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)