Committee to defend consumers

Winahyo Soekanto, Lawyer, Jakarta

Pity the Indonesian consumers of electricity, telephone and other public services because there is no one to defend them from arbitrary price hikes.

The glaring injustice of the recent hike in telephone rates lies not in how the government had discounted all public objections of the policy but more on how the public had been blatantly excluded from the decision-making process. No member of the public, who will of course bear the burden of the new policy, had any say in how the policy was drafted and then launched because there was no forum for them to adequately express their opinions.

This is a long-standing complaint but it is true that Indonesian consumers are not usually granted the opportunity to learn and understand the circumstances that lead to pricing policies. They are even, in a way, demanded to ignore chronic inefficiencies in the production or business operations that lead to high production costs and later to high rates imposed on the consumers of certain services, such as telecommunications. The ultimate insult, however, comes when even the government neglects this fact and allows producers to discount their own inefficiencies and poor service when preparing new pricing rates that will, in the end, further burden the consumers.

For many Indonesian consumers, this is indeed a difficult start to the year 2002. They were first hit by the new electricity rate that was imposed regardless of blatantly poor service, followed by the new fuel prices that were preceded by fuel shortages. Then, just as millions of people in Luwu, Situbondo, Medan, Lampung, Pekalongan, Semarang, Kudus, Jakarta, Bogor, Tanggerang and Bekasi were suffering from flooding, the minister of telecommunications hit them with the increase in telephone rates.

Let us discuss the important subject of inefficiency. The State Electricity Company (PLN) is one of those companies that have been riddled with inefficiencies, a legacy from years of corruption, collusion and nepotism. Rapidly increasing demand forced the state-owned electricity company in 1990 to invite private investors that were all linked to family members and cronies of former president Soeharto.

Former PLN president director Djiteng Marsudi described how negotiations took place "at the top level". All company officials had to do was attend a signing of the new contracts. The agreement on the purchase by PLN of private companies' supplies, Djiteng said, looked very much like a parceling out of favors.

Problems that later emerged included oversupply because of unsolicited delivery. Another problem was, amid the declining value of rupiah, PLN had to purchase their supply in dollars and sell it to consumers in rupiah.

Yet another example of how defenseless the public are in the face of arbitrary policies is the recent hike in telephone rates. Despite PT Telkom recording a profit of Rp 2.5 trillion in the past year, the government insisted on increasing the potential for further profit by hiking telephone rates from Feb. 1, 2002. The reason cited for the increase was its plan to expand its telecommunications network.

It was painful to learn from telecommunications expert Roy Suryo recently that, over the past two years, Telkom has actually been increasing its rates unilaterally, by imposing the new Local 3 rate, without informing the public. To add insult to injury, the government raised the overall rate on Feb. 2, without informing the public how it arrived at the 15 percent increase and what components were involved in the establishment of that figure.

The government undertook the new policy failing to first solve the problem of inefficiencies in the company, which would also mean higher costs for network expansion. The inefficiencies included the loss of billions of rupiah involving the West Java office of Telkom, which has yet to be handled.

Another source of inefficiencies in Telkom is its surplus of employees by 17,000. A plan to streamline has been repeatedly mentioned since 2000 but it has yet to be carried out. Then, there was the botched deal between Telkom and Indosat on the takeover of Telkom Regional Division IV, wasting hundreds of billions of rupiah on consultancy fees.

The sad thing is that consumers do not have the means to defend themselves from policies arbitrarily imposed on them because not only has the government simply backed up producers but even the House of Representatives has become a rubber stamp again.

Consumers need a system that will accommodate their views and opinions in a just manner, and a committee on rates of public services may fit the bill if it has adequate authority to defend consumer rights. Indonesian consumers need a committee that is, for example, able to give legal endorsement to establish rates charged by public utilities.

Should it be established, the committee should ideally work to maintain the balance between the rights of consumers and those of the producers and ensure that decision-making processes be transparent. This means public education and allowing the public some amount of control over decision-making.

The committee should also provide ample space for social advocacy. It should watch and remind the government and producers about the importance of involving consumers in the decision- making process. This is a function that is urgently needed given that Indonesia is undergoing a transition from a monopolistic regime to one that allows competition and the presence of competing suppliers of services and goods.

Hopefully, this committee will help improve the bargaining position of consumers when establishing rates charged by public utilities. This committee should therefore be independent and have the authority to test out proposed rates by producers and monitor implementation.

Who should man the body? Ideally, it reflects all stakeholders, the consumers, producers, regulators, experts and others. The body should also have regional networks in order to accommodate greater interests among stakeholders.

Committee members should have a broad knowledge of the public service sector and be able to establish the criteria and means to measure the efficiency of operators of public services. They should also have the authority to reject rate increase proposals if producers fail to comply with the timetable for efficiency planning.

The committee should also be able to identify potential abuses and corruption that are likely to result in inefficiency and unfairness for consumers. It should be able to establish yardsticks by which to measure the quality and accountability of public services as well as a monitoring mechanism.