Govt criticized for widening social gaps

Govt criticized for widening social gaps

JAKARTA (JP): Market distortions, "counter-productive"
incentive systems and "wrong" strategies towards economic
globalization are responsible for the widening of social and
economic gaps in the country, a research group said yesterday.

The Institute for Development of Economics and Finance
revealed in its economic and political review that the current
political and economic systems are still not supportive of
efforts to narrow the divisions.

When presenting the review, Didin S. Damanhuri, a researcher
at the institute, blamed the government for continuously
tolerating market distortions including a monopoly, an oligopoly
and cartel-like practices.

"All of those practices have resulted in a high cost economy
and inefficiency both at macroeconomic and microeconomic levels.
In such a condition, consumers are forced to sacrifice by
subsidizing the producers," Didin said.

He criticized the government's tax incentive of cutting the
maximum rate of income tax from 35 percent to 25 percent for the
highest income group, as misleading.

"The better incentives for the private sector will actually be
the simplification of procedures to get business licenses, the
cutting of various legal and illegal levies and the increased
security of doing businesses here," Didin said.

He called the government's strategy in facing economic
globalization by empowering the already strong business groups as
"wrong."

Consequently, in its bank credit policy, the government gives
high priority to conglomerates, Didin said. In the second half of
the 1980s, for instance, the government allocated Rp 50 trillion
(US$22 billion at current rate) for 22 conglomerates.

"When the problem of bad debts began to rise, most of them
were credits extended to large borrowers. Remember the Eddy
Tansil-Bapindo case," Didin said.

Eddy Tansil, the boss of the Golden Key Group, was imprisoned
after being convicted of corruptions in relation to a loan
scandal at Bank Pembangunan Indonesia (Bapindo), involving more
than US$430 million in unpaid debts by the group in mid-1993.

In facing the globalization, Didin suggested that the
government assign big groups to focus on export markets and
conduct international business intelligence. Meanwhile, small and
medium enterprises should be given more freedom to work on the
domestic market.

Didin warned that the economic divisions will continue to
widen if the government is not serious in addressing the problem
through both economic and political measures.

Based on his calculation, by using 1993 data from the Central
Bureau of Statistics, Didin revealed that some 27 million people,
or 14.3 percent of Indonesia's population, live with Rp 1,346 (58
U.S. cents) per day, some 140 million people with Rp 2,692 per
day, 20 million people with Rp 10,654 a day and three million
people with Rp 142,308 a day.

"If the government really wants to narrow the gaps, it should
first of all open the access of opportunities for all. That is
the necessary condition," Faisal H. Basri, another researcher at
the institute, said.

He explained that when everybody has the same access of
opportunities, businesses will be growing and the competition
will be the rule of the game. (rid)