Wed, 28 Jun 1995

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)