Smaller firms need some help, economist says
Smaller firms need some help, economist says
JAKARTA (JP): A senior economist suggested over the weekend
that the government establish a bank with a special mission to
support the development of small firms.
Djisman S. Simandjuntak, executive director of the Prasetiya
Mulya School of Management, said at a seminar here that with such
a special mission, the proposed bank could concentrate on helping
smaller firms.
"Rather than making all commercial banks extend a certain
portion of their credits to small businesses, the government
should establish a special bank to take care of them," Djisman
told the meeting, organized by the Center for Strategic and
International Studies.
The government requires all commercial banks to extend at
least 20 percent of their total credits to small firms. Critics
have argued that such a policy really burdens banks which
specialize on corporate banking services.
"Even the so-called collateral-free loan program, which was
recently introduced by the government, for instance, will remain
a peripheral business for most commercial banks," Djisman said.
The government has asked all state-owned banks to extend
credits of up to Rp 50 million (US$21,400) to small firms with
certificates of business viability as collateral. Such loans are
much known as collateral-free credits.
Djisman argued that the cost of loans actually doesn't matter
that much to small firms, which find simply gaining access to
funding the difficult part.
"We often see that small firms can afford high-interest loans
from loan sharks," he told the seminar, which discussed
competition policy and small enterprises.
He also talked about the small business law, which was enacted
by the House of Representatives last December and approved by
President Soeharto in the same month.
Djisman said the small business law focuses on the problem of
monopolistic, oligopolistic and cartel-like set-ups.
To address these problems, Djisman suggested that the
government monitor and regulate large businesses properly so that
they don't distort the justice of the market.
Djisman also proposed that the government give incentives to
large companies which have built partnerships with small firms in
order to encourage other large businesses to follow suit.
He contended that when incentives are introduced, partnerships
between large and small businesses should flourish naturally.
"If such partnerships are called for without incentives, it
won't happen because large companies which do not forge
partnerships will be treated no differently by the government,"
Djisman warned.
He also suggested that the government reserve certain sectors
for small businesses, rather than reserving certain parts of
shopping or industrial centers for small firms. (rid)