Sat, 27 Jun 2009
Government policy to optimize the consumption of local products via small and medium enterprises (SMEs) faces private sector questions due to bureaucratic delays and alleged corrupt practices.

Indonesian Chamber of Commerce (Kadin) spokesperson for small and medium enterprises and people-oriented economy, Novita Dewi, said on Thursday that the organization welcomed the Domestic Goods Usage Intensification (P3DN) policy, intended to help industries (especially SMEs) affected by the decline in exports due to the economic slowdown. However there were many challenges in implementing the policy and problems that were causing concern.

"There is lack of cooperation between government and SMEs. The government never explains any policies to the private sector," she said,

The P3DN also stipulates that companies making use of domestic products should have a better chance to win government tenders.

But Novita added that complex government bureaucracy and illegal fees were hindering SMEs from providing for government needs as intended by the regulations.

"Even until now, there are many fraudulent government tenders being held although the tender winner is already chosen. The government is also buying goods above market price from undeserved winners," said Agus Rahardjo, head of the National Development Planning Agency (Bappenas)'s Procurement Policy centre.

He added that highly corrupt bureaucrats in government institutions were responsible for causing these problems.

Agus said that enforcement of regulations, punishment of wrongdoers, transparency in holding tender processes, and the choosing of winning tenders based on their quality are the best ways to ensure and implement reforms.

Industry Ministry secretary general Agus Tjahajana said Thursday that "In every government tender, each private company that participates must indicate the local content component in their business proposal. High local content usage will be calculated as a variable cost to be considered in *each* tender decision,"

Agus said that from the government side the government planned to spend as much as possible of this year's allocated expenditure budget on local procurement, often via SMEs. The total 2009 state budget for ministry and institutional spending is around Rp 300 trillion, and the government plans to spend 30 percent of this on domestic spending,

Oil cost recovery (estimated between US$ 6 and 9 billion), and hundreds of trillions of rupiah to be spent by state-owned firms would add to domestic spending, said Agus Rahardjo, "The government hopes to raise the government spending contribution to gross domestic product this year," said Agus Tjahjana.

According to BPS, government spending contributed Rp 416,9 billion or about 8.4 percent of total gross domestic product by consumption last year.

This year, the government forecasts to contribute Rp 458,59 billion to Rp 541,97 billion to gross domestic product in these ways. (mrs)



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