Government must regulate cement industry: Experts<\/p>\n
JAKARTA (JP): In the absence of appropriate legislation, the
\ngovernment needs to outrightly regulate the cement industry to
\nprevent collusion among cement producers, experts said yesterday.<\/p>\n
Herb Plunkett, a consultant in the Trade Implementation and
\nPolicy Project at the Ministry of Trade, said here yesterday that
\nthe regulation is necessary to prevent abuses of market power.<\/p>\n
Plunkett suggested that the government license production to
\nlimit the number of production sites that can be controlled by
\nany one group, both regionally and nationally.<\/p>\n
A number of critics have said that the two largest private
\ncement producers -- PT Indocement Tunggal Prakarsa and PT Semen
\nCibinong -- have acquired a controlling market share by colluding
\nwith other cement producers and abusing their market power.<\/p>\n
Currently the Salim Group, through Indocement, and Hashim
\nDjojohadikusumo's Semen Cibinong control practically all of the
\ncountry's cement production and distribution.<\/p>\n
Due to their oligopolistic stronghold on the market, the
\nproducers can control cement prices, without abiding by the
\ngovernment's set prices and leaving cement users at their mercy.<\/p>\n
To deal with the pricing problem, Plunkett suggested, the
\ngovernment could require producers to post ex-factory prices for
\ncement. This, he said, would allow them to offer a uniform
\ndelivered price which they would be free to vary at will.<\/p>\n
\"The addition of uniform prices is not administratively
\ncomplex. The regulator must ensure that cement can always be
\npurchased on an ex-factory plus freight basis by nearby buyers
\nand allow producers to offer a delivered price,\" Plunkett said at
\nthe conference on economic deregulation in Indonesia.<\/p>\n
In addition to retail prices of cement, the government's
\nlatest regulation on cement prices -- called local reference
\nprices-- also includes the ex-factory price, set at Rp 6,350
\n(US$2.87) per 40 kilogram sack for all nine cement producers.<\/p>\n
\"These changes may be interpreted as an attempt to improve the
\noperation of the existing system,\" Plunkett said.<\/p>\n
A number of local economists, including Rizal Ramli and Kwik
\nKian Gie, have called on the government to abolish its pricing
\npolicy as it is based artificial pricing and not market forces.<\/p>\n
Plunkett, however, warned of the danger of completely
\nderegulating the cement industry in the absence of a national
\ncompetition policy in Indonesia, saying that it could result in
\nunregulated, market-collusion practices.<\/p>\n
Larger firms, he said, could temporarily reduce prices in
\ncertain markets to drive out smaller firms and thereby increase
\ntheir market share. Then they could more easily collude with
\nother producers to increase prices to the detriment of consumers.
\n(rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/government-must-regulate-cement-industry-experts-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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