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