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)