The pribumi entrepreneurs of Bali and Central Java (or how not to help indigenous enterprise)

Fostering indigenous (pribumi) entrepreneurs remains a major aim in Indonesia. The history of the Central Javanese batik industry shows, however, that affirmative action programs in pursuit of that aim can be counter-productive if they undermine entrepreneurial skills-innovation in relation to products, markets, technologies and management-and instead encourage cultivation of political and bureaucratic contacts. The batik industry cloth subsidy did this by rewarding well-established and well-connected firms for continuing to do what they had long been doing, while discriminating against new and innovative firms. On the other hand, the emergence and rapid expansion of the Balinese garment industry showed that pribumi are capable of successful entrepreneurship in a favourable environment without any extraordinary government assistance. The challenge for policy makers determined that pribumi play a larger role in business, therefore, is to design policies that encourage the development of pribumi entrepreneurial skills, rather than causing them to atrophy.