'Protection leads to monopoly'

JAKARTA (JP): The government's infant-industry protection for most of Indonesia's conglomerates in the last 25 years has pampered them and made them oligopolistic and monopolistic in nature, an economist says.

"With the upcoming liberal trade era, protection and government subsidies as well as intervention in the business world must be transparent and should only be permissible in very specific conditions," said Christianto Wibisono, the director of the Indonesian Business Data Center.

Speaking at a seminar on Reconstructing the Goals of Our Republic held by the Indonesian Institute of Sciences, Christianto said that monopolistic protection has allowed giant businesses be inefficient and have high-cost performances.

He said that in the future countries will have to eliminate all forms of protection, which may result in market distortions, such as trade regulations and non-tariff barriers.

Christianto said that Indonesia would also have to face the problem of re-identifying and redefining its national interests.

"Indonesia has been focused on emotionally protecting national economic strengths. Both state-owned and private companies have been catered to for the sake of a sense of nationalism and patriotism...All of this is an abstract concept to logic," he said.

Christianto pointed out that in many developed countries, although a company may belong to a family network, it was usually publicly listed and managed professionally.

Such segregation between the individual and public interest, he said, "can only happen in a politically democratic atmosphere -- which happens to occur in the West -- which is rigid and cannot be compromised".

In Indonesia, he said, the process of conglomeration in many giant enterprises usually has many side effects, including the development of a weak economic structure.

"The syndrome of a 'one man show' and founder of a corporation cannot adapt to the needs and challenges of present times. It is also unable to make management restructurings and reorganizations," he said.

He said that "random expansion" in doing business was no longer popular and had been abandoned by businessmen in the United States in the 1960s.

"It was corrected in the 1980s when large enterprises returned to de-conglomeration, consolidation and core businesses," he said. (pwn)