House approves law on medium, small businesses

House approves law on medium, small businesses

JAKARTA (JP): The House of Representatives approved a bill
yesterday empowering and protecting small and medium-size
enterprises.

Minister of Cooperatives and Small Enterprises Subiakto
Tjakrawerdaya said yesterday that the new law will provide a more
conducive business climate for small firms to work with larger
firms and to become independent businesses.

Subiakto said that cooperation between small firms was needed
to strengthen their bargaining power, to increase their economies
of scale and to prevent the development of "abnormal" market
practices such as monopolies, oligopolies and monopsonies.

"Efforts to prevent abnormal market practices... will be done
through deregulation, trade regulations, price determination and
penalties," he said.

However, he added that certain monopolies, oligopolies and
monopsonies would be allowed to exist if they are considered
beneficial to the people.

Partnership

The law places much emphasis on partnerships, which, Subiakto
said, should be based on a reciprocal need between large and
smaller firms.

"This will hopefully be achieved by incentives and without any
coercion," he said.

Subiakto said the law also makes provisions for training and
development programs between smaller enterprises and government
agencies.

The law also stipulates penalties for medium and large
companies which undervalue their assets in order to be
categorized as small companies.

The penalties range from fines of up to Rp 2 billion
(US$873,362) to the temporary or permanent suspension of
business licenses.

The law also puts into place a means of preventing large firms
from taking over their smaller counterparts illegally.

Violators can be fined up to Rp 5 billion or have their
business licenses suspended or canceled.

Subiakto explained that companies categorized as small firms
are those with maximum total assets of Rp 200 million
(US$88,200), excluding land and buildings, or those with maximum
annual sales of Rp 1 billion.

The definition, he said, was needed to avoid different
interpretations of the term and to reduce the likelihood of
abuse. (pwn)