Govt told to raise financial commitment to small firms

Govt told to raise financial commitment to small firms

JAKARTA (JP): The government should increase its financial commitment to small businesses to help accelerate their expansion, a noted economist said.

"The funds provided by the government for the development of small businesses are nominal," Djisman S. Simandjuntak, the executive director of the Prasetiya Mulya School of Management, stated yesterday after addressing a seminar on banking partnerships with small businesses ahead of the 21st century.

The government decreased its small business and cooperative development fund from Rp 75.13 billion (US$32 million) in 1995/1996 to Rp 62.7 billion this fiscal year.

He noted that even when combined with funds sourced from private commercial banks and state-owned banks and companies, the amount are still inadequate.

The government requires state-owned banks and companies to allocate up to 5 percent of their net profits to the development of small businesses and cooperatives. The government also requires commercial banks, including those owned by the state, to allocate at least 20 percent of their credit to small businesses and cooperatives.

As of March this year, commercial banks and state-owned banks and companies have allocated Rp 64.4 trillion, including Rp 41.7 trillion in credit, to the development of small businesses and cooperatives.

Djisman said the government should play the key role in the development of small businesses by committing enough funds for the program.

"The government should not let the program be pursued merely through commercial facilities," he said, adding that small businesses could not afford to expand without special treatment.

Small enterprises, he said, should be given incentives that will encourage them to grow. He suggested that the current regulations be simplified.

"Interest rates for small businesses should be set much lower than the market rates which are generally above 20 percent per annum," Djisman said. "Interest rates for them should be lowered to 10 percent, if possible."

He said the government has the financial resources to finance the development of small businesses.

"The government has the funds for big projects; without which I think we could have been much more prosperous than now," said Djisman. His comment was received with laughter from seminar participants. The talk was organized by Bank Danahutama to commemorate its sixth anniversary.

Furthermore, he said, there are state-owned companies which pursue work outside their core business.

"Why don't they just divest them and leave them for small businesses?" he asked.

Djisman suggested the government sell inefficient state-owned companies and use the money to help small businesses grow.

Sofyan Wanandi, a member of the Jimbaran Group of 41 tycoons committed to helping small businesses, agreed with Djisman.

Sofyan, who is also the chief commissioner of Bank Danahutama, said the government should have the courage to use funds originally allocated for "unnecessary" projects to finance small business development. He did not elaborate.

He said the government's reforestation funds could help in the development of small businesses. (13)