Core-Plasma Partnerships: Partnership in Principle, Imbalance in Practice

Economic structures divide businesses across different scales, from micro, small, and medium enterprises (MSMEs) to large enterprises. Each has different characteristics and roles: large businesses generally have an advantage in capital, technology, management, and market access, while MSMEs often face limitations in those same areas — a structural imbalance that can hold back inclusive economic growth.

One mechanism designed to connect the strength of large business with the potential of MSMEs is business partnership. Under Article 1(13) of Law No. 20 of 2008 on Micro, Small, and Medium Enterprises (the MSME Law), a partnership is a direct or indirect business relationship built on mutual need, trust, strengthening, and benefit, involving MSME and medium-scale actors together with large businesses. Article 87(5) of the Job Creation Law identifies the core-plasma pattern as one recognised partnership model.

Under Article 27 of the MSME Law, a core-plasma partnership is one where a large business, as the "core," nurtures and develops MSMEs as its "plasma" through:

• Providing and preparing land;
• Supplying production facilities;
• Providing technical production and business management guidance;
• Acquiring, controlling, and upgrading the technology needed;
• Financing;
• Marketing;
• Guarantees;
• Providing information; and
• Other assistance needed to improve efficiency, productivity, and business insight.

The core-plasma pattern is further regulated under Article 107 of Government Regulation No. 1 of 2021 on the Ease, Protection, and Empowerment of Cooperatives and Micro, Small, and Medium Enterprises, which describes it as either:

• A large business positioned as the core, with micro, small, and medium enterprises positioned as plasma; or
• A medium enterprise positioned as the core, with micro and small enterprises positioned as plasma.

A core-plasma partnership is meant to create a mutually beneficial relationship between small and medium/large business partners, accompanied by guidance and development from the large business — building a relationship of mutual need, mutual benefit, and mutual strengthening.

In practice, however, the core-plasma relationship doesn't always run according to the ideal partnership principle. One central issue is the imbalance in bargaining position between the core company and the plasma businesses. Although the relationship is conceptually a partnership, in practice it often resembles a subordinate relationship, in which the plasma party sits in a weaker position — whether in terms of access to capital, technology, or information. This can create a high degree of economic dependency on the core company.

Contractual issues are equally crucial. Article 34(1) of the MSME Law requires a partnership agreement to be made in writing, covering at minimum the business activity, the rights and obligations of each party, the form of development, the term, and dispute resolution. Article 34(2) further requires that the partnership agreement be reported to the relevant authority under applicable regulation. A partnership agreement must not conflict with the fundamental principle of MSME independence, nor create MSME dependency on the large business.

In reality, the requirement for a written partnership agreement is not always observed. Cooperation based only on a verbal agreement remains common, which weakens legal protection for the plasma party in the event of a dispute. The absence of a written contract also makes it harder to prove each party's rights and obligations, opening the door to non-transparent practices that can harm the weaker party. From a civil-law perspective, this can also be linked to the principle of good faith, the principle of balance in agreements, and the potential for misbruik van omstandigheden (abuse of circumstances), in which the stronger party takes advantage of the other party's weakness — leading to a disproportionate division of rights and obligations, such as the core party unilaterally setting prices, shifting a greater share of business risk onto the plasma party, and limiting the plasma party's access to market information.

This bargaining imbalance can also give rise to unfair business competition. In some cases, a core company holds significant control over price, distribution, and market access, placing the plasma party at a disadvantage — potentially breaching Law No. 5 of 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition, particularly its provisions on monopoly, monopsony, market control, and abuse of a dominant position, ultimately running counter to the principle of fairness and the goal of empowering MSMEs through partnership.

Where a dispute arises in a core-plasma agreement, the parties can, in principle, pursue non-litigation resolution — consultation, negotiation, conciliation, mediation, or arbitration — which is generally preferred for its flexibility and focus on reaching a mutual agreement. Where the dispute involves an alleged unfair business practice, the aggrieved party may also lodge a report with the Business Competition Supervisory Commission (KPPU) for examination and a ruling under Law No. 5 of 1999 — a form of public law enforcement separate from the parties' own civil dispute resolution. Where non-litigation resolution fails to reach agreement, the parties may pursue litigation through the courts.

In short, while the core-plasma model already rests on a fairly comprehensive legal foundation, the main challenge lies in implementation. What's needed is stronger government oversight, certainty in the making of written agreements, and a more effective legal protection mechanism for plasma businesses. Without these improvements, core-plasma partnerships risk drifting away from their original purpose: building a business relationship that is fair, equal, and mutually beneficial.