Official says RI needs people-oriented economy

JAKARTA (JP): Indonesia must shift to a more people-oriented economy from the current strictly capitalistic system to ensure fair distribution of wealth for its people, a government staff expert has advised.

The country's strong leaning toward pure capitalism had led to the destruction of its own economy, Mubyarto from the Coordinating Ministry for Economy, Finance and Industry said here yesterday.

"What Indonesia needs is a radical shift of its capitalistic economic system toward the Pancasila economic system," Mubyarto told a seminar. He was referring to the country's ideology, which guarantees fairness and equality of the citizens' welfares.

Mubyarto said the government had focused on the development of large conglomerates to boost the country's economic growth, while it neglected smaller businesses in more than 30 years of development.

Pure capitalism promised large growth but disregarded equality and fair distribution of wealth for the majority of people, he said.

The system created a "time bomb, which after 30 years really exploded and destroyed the national economy".

Mubyarto said the country should adopt instead a "moral capitalism", giving power to the working class and farmers who make up the majority of the population.

There must be limits and quotas on distribution of domestic income and wealth without sacrificing freedom, human rights and productivity, he said.

The government must create a more progressive taxation system, he added.

It must also implement more populist programs such as those to help increase the income of people in rural areas.

He expressed fears the country would merely introduce cosmetic changes to the badly hit economy.

"We usually prefer to take a middle road which is compromising and not radical in nature by using (the word) reforms," he said, adding that reforms might be interpreted as mere regulatory and legal changes instead of structural one.

If the government was really serious, it should now focus on empowering small and medium enterprises as well as cooperatives rather than giving more facilities to big businesses.

The managing director of the Center of Economic, Industry and Trade Studies, Benny Pasaribu, said small enterprises and cooperatives were currently burdened by a lack of liquidity and high credit interest rates, a poor raw material supply, hampered distribution system and difficulties in marketing their products.

Pasaribu said less than 0.2 percent of large companies dominated 61 percent of the gross domestic product, but only contributed 12 percent to the labor field, while about 38.9 million small enterprises and cooperatives contributed 88 percent of labor but had just 39 percent of the GDP.

The government has a long list of plans to empower cooperatives, small and medium enterprises, including a plan to provide them with funds to rebuild the distribution network, severely affected by recent rioting.

However, a director of major retail chain Hero Supermarket, Anton Lukmanto, said the government's intention to hand over the distribution to the small and medium entrepreneurs and cooperatives could backfire on the businesses.

"Retail businesses are not an easy business to manage -- bad management could break the business.

"Involving small businesses in the complete economic activities will need a long time and more effort than just providing them with opportunities," he added.

The chairman and founder of the Lippo Group, Mochtar Riady, said the government needed to develop human resources through education and training.

"The economic gap between the countries in the northern part of the world and those in the southern part lies in the disparity of the quality of human resources."

The seminar was organized by the Center of Studies and Development of People's Economy of the Argo Ekonomika foundation.

Other speakers were the vice president of Bank Nusa, Yan Arial, president of the Kodel Group Soegeng Sarjadi, the director of Trisakti University's Graduate Studies Program, Thoby Mutis and the president of Bank Duta, Muchtar Mandala. (das)