Soeharto asks large businesses to end monopolies

JAKARTA (JP): President Soeharto yesterday called on large businesses to stop their monopolistic practices as they are at odds with the country's constitution.

"Bapak President said large businesses may not monopolize any sector as monopolies contradict the Constitution of 1945," the chairman of the Association of Indonesian Indigenous Entrepreneurs, Iman Taufik, said after meeting with Soeharto.

The President, according to Taufik, quoted article 33 of the constitution, which stipulates that Indonesia's economy shall be organized on the common principle of the family system.

Therefore, Soeharto continued, there should be partnerships among state firms, cooperatives, as well as large, medium and small businesses.

"Now, we should look for ways to ensure these large entrepreneurs do not lose direction in developing their companies," Soeharto was quoted by Taufik as saying.

Soeharto, when launching a national business partnership drive on Wednesday, said that it is expected to reduce business concentration, which, if not reduced, could widen the existing gaps between large and small businesses.

According to the Central Bureau of Statistics' latest annual manufacturing survey of medium and large industries, the percentage of total industries with a four-firm concentration ratio (combined output share of the four largest firms) above 70 percent declined from 38.2 percent in 1975 to 23.6 percent in 1990, but increased again to 30 percent in 1993.

Soeharto, however, warned yesterday that when analyzing the current gaps between large and small businesses, people should not put all the blame on large businesses as business opportunities have been given to everyone according to their capacity.

He suggested that the partnership between large and small businesses be based on clear rules, so that it would not burden the people.

"Therefore, such a partnership must be based on mutual benefits, not pities, as the government does not force the large ones to cooperate," Soeharto said.

He added that the partnership should help small enterprises and cooperatives improve their business capability in terms of prices, quality and delivery of products.

Taufik noted that his association, which groups merely small- and medium-scaled businesses, hailed the partnership drive, saying that "it deals with national interests."

Soft loans

Meanwhile, tycoon Eka Tjipta Widjaja, chairman of the Sinar Mas Group, suggested yesterday that the government seek soft loans abroad to help accelerate the development of small and medium sized businesses in the country.

Speaking to reporters at a gathering organized by the Forum for Inter-Associations of Indonesian Companies yesterday, Eka said the interest rates on the loans for small businesses should be set at under 10 percent per annum.

"We can get cheap foreign loans at annual interest rates of between 6 and 7 percent. This will precipitate the development of our small businesses," he noted.

Eka is a member of the so-called Jimbaran forum, which groups most of the country's prominent tycoons who pledged in Jimbaran, Bali, last year to help the government eradicate poverty by forging partnerships with smaller businesses.

Concurring with him was I Njoman Moena, an economic analyst, who noted yesterday that procuring soft loans from abroad could an alternative way to speed up the development of small and medium-scale businesses in the country.

Asked by reporters what could be the impact on the current account deficit if such loans are allowed, Moena said that it would only slightly affect the balance of the country's current accounts if they are provided carefully.

"If we use such foreign loans to finance small businesses to make goods for exports, there will be no problem," he said.

He acknowledged that the current interest rates in Indonesia are too high compared to those in foreign countries.

"The high interest rates have already dented our competitive edge in the international market," he said, adding that currently the lending rates in Indonesia are already over 20 percent per annum, while Indonesian competitors abroad have only to pay the rates of between 7 and 8 percent.

"We're facing a dilemma. If we lowered the rates now, it could worsen our overheated economy, but if we don't, it will blunt our competitive edge," he noted.

He stressed that if the economic growth requires deregulation, the equal distribution of wealth requires protection and subsidy.

"But we should make sure that only small businesses shall get such protection and subsidies," he said, adding that according to past experience many non-small businesses got protection and subsidies. (13/rid)