'Anti-competitive' policies cause market distortions

'Anti-competitive' policies cause market distortions

JAKARTA (JP): Emil Salim, a former cabinet minister, yesterday criticized the government's "uncompetitive" economic policies which help create market distortions.

Speaking at a two-day workshop, hosted by the Investment Coordinating Board, Emil noted that such uncompetitive policies conflict with the country's commitment to free trade arrangements in the Southeast Asian and Asia-Pacific regions.

Such uncompetitive policies, Emil said, include pricing policies on a number of commodities, tolerance toward cartel-like institutions, barriers of entry into a number of businesses and exclusive licensing.

"In Indonesia, cartels are not regulated but tolerated," Emil said. "The government even lets some associations help regulate businesses."

Because of the privileges, becoming executives at a number of associations, including the Indonesian Chamber of Commerce and Industry (Kadin) and the Associations of Indonesian Young Businesspeople (Hipmi), is the best deal to do business, Emil said.

"Therefore, it's not surprising many people compete for the chairmanship of Kadin or Hipmi. There is something behind it," he said.

He suggested that the involvement of associations in regulating business life be abolished because this can create barriers to entry into business.

He also questioned "obligatory" fees imposed by associations on their members.

Such levies, combined with various levies imposed by the government and local administrations, reduce the competitiveness of Indonesia's products both in local and international markets.

Emil questioned the need for such uncompetitive policies which help discourage exports at a time when the competitiveness of Indonesia's exports is weakening.

The policies include the banning of exports on certain commodities, supervision on the exportation of certain commodities, licensing of exporters and export taxation.

These uncompetitive policies, which are essentially protectionist, should be abandoned in the current era of economic liberalization, Emil said.

"Such policies were valid for the last 25 years, but not anymore, not for now and the coming years. Particularly since we will have free trade in Southeast Asia by 2003. Those policies are just irrelevant," Emil said.

In addition to the uncompetitive policies, Emil said Indonesia's economy is also plagued by the ineffectiveness of the law enforcement, which results in uncertainty.

In terms of "predictability in business", Indonesia is placed at the lowest among the seven members of the Association of Southeast Asian Nations (ASEAN), just above Vietnam, Emil said.

Besides Indonesia and Vietnam, ASEAN also groups Brunei, Malaysia, the Philippines, Singapore and Thailand.

To make doing businesses in Indonesia more predictable, the government should launch more reforms on its economic legislations, some of which are still based on colonial rules.

"Our legal infrastructure for the economy, especially for the services sector, is still inadequate. We should floor the gas pedal, and reform it," he said.

Emil served as state minister of administrative reforms from 1971 to 1973, as minister of transportation from 1973 to 1978, as state minister of development supervision and environment from 1978 to 1983 and state minister of population and environment from 1983 to 1993. (rid)