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.