Beer monopoly abolished

Beer monopoly abolished

We should commend Bali's Governor Ida Bagus Oka for his decision over the weekend to withdraw the right he gave last year to PT Arbamass Multi Invesco to collect levies from the sales of beer and liquor in Bali. Although the decision was not made until after President Soeharto's strong warning against levy collection by private companies, the move should be welcomed as a magnanimous decision to take corrective measures in order to improve the business climate.

The decision is greatly significant because it immediately abolished not only unnecessary additional costs for the domestic beer and liquor producers, but also the monopoly in the marketing of alcoholic beverages in Bali.

We fully understand why the two major beer brewing companies, PT Multibintang Indonesia and PT Delta Djakarta, felt "burned" by the authority given to Arbamass last November to manage the sticker system for the distribution of liquors and beer in Bali. Since beer accounts for the bulk of alcoholic beverage sales, it was the two brewers who had to bear the greatest brunt of the additional levy imposed on beer sales.

We reckon that the sticker system itself would not have so deeply hurt the beer companies -- almost all provincial administrations impose a local levy through such a sticker (levy band) system, in addition to the excise tax collected by the central government -- had it not been for the official appointment of a private rent seeker. In other provinces the beer levy is collected directly by the local revenue offices at the face value stipulated on the stickers. The beer producers' sense of what is proper was offended because the Bali governor authorized the privately-owned company Arbamass to sell the stickers, each with a face value of Rp 200, as a commodity whose price is subject to the supply-demand equation.

We also fully understand if the brewers felt their dignity was violated because, simply by the stroke of the governor's pen, Arbamass automatically became the sole distributor of beer throughout Bali. That immediately nullified all the investments already made by the brewers in promoting their trademarks and in developing their distribution networks on the island. One can imagine the frustration and sense of hopelessness felt by the managements of firms which cannot manage and control the marketing of their own products. It is against these unfavorable backdrops that the brewers' boycott of Bali over the last three months should be seen.

Hopefully, the latest move by Bali's governor will prompt Minister of Agriculture Sjarifuddin Baharsjah to cancel his recent decree which imposes a similar sticker system on the distribution of pesticides beginning in April. As we argued in this column last week, the sticker system is unlikely to prove be an effective way of protecting the farmers from counterfeit products. That system can instead be expected to raise the prices farmers must pay. Baharsjah's announcement last week that he has postponed the enforcement of his ruling is not effective enough to remove the sense of uncertainty currently looming among pesticide producers.

The removal of the authority of a private body to collect the beer levy in Bali further strengthens our confidence that the government is really serious about abolishing not only illegal but also legal levies which actually do not perform any service. After all, the people and business entities are already subject to various kinds of direct and indirect taxes, as mandated by the tax laws, to enable the government to provide public services and facilities.