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Indonesia takes a new look at the wealth pie

Australian Financial Review - November 28, 1998

Greg Earl, Jakarta – Indonesia is moving quickly towards a policy of redistributing wealth through new Government policies with several key economic officials signalling support for affirmative action.

The Minister for State Enterprises, Mr Tanri Abeng, a former businessman, is understood to be backing the creation of a new agency to channel money to small enterprises and hold shares on behalf of pribumi (indigenous) Indonesians.

Sources familiar with the plan say the agency will be called the Lembaga Permodalan Nasional (National Capitalisation Agency) in a clear parallel with Malaysia's Permodalan Nasional Berhad, which was established 20 years ago as part of that country's New Economic Policy.

The sources say the agency is intended to create several hundred new pribumi business people each year with soft credit and share allocations from privatisations in an effort to rebalance wealth away from the heavily Chinese corporate community.

The supporters of the new agency say it will be the first concrete Government response to the direction by the People's Consultative Assembly two weeks ago to emphasise "economic democracy" in economic policy. Under Malaysia's policies to direct more wealth towards its bumiputera (native) population and away from ethnic Chinese citizens, the PNB holds equity in a wide range of companies on behalf of the bumiputera population.

A week ago the Finance Minister, Mr Bambang Subianto, and the head of the Indonesian Bank Reconstruction Agency, Mr Glenn Yusuf, surprised observers with their swift support for the new tilt towards redirecting wealth.

Mr Yusuf, who is charged with selling bank assets to recover liquidity credits from the central bank, said he hoped to enhance wealth distribution through the sale of bank assets.

He said the Government would like to see social benefits from the activities of IBRA in what appeared to be a concession to powerful political and business interests that want to see the mostly Chinese-owned bank assets distributed to co-operatives and pribumi-owned companies.

Mr Bambang said Indonesia was shifting its policies towards a "people's economy" that would emphasise the development of small enterprises and co-operatives.

Economist and long-serving Former Minister, Professor Mohamad Sadli, said on Friday he was concerned that some confusion was now emerging over distributional policies to deal with poverty and redistributional policies to help an emerging business class.

Apart from the IBRA sales, Mr Tanri is overseeing one of the biggest ownership changes in Indonesia with the planned privatisation of 12 government companies this year under the International Monetary Fund program.

The planned new capital agency is intended to channel some of the privatised equity into pribumi hands, but the privatisation program was substantially wound back this week with the announcement that six rather than 12 companies would be sold this financial year.

Only one privatisation has been carried out so far with the partial sale of a cement company after several setbacks. But the Government on Thursday announced it had received bids from six international companies – including Australia's P&O Ports – to buy half of Jakarta's ports.