Cement shortage puzzling<\/p>\n
President Soeharto did not mention anything about the current chaos
\nin the cement market in his speech when he inaugurated a new cement
\nplant in East Java yesterday. The cement issue might be too
\ninsignificant for the President to comment on. But the bitter fact is
\nthat the puzzling questions about the steep rise in cement prices since
\nJuly have remained unanswered. In the interim the cement prices have
\nincreased further and further to reach more than twice as high as the
\ngovernment-mandated local price references.<\/p>\n
And the government seems powerless to do anything about the problem.<\/p>\n
The consumers have accused the producers of profiteering. The
\nproducers in turn have blamed the problem on speculation by
\ndistributors, claiming that the volume of deliveries from their plants
\nare is than adequate to meet the domestic demand.<\/p>\n
The government has persistently said that the cement prices should
\nnot have risen so steeply because domestic production is running at the
\nnormal rate and should be adequate to satisfy the domestic demand.
\nMoreover, the lid on cement imports has been opened to meet counter any
\ndomestic deficit.<\/p>\n
The more intriguing are the questions about the unusual cement
\nshortage in light of the fact that the marketing of the building
\nmaterial, being considered a strategic commodity, has always been
\nregulated by the government. In addition, the government actually has
\ndirect control of more than 75 percent of the national cement production
\ncapacity because state companies account for over 33 percent of the
\nnational capacity and the government owns 26 percent of PT Indocement
\nTunggal Perkasa that accounts for 44 percent of the total capacity.<\/p>\n
We cannot understand why the government seems to have always been
\ncaught off guard whenever anomalies take place in the cement trade.
\nAfter all, this is not the first time such a questionable cement
\nshortage has occurred. Last November, cement also became a national
\nissue for similar reasons. The problem was solved only after the
\ngovernment raised the local reference prices.<\/p>\n
Judging from the arguments and counter arguments and the exchanges of
\naccusations, we can only come up with three painful assumptions.<\/p>\n
First, the government has no accurate data on the real cement
\ncapacity and actual cement production, nor on the domestic market
\ndemand, and is not well informed of the mechanism of cement
\ndistribution.<\/p>\n
Second, the government is not really serious about maintaining
\nstability in cement prices, or is ambivalent in dealing with the major
\ncement producers.<\/p>\n
Third, if the trading of such a heavily regulated strategic commodity
\ncan degenerate into such chaos, there must be something fundamentally
\nwrong with the government's policy regarding the cement industry.<\/p>\n
Business analysts, including those of the Ekonit economic and
\nbusiness research group, have often suggested that the government expose
\nthe cement industry to open market forces by abolishing the system of
\nmarket zoning and local reference prices and by opening up the domestic
\nmarket to imports. The government also should thoroughly investigate the
\nallegations by several new private investors that it is actually not so
\neasy to enter the cement industry. We have learned that even though the
\nindustry is still open to new producers, new private-sector investors
\noften encounter \"some barriers\" to implementing their projects.<\/p>\n
We think the latest cement crisis should prompt the government to
\nmake an overall review of its policies regarding the cement industry and
\ntrade, otherwise the government will find itself in an awkward and
\nseemingly powerless position every year. The first thing the government
\nshould do now is to rule that cement imports will remain free because a
\n\"stop-and-go \" policy regarding imports will not encourage and not
\nprovide ample time for independent trading companies to develop domestic
\ndistribution networks.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/cement-shortage-puzzling-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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