Influx of foreign investors
Influx of foreign investors
From Media Indonesia
One of the grave problems to be faced by Indonesia when AFTA comes into effect in 2003 is the big influx of foreign investors, investing in various sectors. No doubt they will become formidable competitors.
The worst impact of this capital rush will be felt by small/middle-scale businesses which roughly comprise 80 percent of the nation's entrepreneurs. Imagine how security will be at stake if just 25 percent of the affected businesses collapse as a result of the sudden influx.
In anticipation of this condition the government has introduced new deregulation measures that include matters concerning partnerships between big companies and their weaker counterparts. In the banking sector, for example, the deregulation policy rules on an increase of credit for small/middle-scale businesses in order to augment their capital and in turn help them grow and develop fully.
However, the big surprise in this deregulation package is the merging of state-owned banks. These mergers are aimed at making the banks stronger so they can help small businesses perform better.
But that is not the end of the story. The banks must stick to their proper function, and the merged banks are expected to specialize if they are to remain healthy or become stronger.
Many banks seemed unprepared for the policy launched by the central bank which stipulates the amount of credit banks should extend to small businesses and the penalties applied for failure to do so. They argued that small companies were difficult to manage.
On the other hand, Bank Rakyat Indonesia succeeded in this area by extending 40 percent of its loans to small creditors, twice the target set by the government. This is because the bank specializes, although not 100 percent, in dealing with small and middle-scale entrepreneurs, right down to villages. It also reflects quality management of the bank. It is evidence that dealing with small businesses is not that difficult. On the contrary, it is often the case that big entrepreneurs dictate to banks, which could be of more harm than good to the banks.
A. DJATMIKA
Jakarta