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)