Share Wealth, Indonesians Urged : Economy: In a policy reversal, President Suharto wants businesses to sell shares to smaller cooperatives.

The country’s leaders have admonished rich Indonesians for years not to flaunt their wealth with luxury homes or other conspicuous consumption.

Now, President Suharto wants businessmen to help redistribute wealth by selling shares in their companies to cooperatives.

Home Minister Rudini declared in 1988: “It is an insane idea for people to compete to build mansions similar to the White House. . . . They are asocial.”

Retired Adm. Sudomo, coordinating minister for general policy and security, said last year the slow spread of wealth was a greater danger to stability than any political or military threat.

Sudomo said “the side effects of economic development” were not moving rapidly enough “to cope with all the social problems so we can narrow the gap between the rich and the poor.”

In February, Suharto said: “Of course we cannot avoid differences in levels of income and abilities, but these differences should not be allowed to grow into a social gap that is contrary to the spirit of togetherness.

“We must recognize these differences and take steps to minimize them before it is too late.”

Per capita annual income is less than $500 in this nation of 178 million people. The gap between rich and poor is great and a middle class began to emerge only in the last generation.

In his annual budget speech in January, Suharto urged companies to sell 25% of their shares to cooperatives so the co-ops could become a “national economic force.” He suggested making loans to poorer cooperatives to help them buy the shares.

Businessmen were surprised by the proposal and many dismissed it as a populist response to criticism of powerful conglomerates.

Indonesia has 34,000 cooperatives with about 26 million members. They were established to give small farmers the advantages of mass buying and marketing and to help introduce modern methods in handicraft and cottage industries.

Cooperatives, enshrined in the constitution, were intended as an economic complement to state-owned enterprises and private companies.

Suharto has promoted cooperatives as the ideal way to help the poor in a land where 70% of the people make their livings in the countryside.

Unfortunately, most cooperatives are perceived as poorly managed, undercapitalized and burdened with bad debts. Of 6,000 rural credit co-ops, a 1988 World Bank report said, “1,272 are insolvent but not entirely hopeless, while 1,658 are candidates for dissolution or liquidation.”

Some businessmen, startled by the idea of selling shares to cooperatives, hope Suharto’s suggestion was a pep talk rather than a new government policy of divestiture.

As explained by Radius Prawiro, coordinating minister for economy, finance and industry: “This is an appeal and not an entirely new policy. Helping one another must not be spelled out by legislation. This is an appeal to the private sector to give cooperatives a chance to own part of the equity.”

Prawiro and other senior officials said private companies would not be compelled to sell stock to cooperatives, but it was not made clear how such transfers might occur without compulsion.

Business analysts said few privately held companies would voluntarily sell shares to cooperatives or lend money to finance the purchases.

Suharto’s proposal followed months of statements by economists, politicians and educators that efforts to deregulate the economy in recent years benefited big enterprises at the expense of small ones, especially of cooperatives.

There were complaints that many of Indonesia’s largest companies are controlled by ethnic Chinese, who make up less than 5% of the population but have great influence.

Any belief that the Suharto proposal would fade away ended with a major presidential gesture March 4. On that Sunday, he was host on his farm at Tapos, 45 miles south of Jakarta, to 31 of Indonesia’s business leaders, most of them ethnic Chinese.

“A more equitable distribution of incomes should be developed, together with growth and stability, otherwise social jealousy and upheaval may break out to annihilate all our achievements,” the Jakarta Post quoted him as saying.

He said conglomerates were useful in fighting tough international competition, but should not become domestic monopolies because “they can also manipulate prices, causing the people to suffer,” the paper reported.

Antara, the national news agency, quoted Suharto as saying: “The government hopes the selling of shares to cooperatives will proceed smoothly. . . . If the transactions do not run smoothly, the government will take measures to see to it that they do.

“If this fails to proceed, the existing gap will only give rise to social envy and social upheavals,” Antara quoted him as saying. “There will thus be no winners.”

Suharto told the businessmen that the government would prepare a list of worthy cooperatives deemed to have the necessary financial resources.

“That way,” he said, “you would not have to look for such cooperatives.”