Deficiency within reform<\/p>\n
Except for the applauded definitive targeting of import tariff
\nreduction up to the year 2003, the May 23, 1995, package of
\neconomic reform measures has been criticized by most businessmen
\nas deficient in the most essential elements -- removal of
\nmonopolies and other forms of non-tariff barriers.<\/p>\n
In fact, as we reported on Wednesday, the measure taken on
\ninvestment areas was rather confusing. First of all, the copy of
\nPresidential Decree No.31\/1995 on the Negative Lists of
\nInvestment Areas was not available until one day after the
\nannouncement of the package. Because the State Minister of
\nInvestment, Sanyoto Sastrowardoyo, was not present at the joint
\nministerial news conference (he was leading an investment mission
\nin the United States), the puzzling questions that arose could
\nnot be clarified immediately.<\/p>\n
Indeed, several points in the Investment Negative Lists, as
\nstipulated in the 15-page official press statement on the
\npackage, have turned out to be different from those stipulated in
\nthe sections attached to Presidential Decree No.31\/1995.<\/p>\n
Many foreign businessmen might initially have been excited
\nabout the passage in the press statement saying that supporting
\nservices for domestic trade are now open to Indonesian-foreign
\njoint ventures. But the attachment to Presidential Decree
\nNo.31\/1995 includes those services in the list of business areas
\ntotally closed to direct foreign investments either through
\nwholly foreign-owned companies or joint ventures. Moreover,
\nneither the press statement nor the decree explain what is meant
\nby supporting services for domestic trade. In the 1993 the
\nInvestment Negative List this was defined as supporting services
\nfor trade and advertising.<\/p>\n
The press statement lists civil aircraft maintenance service
\nnear airports as open to Indonesian-foreign joint ventures but
\nPresidential Decree No.31\/1995 does not mention this at all. The
\ndecree opens civil aviation service to Indonesian-foreign joint
\nventures, but that is not mentioned in the press statement.<\/p>\n
We think, therefore, that Minister Sanyoto will have to do a
\nlot of explaining, otherwise foreign businessmen, supposed to be
\nthe main target of the measure, will not understand it, let alone
\nact to seize on the newly-opened business opportunities.<\/p>\n
But the main reason for disappointment in the new package
\nseems to be the maintenance of monopolies in several basic
\nagricultural commodities such as soybeans, soy meal, sugar, wheat
\nflour and cloves. Some might see the disillusionment as
\nunreasonable and out of proportion. After all the package removed
\nnon-tariff barriers from 81 items and the government says that
\nthe items still subject to non-tariff barriers now represent only
\n2 percent of the total number of categories of products listed in
\nthe Tariff Book (harmonized system). As a percentage of total
\nimport value in 1994, those controlled commodities represented
\n6.3 percent.<\/p>\n
We reckon, though, that the disillusionment has been caused
\nnot by the monopolies held by the National Logistics Agency
\n(Bulog) but by the ones granted to private companies which happen
\nto be controlled by politically well connected businessmen. Wheat
\ngrain milling, for example, remains virtually monopolized by PT
\nBogasari Flour Mill, which is controlled by Sudono Salim. The
\ngovernment did allow new mills, but not a single investor has
\nseemed interested because of the condition that new mills have to
\nexport the bulk of their production. The clove trade is
\nmonopolized by the BPPC and PT Sarpindo monopolizes the crushing
\nof soybeans into soy meal. Both companies are controlled by
\nbusinessmen with strong lobbying power.<\/p>\n
Moreover, as various studies have concluded, many of the
\nmonopolies have been hurting, instead of benefiting, the
\nconsumers, who are mostly the common people (wheat flour, sugar,
\ncloves and soybeans) and small and medium-scale firms engaged in
\nthe raising of livestock and poultry and fish farming.<\/p>\n
However legitimate the disappointment may be, we should also
\nbe pragmatic and not expect too much at a time. The government
\nitself has repeatedly stated that economic reform is a gradual
\nprocess. And the latest package did prove that the process is
\ncontinuing, although at a pace seen as much slower than expected
\nby most businessmen.<\/p>\n
But as we argued in this column on Wednesday, the magnitude of
\na reform package at any one time is only as big as the clout of
\nthe technocrats in selling their ideas to the President. That is
\nhow the game of political economy is now played.<\/p>",
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