Partnerships urged to stop monopolies

Partnerships urged to stop monopolies

JAKARTA (JP): We must work hard to promote partnerships
between large businesses and small and medium-scale enterprises
(SMEs) to eliminate monopolies and oligopolies, the state
minister for national development planning said yesterday.

Ginandjar Kartasasmita said it was likely that monopolistic
practices could be eliminated through partnership programs.

"Partnerships are the answer to... unlimited control over
productive assets by a limited group in society," he said.

He said it was wrong to blame domestic monopolies and
oligopolies for the failure of partnership programs.

"The reason why large-scale businesses here are often
reluctant to collaborate with SMEs is that they are unaware of
the programs' profitability," he said after opening Golkar's
Agency for the Promotion of SMEs and Cooperatives' one-day
seminar.

The seminar's panelists included Citra Group President Siti
Hardijanti Rukmana, the Indonesian Chamber of Commerce and
Industry Chairman Aburizal Bakrie, Gemala Group Chairman Sofyan
Wanandi and Kodel Group executive Fahmi Idris.

"Large-scale companies -- or monopolies for that matter -- are
required in partnerships because businesses need a feasible
economic scale to operate," said Ginandjar, who is also the
chairman of the National Development Planning Board.

On the importance of economies of scale, Ginandjar said that a
palm oil refinery could not run with only several hundred oil
palm trees, while oil palm plantations without refineries were
useless.

"You need thousands of hectares of oil palms and a refinery,
and this can only be provided by people who have capital. This
situation calls for a partnership program," he said.

Ginandjar acknowledged that partnership programs did not
usually work unless the government was behind them. He blamed
this on the Indonesian business climate which "has not yet been
developed".

He said large domestic companies tended to grow larger because
they integrated vertically instead of forming partnerships.
Vertical integration occurs when companies establish their own
upstream and downstream industries.

"Maybe big businesses here think partnerships are
unprofitable, but in many developed countries they have proved
that they are... It's a win-win situation," Ginandjar said.

Businessman Fahmi Idris said the government must be stricter
if it wants partnerships to occur: "If necessary, a set of
regulations should be issued so there are clear sanctions and
incentives for businesses involved in partnerships."

He said companies must think about forming partnership at all
levels of their businesses; from planning to marketing and
distribution.

"It will be easier if collaborating businesses operate in the
same or related fields," he said.

Ginandjar, quoting the Central Bureau of Statistics' figures
for 1994, said that 99.8 percent, or 33.4 million, of the 33.5
million businesses in Indonesia were small businesses, each with
a turnover less than Rp 1 billion a year. Of the small
businesses, 17.46 million had a turnover less than Rp 1 million a
year.

There were 66,428 medium-size and large enterprises in 1994,
making up 0.2 percent of all the country's businesses.

"Although the small businesses accounted for 99.8 percent of
the total businesses in Indonesia, their contribution to the
country's gross domestic product was only 38.9 percent,"
Ginandjar said.

Siti Hardijanti, known also as Mbak Tutut, said small
companies would always be needed because they had a clear role in
the economy.

"Their status (as SMEs) need not change because it is
impossible for every business to become a conglomerate. But
(SMEs) should increase their professionalism," said Siti
Hardijanti, the eldest daughter of President Soeharto.

Businessman Aburizal Bakrie said the government must provide
equal opportunities for all players in the economy.

"We have become big because the government once gave us an
opportunity to grow. If the SMEs are given an opportunity like
this, it will be easier for partnerships to be established," he
said.

"So it is really up to the government to provide a conducive
business atmosphere," he said. (pwn)