Govt asked to give equal right to market entry

Govt asked to give equal right to market entry

JAKARTA (JP): Experts suggested yesterday that the government open up Indonesia's market to all companies since protectionist policies have only concentrated the country's wealth into the hands of a few conglomerates.

Didik J. Rachbini of the Institute of Economic and Social Education, Research and Information said that the government has not taken any systematic measures in the last 20 years to prevent conglomeration and to give equal opportunity to all business entities.

The gap between big and small businesses has widened and can no longer be hidden behind figures from the Central Bureau of Statistics, he said.

"President Soeharto acknowledges this condition and has called on conglomerate owners to share their wealth with cooperatives," he said.

He suggested that the government take further deregulatory measures to directly reach grass-root levels and that existing deregulations only benefit certain people.

Sharing Rachbini's argument, Jochen Roepke, a professor at the University of Marburg in Germany, said that what makes deregulation difficult in Indonesia are market forces, pressure from specific individuals, groups and industries, self-enrichment and infant-industry protection. All of these elements, he concluded, inhibit market entry in Indonesia.

Protection

Roepke said that restricted market entry, which is regulated through licenses, protection, provision of monopoly rights and so on, is indirectly related to the current market position of Indonesian conglomerates.

According to 1994 data, the share of the 10 biggest private conglomerates accounted for 18.3 percent of the country's Gross National Product (GNP). The shares of the 20 biggest accounted for 25.2 percent and the 30 biggest accounted for 29.4 percent.

However, aggregate concentration in Indonesia does not differ substantially from other countries, such as Germany, Roepke said.

Indonesia's concentration of wealth is also still below South Korea, where the biggest conglomerate, Samsung, has a share of 16.6 percent of the country's GNP, which is nearly equal to the 10 top Indonesian conglomerates.

"But has the acquisition of wealth and power by Indonesian conglomerates been legitimate?" Roepke asked. "A closer examination would demonstrate that in Indonesia substantial wealth was amassed via privileged access to government-related strategic assets."

While many small and medium firms are mostly self-financed, big concerns have ample access to financial capital and are often able to finance more than 100 percent of projects by credit due to mark-up practices, closed relationships to banks and government officials.

Access to commercial banks remains difficult for many small firms due high intermediation costs, information asymmetries and moral hazard, all resulting in low-trust relationships between lenders and borrowers.(rid)