Competition policy a must for RI to be competitive<\/p>\n
By Bob Widyahartono<\/p>\n
President B.J. Habibie has initiated the establishment of an
\nAgency for the Empowerment of Indonesian Competitiveness. Such an
\nagency sounds attractive but a thorough analysis of the
\ncompetitive power of companies' strategic capabilities is
\nrequired before it can function properly.<\/p>\n
JAKARTA (JP): Competition these days is very challenging and
\nis continuously driven by improvements and innovation. For
\nIndonesian companies of whatever scale, their corporate mission
\nor internal environment will determine their ability to respond
\nto the market's competitive demands.<\/p>\n
A company's competitive power is seen in its ability to secure
\na share of the market in the face of other competing firms.<\/p>\n
In most Indonesian firms -- from manufacturers and hotels to
\nbanks and trading houses -- the views of the shareholders and top
\nmanagement generally carry considerable weight in the
\ndetermination of their business activities, strategy and policy.<\/p>\n
Profits are what count and profit maximization is seen as the
\nbest way to improve a company's chances of obtaining more
\nfinancial rewards and dividends in the future. Such views have
\nbeen inherited over time or copied from the Western way of doing
\nbusiness.<\/p>\n
In their pursuit of success, managers are aware that
\nbusinesses can succeed by providing goods or services people want
\nat prices they are willing to pay -- prices high enough to
\nproduce a profit. If a company's orientation, however, is only
\ndirected toward profit, it would be very difficult to maintain
\ncustomer satisfaction.<\/p>\n
Business should not solely be motivated by profit. It should
\nbe a form of social activity performed by a group of human
\nbeings, even though its purpose is generally complex. Besides
\nmaking profits, there are, in fact, three other objectives of
\nbusiness activity: company growth, helping society and improving
\nthe quality of the employees' work life.<\/p>\n
The fourth objective would ensure that workers' day-to-day
\nlives in the workplace are comfortable and pleasant, that
\nrelationships with colleagues are friendly, that they grow
\nintellectually and spiritually through their work, and that they
\nare aware of the existence of corporate values and ethical
\nstandards.<\/p>\n
Companies aware of these four objectives are in a better
\nposition to equip themselves to face a competitive market.<\/p>\n
Competition is a dynamic process and business players
\ndetermined to participate with a sense of mission have a better
\nchance of succeeding.<\/p>\n
In many business environments, standards for fair competition
\namong businesses are set up through competition policies. Have
\nsuch policies been put in place in Indonesia, and if not do we
\nneed such standards?<\/p>\n
Competition policy on the one hand encourages competition so
\nas to ensure as much competition as possible within the economy,
\nwhile on the other hand the government is required to intervene
\nin economic activities to prevent negative effects of excessive
\ncompetition.<\/p>\n
So the role of the government is like an umpire balancing
\nexcessive regulation and a laissez faire system. In case of
\ndoubt, the mission of the government should be to introduce more
\ncompetition, because that is better than very limited competition
\nsuch as monopolies, oligopolies or cartel practices.<\/p>\n
Competition is not solely an economic principle, but it serves
\nas an excellent democratic principle adhering to fairness and
\nethics in business.<\/p>\n
Many countries, developed and developing, do not have
\nextensive competition policy frameworks. Some developing
\neconomies question the value of such frameworks during their
\nearly stages of growth. Some even consider this issue as a tool
\nto undermine competitive advantages. It has become a matter of
\nfeat that business is becoming increasingly global in its vision.<\/p>\n
Does Indonesia have and, if so, does it feel the need for a
\ncompetition policy? Some players in their field see such policies
\nas unnecessary regulatory intervention at a time when their
\ndesire is to stimulate commercial activity.<\/p>\n
They also consider formal competition policies as bearing high
\nadministrative burdens and costs which they cannot afford and
\nprefer to be flexible. This flexibility in approach has become
\nless effective and more inefficient over time, and therefore
\nvulnerable to collusion and corruptive deeds.<\/p>\n
At present Indonesia does not have a so-called \"antitrust\" act
\nto limit and or regulate the conduct of larger firms, so that
\nthey do not dominate a market and influence the behavior of
\nsmaller firms. And the country also does not have a fair trade
\nact to set rules and regulations for fair trade and competition.<\/p>\n
Experts and practitioners contend a \"narrow competition
\npolicy\" as being the dominant policy adhered to by many
\nindustrialized economies. Such a policy focuses on four main
\nareas of business activity.<\/p>\n
* Horizontal arrangements where competing firms can enter into
\ncollusive arrangements.<\/p>\n
* Vertical arrangements which restrain competition at different
\nstages of the production process.<\/p>\n
* Misuse of market power to prevent or frustrate the entry of
\npotential competitors.
\n* The regulation of mergers and acquisitions.<\/p>\n
This narrow approach can have a great risk of regulatory
\nfailure, where the consequences of government intervention are
\ngreater than the perceived inadequacy of the market place.<\/p>\n
Some believe that a formal competition policy can have high
\nadministration costs which are not efficient for business. Fair
\ncompetition has many foes in businesspeople who have been and are
\nalways in a favored position, such as holders of monopolies and
\nspecial treatment from certain government officials who have
\nalready have lost their \"shame culture.\"<\/p>\n
Nowadays one cannot just mention a trade policy in isolation
\nto investment and competition policies. A competition policy is
\nnecessary because a level playing field is important to attract
\nforeign direct investment and avoid a rapid increase in operating
\ncosts, although formulating such a policy needs focused attention
\nand extra effort.<\/p>\n
While Indonesia is moving toward having better welfare for its
\nsociety, is a local administration's regulation of not allowing
\nlarge-scale retailers to set up their outlets close to
\ntraditional markets (where small retailers are in operation) one
\nform of competition policy?<\/p>\n
In meeting the growing importance of human life, it is
\nimportant to have a competition policy stipulating clearly the
\nrules of the games for large, medium and small firms as an
\nintegrated part of the reform and globalization process. For
\nsure, a competition policy is not an act of reregulation.<\/p>\n
Legislators should play their roles in speeding up competition
\npolicy as part of their moral obligation toward developing
\nsociety. Once this policy is enacted, government officials must
\nbehave themselves and feel responsible for making the environment
\nmore conducive to the adherence of competition policy.<\/p>\n
This is the dynamic challenge for Indonesia in a better
\nbusiness and investment environment, particularly in facing free
\ntrade arrangements under the ASEAN Free Trade Area (AFTA)
\nagreement and the Asia Pacific Economic Cooperation (APEC) forum.<\/p>\n
The writer is a member of the Institute of Economic Studies,
\nResearch and Development (LP3E) of the Indonesian Chamber of
\nCommerce and Industry (Kadin).<\/p>",
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