Govt's SME measures blasted as ineffective

The Jakarta Post ,  Jakarta   |  Thu, 06/14/2007 9:19 AM  |  Business

Ary Hermawan, The Jakarta Post, Jakarta

Responses to the government's latest policy package to accelerate growth in the real sector and strengthen small and medium enterprises have been lukewarm, with some analysts saying it was ""ineffective and lacking in priorities"".

Fadhil Hasan of the Indonesian Development of Economics and Finance (INDEF) organization told a press conference here Wednesday that the government's plan to expand credit insurance facilities for SMEs so that they could more easily secure bank loans would be ineffective.

""The quicker way for the government to develop SMEs would be to require the banks to allocate 20 percent of their loans to SMEs,"" he said.

Meanwhile, according to Revrisond Baswir of Gadjah Mada University, the central bank as regulator should be more responsive to the problems currently faced by SMEs.

Hendri Saparini, an analyst from economic think-thank Econit, concurred, saying that difficulty in securing bank loans was not the only problem hampering the growth of SMEs.

Unequal competition with bigger companies and cheaper imported products, she said, also played a big role in preventing SMEs from gaining bigger market shares.

""How can they expand if there is no demand for their products?"" she said.

Hendri said the government plan to provide incentives to hotels willing to sell SME products to expand their market access had already proven itself ineffectual.

""This has been done since the 1990s, and all to no avail.""

Indonesian Employers Association (Apindo) chairman Sofyan Wanandi told The Jakarta Post separately that the government lacked priorities as to which SME sectors needed to be developed.

The absence of an adequate monitoring system is another problem, he added.

""We acknowledge that the financing issue has been undermining SMEs, but we have to ensure that the funds they borrow are properly used,"" he said.

Sofyan also criticized the fact that the package did not involve the Agriculture Ministry, and thus overlooked the agricultural sector. While the policies were aimed at boosting the real sector, Sofyan said that many, if not most, of the reform measures introduced were in fact related to the financial sector.

Echoing Sofyan's comments, Drajad Wibowo, a lawmaker from the National Mandate Party (PAN), said the package would only further widen the gap between labor-intensive and capital-intensive industries.

However, Coordinating Minister for the Economy Boediono said that the latest policy package was part of an ""ongoing reform"" process.

""The package we introduced yesterday (Tuesday) is part of a process of reform, which is pushing ahead gradually. It is like building a house, brick by brick,"" he said.

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