KL model ‘will not do’ for Indonesia

Jakarta minister rejects economic system run along racial lines and prefers a US or Taiwan model instead.

INDONESIA will not adopt Malaysia’s race-based New Economic Policy as a model to revamp its battered economy, says Cooperatives Minister Adi Sasono.

“Our basic qualifications are very different. Indonesia rejects a system of politics and economics based along ethnic lines,” he said in an interview with The Straits Times. “We are also not an Islamic state like Malaysia and we don’t have sultans. We don’t seem to have anything in common with them.”

His critics charge that Mr Sasono has been associated with moves to get Indonesia to follow a Malaysian-style affirmative-action programme that would call for the redistribution of the assets of ethnic Chinese-owned conglomerates to indigenous businessmen.

However, in the interview, he said he preferred a system based on the economic models of either the United States or Taiwan. He explained that both were attractive because they were free market economies.

“I want to build an economic democracy, a modern economy, where small businesses are a key element in the economic structure.

“The American model is very sensitive to monopolistic practices,” he said, pointing to its anti-trust laws.

Turning to Taiwan, he said that it too offered qualities worth studying: “Taiwan has created an environment for small businesses to flourish. There are no conglomerates in Taiwan.”

He attacked the previous government for policies that encouraged “primitive dirty capitalism” and sidelined small businesses.

The big players dictated the supply and prices of goods, he said. “People close to the power centre got priority in the distribution of economic assets. It was a ‘Santa Claus approach’ to preserving power.”

As a result, 0.1 per cent of Indonesian firms controlled 61 per cent of assets. He said he had proposed anti-monopoly laws several times but they were rejected by the Suharto government.

Now Cooperatives Minister in the Habibie administration, Mr Sasono is pushing for a level playing field for both big and small businesses.

His top priority is providing credit to small-time traders to get the distribution network flowing again.

He said he had received 10.8 trillion rupiah (S$2.32 billion) from the government for the project and expected to receive another 20.8 trillion rupiah soon.

He noted that contrary to expectation from some economists that it would fail, the prices of staple goods fell after the cooperatives entered the market.

Another ambitious plan is to pump liquidity into the farming sector through cooperatives and other community-based organisations to increase food production and create millions of jobs.

The plan will bypass the modern banking system and the provincial authorities.

He brushed aside the notion that his plans were aimed at marginalising the ethnic Chinese and giving advantage to the pribumis.

“I will create a friendly environment for the Chinese to do their business. More than 1,000 Chinese small firms have received aid from the government and there are cooperatives headed by the Chinese.”