Committee to defend consumers

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.