medium-sized businesses.
It said the government should also act as a fair and neutral
mediator to resolve any conflicts in the partnerships.
The study proposed the government establish an information
center to provide accurate information on potential partners for
small and medium-sized businesses. (07)