Indonesia warned of widening economic gap

Indonesia warned of widening economic gap

JAKARTA (JP): Indonesia, whose gap between the poor and the
rich has become notorious in the last two decades, received
another warning yesterday following the remark of a senior
economist, Sumitro Djojohadikusumo, about the issue.

"I immediately read this eye-catching statement," State
Minister of Research and Technology B.J. Habibie said yesterday.

The 77-year-old Sumitro suggested on Wednesday that the
government found an investment fund to help small and medium-
scale businesses compete with the bigger ones.

"The bank usually prefers to give credits to a certain group
of companies," said the professor, referring to big businesses --
particularly those owned by prominent Chinese businessmen.

"A state-owned bank even gave Rp 2.8 trillion (US$1.3 billion)
in credits to just two tycoons. We cannot put ourselves at risk
by allowing this group to control state assets," he said.

Habibie told reporters yesterday that Sumitro had
realistically described the situation and called on the people to
prevent the widening of social gap and to find a peaceful
solution.

The Chinese-Indonesian community, which accounts for only
around 3 percent of the country's total population of over 180
million, has played a dominant role in the economic life of this
country over the last three centuries since the Dutch colonial
period.

Combined with the ethnic and religious differences, the
business gap has transformed itself into a social gap which
periodically erupts into riots.

Sumitro, an in-law of President Soeharto, said that the
government should have the political will to establish an
investment fund.

Referring to a similar fund under the new economic policy of
Malaysia, he said that the proposed fund will encourage
investment in small-scale businesses which will later narrow the
social gap.

Other analysts, Laksamana Sukardi, a former executive of Lippo
Bank, Christianto Wibisono, the director of the Indonesian
Business Data Center (IBDC), and Arief Budiman, a lecturer at the
Salatiga-based Satya Wacana Christian University in Central Java,
however, told The Jakarta Post yesterday that the government
should learn from past experience before establishing such an
investment fund.

"The proposal was made out of desperation over the regular
banking procedures," Laksamana said, referring to the failures of
the government to force Indonesian banks to channel some 20
percent of their loans to small-scale businesses.

"It would be another political consumption if the government
gave no guarantee behind the investment fund," Laksamana said. He
added that such a fund should be exempted from tax, transparently
managed, capitalized with public investments and providing
greater yields than banking deposits to make it a worthwhile
project.

Arief Budiman, however, raised the question whether Indonesia
could follow the path of Malaysia, saying that Sumitro tries to
invite the state to intervene in the ongoing market mechanism to
minimize the impact of capitalism.

"The requirement of such an intervention is a clean
bureaucracy, with no abuse of power," Arief said. He added that
Malaysia could achieve its new economic policy because it has a
relatively clean bureaucracy which is totally different from the
Indonesian.

"It is not a matter of a free market, but one of the man
behind the gun," he added.

Christianto said that democracy and openness are the
prerequisites of dealing with the problem of the gap between rich
and the poor.

He said that instead of the business gap, he warned about the
gap between the Chinese and the other groups in the fields of
politics, culture and lifestyle. (09)