Subject to our own creation<\/p>\n
Shortages in cement supplies have occurred practically every
\nyear since the early 1970s. Each time the result is an increase
\nin prices to well above the local reference prices set by the
\ngovernment. Each time this is followed by a \"dialog\" between the
\ngovernment and cement producers, who usually propose an increase
\nin local reference prices. And each time their demand is met.<\/p>\n
As we pointed out in this column last week, this upward spiral
\nof pricing is a recurring quandary. It is an annual problem which
\nhas actually never been resolved. Each time, the solution
\naddresses only the end part of the problem. Cement producers
\nusually end up the winners, at the expense of cement users all
\nover Indonesia.<\/p>\n
And it is happening again this year. Cement prices have
\nincreased to above local reference prices. Not surprisingly,
\ncement producers blame shortage of supply as the cause,
\nsimultaneously giving out hints that an increase in supply is not
\nencouraged by the current reference prices. The proposal to the
\ngovernment is: Increase the reference prices and the supply will
\nincrease.<\/p>\n
We can presume that the government will announce a new list of
\n(increased) local reference prices within the next few weeks. We
\ncan presume that supply will meet demand soon afterwards, at a
\nhigher level of prices. And again it will be hard to refute the
\nallegations that this whole annual event is engineered by
\nproducers in collaboration with distributors.<\/p>\n
All of this has been recurring in that sequence since 1974,
\nwhen the government laid the foundation for an oligopolistic
\nmarket for cement through a ministerial decree signed by the then
\nminister of trade, Radius Prawiro. That ministerial decree, No.
\n05A\/Kp\/I\/1974, dated 15 January 1974, has been renewed several
\ntimes. Other ministerial decrees have been issued to supplant it.
\nThe foundation, however, has never changed.<\/p>\n
It is the foundation for a producers' cartel, in which only a
\nfew producers supply the market through a state-controlled
\ndistribution system. The government sets their selling prices,
\nbut their market is effectively protected. Cement producers do
\nnot need to compete in an open market, as each producer is
\nprovided with a specific market area where nobody else is allowed
\nto enter. Even wholesale distributors and retailers in each
\nspecific area are accredited by the state.<\/p>\n
All this was justifiable in the beginning because of the
\nshortage of a domestic supply of cement. At that time, the
\ndomestic cement production capacity could not adequately meet the
\nincreasing domestic demand. At the same time there were
\nindications that worldwide demand exceeded world supply. By
\neffectively protecting their market against \"intruders\", the
\ngovernment could expect producers to increase their production
\ncapacity and thus avoid a situation in which Indonesian economic
\ndevelopment would be subject to world price fluctuations or even
\nmanipulation.<\/p>\n
The national production capacity has indeed been increasing.
\nEvery cement producer has grown substantially, to the extent that
\nthey are now comparable in size to world cement producers.
\nIndonesian economic development is proceeding practically
\nunhampered by fluctuations in world cement prices. The initial
\ngoal of the ministerial decree was thus achieved many years ago.
\nThe protection, however, remains to the extent that the state
\nitself, and the rest of the nation, has become subject to a
\ncircumstance of its own creation.<\/p>\n
The time is long overdue for the oligopolistic power of cement
\nproducers in this country to be harnessed. By now -- after having
\nbeen securely protected for more than 20 years -- they should be
\nable to compete fairly, not only in the domestic market but in
\nthe global market as well. As long as the protection is there for
\nthem to enjoy we will all remain the victims of annual cement
\n\"shortages\" and price increases.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/subject-to-our-own-creation-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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