Reforming customs service<\/p>\n
Our front-page investigative story on the customs service on
\nMonday serves only to validate what businesspeople have been
\ncomplaining about over the last few years and to confirm the
\nfindings of a survey of public institutions during the period
\nOctober 2000 to March 2001. It was sponsored by several
\nmultilateral agencies and ranked the customs directorate general
\nas one of the most corrupt offices in Indonesia.<\/p>\n
The extensive web of corruption and collusion was also
\nrevealed by research carried out last year by the Economic and
\nSocial Research Institute of the University of Indonesia and a
\nseparate study by the Indonesian Importers Association. Both
\nstudies estimated state losses from under-invoicing of import
\nprices alone at US$1.2 billion to $2 billion per year.<\/p>\n
The Association of Sugarcane Farmers in Central and East Java
\nrecently urged the attorney general to investigate Director
\nGeneral of Customs and Excise Permana Agung for alleged collusion
\nbetween customs officials and importers to allow sugar imports to
\nenter the domestic market without properly paying import tariffs.
\nThe farmers have even sued the director general through the State
\nAdministrative Court on charges of allowing sugar imports to kill
\nthe domestic sugar industry.<\/p>\n
Yet the government has not yet taken any concrete measures to
\naddress the problems. The Cabinet apparently did not see the
\nissue as severe enough to deserve urgent action, seemingly
\nresigned to accepting that the customs problems are simply the
\nreflection of the generally low level of tax morality within the
\ncountry.<\/p>\n
Last week, Permana Agung told a press conference that the
\ngovernment and the International Monetary Fund had agreed on a
\n17-point reform of the customs service, which would be
\nimplemented next year. He did not elaborate on the reform
\nmeasures, only saying that a steering committee would be set up
\nto formulate technical details of the program and an advisory
\ncommittee would be formed to monitor and advise on the reform
\nimplementation.<\/p>\n
It is imperative for the government to realize that even
\nthough the customs issue appears to be simply a commonplace
\nfeature within a bureaucracy that has been perceived as one of
\nthe most corrupt in the world, the impact of a corrupt customs
\nservice on the economy is much more devastating than, say,
\nmalfeasance at the tax office.<\/p>\n
The most damaging effect of malfeasance within the tax service
\nis loss of state revenue, as the government receives much less
\nthan it is due from taxpayers. But corruption within the customs
\nservice inflicts far-reaching damage on the economy. Violations
\nof customs rules, besides causing revenue losses, create
\ndistortions within the domestic market because foreign goods,
\nwhich pay much less duty and taxes than are mandated by law, pose
\nunfair competition on domestic products, similar to the market
\ndisruption the sugarcane farmers and other industrial
\nassociations have been complaining about.<\/p>\n
No trade policy instruments will be effective, however well
\ndesigned they may be, if the customs service, which is
\nresponsible for guarding the gateways (airports and seaports) to
\nthe country, remains as highly venal and technically incompetent
\nas it is now. There will never be fair trade without an
\nefficient, clean customs service.<\/p>\n
The service plays a vital role not only in preventing under-
\ninvoicing but also in facilitating the smooth flow of imports,
\nwhich is vital to the domestic manufacturing industry due to its
\nheavy dependence on imported materials and components.<\/p>\n
The government, therefore, should place overall reform of the
\ncustoms service at the top of its priorities, especially in view
\nof the forthcoming implementation of the ASEAN Free Trade Area in
\nJanuary, whereby import tariffs for most manufactured good with
\nat least 40 percent ASEAN content will be cut to a range of zero
\npercent to 5 percent. The domestic market would be flooded by
\nimports from other ASEAN countries if importers could collude
\nwith customs officials to circumvent the minimum 40 percent ASEAN
\ncontent rule.<\/p>\n
True, corrupt mentality is a disease that cannot be cured
\nwithin one or two years and cannot be treated in isolation from
\nother government and state institutions. But manufacturers and
\nfarmers cannot afford to wait that long.<\/p>\n
The government needs to emulate the bold measures taken by
\nthen president Soeharto in 1985, when he hired an independent
\nsurvey company to assist the customs service in its inspection of
\nimports at ports of loading (at countries of origin).<\/p>\n
Such bold measures seem essential now to supplement gradual
\nreform measures within the general campaign to develop good
\ngovernance. Most important too is that such bold, contingency
\nmeasures will simultaneously address the problems of corruption
\nand technical incompetence within the customs service, expedite
\nimport flows and ensure fair trade.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/reforming-customs-service-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}