Production expansion still allowed: Hartarto

Production expansion still allowed: Hartarto

JAKARTA (JP): Coordinating Minister for Industry and Trade
Hartarto reaffirmed yesterday that large business groups are
still allowed to expand their production capacities despite their
leading position in the local market.

Speaking to reporters following a meeting with President
Soeharto, Hartarto said that such a business policy is essential
to enable Indonesian companies to compete in the era of trade
globalization.

"Expansion will not be restricted because the most important
thing is not related to market share but ownership," said
Hartarto, who met the President while accompanying visiting
Japanese Minister of International Trade and Industry Ryutaro
Hashimoto.

Hartarto's statement was apparently made to clear the
controversy over the expansion of the country's conglomerates.

However, he did not say if the government would control the
ownership of these companies. He also refused to explain if the
ownership control would require conglomerates to sell part of
their shares to the public.

In a recent hearing with the House of Representatives State
Minister/Chairman of the Investment Coordinating Board Sanyoto
Sastrowardoyo said that the government would no longer issue
expansion licenses for companies which held more than 50 percent
of the market to limit the widely criticized oligopolistic and
monopolistic practices.

Sanyoto's statement gained the support of the House's members
but was severely criticized by large business groups, which claim
that the restriction would affect their competitive edge on the
international market.

Sudwikatmono, a key executive of the Salim Group, the
country's most influential business conglomerate, said that the
government's tighter control of large business groups is not only
unrealistic but counter-productive.

"The move will not only discourage foreign investments but
might also set off capital flight," he said.

Earlier reports said that the application of PT Indofood -- a
publicly-listed affiliate of the Salim Group, which controls
nearly 90 percent of the instant noodle market in the country --
to further expand its noodle factory had been turned down by
Sanyoto's office.

Sanyoto, after he and Sudwikatmono met the President, later
said that companies, with a market share of more than 50 percent,
will still be permitted to expand their production as long as the
additional output is sold overseas.

In a press briefing yesterday, Hartarto reemphasized that the
expansion of the country's business conglomerates is essential to
enable industry to compete both regionally and globally.

He said that the policy to allow companies, with a market
share of above 50 percent, to further expand is not against the
Industrial Law.

To face trade globalization, Indonesia has also launched a
series of reform measures such as tariff reduction and removal of
non-tariff barriers, Hartarto said.

He said that the gradual tariff reduction reflects the
government's commitment to free trade both under the ASEAN Free
Trade Area and the World Trade Organization.

"In facing such a (competitive) situation, the business
expansion should not be restricted," he said, adding that the
country's investment policy will still be guided under the
negative investment list.(hen)