Business leaders criticize office

The Jakarta Post, Jakarta

Sofjan Wanandi, a leader of the Indonesian Chamber of Commerce and Industry (Kadin), has urged economics ministers to strengthen the customs service due to the domestic market being flooded with foreign goods entering the country illegally, either through outright smuggling or underinvoicing.

Sofjan, chairman of the Gemala Group, noted that local industry had only barely survived the crisis thanks to exports and domestic sales, but exports had now become much more difficult due to the global recession.

"We now need the domestic market to survive, but even this market is being destroyed by smuggling and underinvoicing. This problem must be tackled immediately because we are running out of time," Sofjan said here on Friday during a meeting between the Cabinet's members and business leaders organized by the International Finance Corporation (IFC), the commercial arm of the World Bank.

James Castle, from the American Chamber of Commerce, concurred, saying that there was an urgent need to solve the problems of corruption within the customs service by establishing an independent monitoring mechanism.

Castle also criticized the grossly inefficient and corrupt tax system, warning that if the system was not renovated in a comprehensive and timely manner, the money disbursed by the Consultative Group on Indonesia members would be wasted because the economy would not recover and the loans would not be repaid.

"The problem is so pervasive and destructive that there is little doubt in the minds of the Indonesian audit community that if taxes were honestly collected, the current budget deficit would be significantly reduced by as much as 50 or even 60 percent," he said.

Castle suggested that the government cease its current practice of harassing good taxpayers and instead harass corrupt tax collectors.

Minister of Finance Boediono said the government would need to learn more from the private sector about problems with the customs service.

The corruption-infested customs service was stripped of its import inspection authority in 1985 but regained that authority in 1995 under a new customs law.

Javed Hamil, regional director of the International Finance Corporation, pointed out that the private sector still lacked confidence in Indonesia due to inadequate law enforcement and complications resulting from the decentralization process.

Instead of capital flowing in, a steady stream of capital has now been flowing out of the country, Hamil added.