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)