Govt charged with badly managing aid to small firms

Govt charged with badly managing aid to small firms

JAKARTA (JP): Members of the House of Representatives charged
the government yesterday with improperly managing funds of about
Rp 500 billion (US$227.27 million) set aside by state-owned firms
to support small businesses and cooperatives.

Eko Sumista of the House's Finance and Trade Commission said
in a hearing with Minister of Finance Mar'ie Muhammad that the
government's weakness in managing the funds is not only in its
distribution but also in the collection of the facilities.

"Recipients are often not aware that the money should be
returned to the government," Eko said.

State-owned companies are required to set aside one percent to
five percent of their profits, depending on the scale of their
businesses, to help around 25 million small-scale companies and
cooperatives in the country.

The distribution of the financial aid scheme was introduced in
the early 1990s as alternative funding to help small-scale
companies and cooperatives.

The government, in fact, has also instructed banks to provide
at least 20 percent of their lendings to small-scale businesses,
but the banks often escape the mandatory lending not only due to
the fact that most small-scale businesses are unviable but also
because of the higher costs they have to cover in providing such
loans. Many banks were reported to have bought the small-scale
loans of other banks to meet the government's 20 percent
mandatory lending.

Management

House members and business analysts said that the loan
facilities from state-owned companies are not properly managed
due to the absence of a special agency handling the facilities.

The interest rates of the state-owned loan facilities are
around 10 percent, less than half of the lending rates charged by
commercial banks.

The facility sometimes benefits only those who have a good
relationship with state-owned companies, the members said.

Director General for State Enterprises Martiono Hadianto said
that state-owned companies have set aside nearly Rp 500 billion
of their profits to help small-scale businesses and cooperatives.

He said around Rp 384.3 billion, equivalent to around 70
percent of the total funds, had been distributed as low-interest
financial aid to 423,000 small-scale companies and around 15,000
cooperatives in the country.

"The government plans to distribute another Rp 226 billion
this year," he said.

Also speaking at the hearing with the House's Finance and
Trade Commission, Martiono said that his office, as lead
coordinator of state-owned companies' financial aid scheme, has
cooperated with other government agencies to ensure the
effectiveness of the loan facility and to guarantee its fair
distribution.

"We continue improving the system in order to increase the
coverage of the loan facility and to improve collectibility," he
said. (hen)