Mon, 15 Aug 1994

Govt to issue measures to narrow economic gap

BANDUNG (JP): The government promised on Saturday to introduce more measures to narrow gaps between the rich and the poor and to alleviate absolute poverty.

State Minister of National Development Planning Ginandjar Kartasasmita told reporters before addressing a meeting with students of the Bandung Institute of Technology that the measures will concern macro-economic, monetary, fiscal and investment affairs.

Ginandjar, who is also chairman of the National Development Planning Board (Bappenas), made the statement in response to last week's remarks by senior economist Sumitro Djojohadikusumo on the widening gap between the rich and poor.

"What Pak Sumitro said has some degrees of correctness and, therefore, the government does not necessarily deny it as we have realized that there are gaps -- a gap in income, a gap of societies in different areas and businesses gaps in different sectors," Ginandjar said Saturday.

"On monetary policy, we will encourage banks to channel more credits to small businesses and to companies in less-developed areas," he said. "Now we still notice that many banks distribute their funds to a limited number of people and to companies in certain areas."

The government, in efforts to narrow the gap between the poor and the rich, has required all commercial banks to channel at least 20 percent of their credits to small-scale businesses or cooperatives. It has also assigned all state-owned companies to set aside up to five percent of their after-tax profits to help these unlucky group of businesses. President Soeharto has also called on conglomerates to transfer part of their shares to cooperatives.


Ginandjar said the government has also long proposed a law to protect small-scale businesses. "We have long proposed a bill on the protection of small businesses but until now it has not yet been passed by the House of Representatives into law. We only hope that this law will soon be passed."

Ginandjar did not rule out the possibility that the government will propose an anti-trust law to avoid further monopolistic practices in the country, which surely endanger the life of small businesses.

"If it is needed, why not," he said, referring to the proposal of an anti-trust law.

The minister also suggested that the government review its fiscal policies which do not distinguish between developed and less developed areas.

"Although our tax law adopts a progressive system, it is still not discriminatory, for instance, whether you invest your money in Jakarta, Maluku or East Timor you have to pay the same rate of tax," Ginandjar noted.

He said if the government is not quick in bridging the gaps, they will spread even wider as the pace of growth among the poor is slower than among the rich.

"So, the gap occurs not because of backwardness of those in lower income brackets but because of the different pace of development and growth," Ginandjar said.

He noted that a number of sectors seem to follow this trend. One of them is the farming sector. "It's because there are so many people involved in farming. So what we should do now is transfer these people to other sectors, such as industry or services."

He said the government will intervene in any sector or area which seems not to make any progress. "So we have to quicken the pace of growth of the lower parts. That's how to narrow the gaps." (rid)