Deregulation welcomed, but criticisms persist
Deregulation welcomed, but criticisms persist
JAKARTA (JP): Several analysts and politicians welcomed yesterday's deregulation package, although they lamented its lack of solutions to various distortions caused by monopolistic practices in the Indonesian economy.
"Overall, especially its emphasis on a gradually-scheduled reduction in tariffs, the package is a step in the right direction...but it lacks any concrete solutions to the problems in relation to the powerful monopolies," Rizal Ramli, director of the Econit think-tank, told The Jakarta Post yesterday.
The government announced yesterday the latest deregulation package which aims to cut tariffs on 6,030 items, place tariffs -- instead of non-tariff barriers -- on various sectors and to relax various investment regulations, including the opening of 10 sectors to private investors.
The package also lowers all tariffs over 20 percent to a maximum of 20 percent by 1998 and to maximum of 10 percent by 2003.
The package is meant to boost economic competitiveness and efficiency, officials said.
"To be sure, the tariff reductions on some crucial items like newsprint (the import tariff has been slashed to five percent from 20 percent) and automobiles (maximum tariffs have been cut to 75 percent from 100 percent) are great news, but it is evident that the package fails to touch upon distortions in the economy," Rizal said.
Other economists, including those grouped in the World Bank, have said that distortions caused by monopolized importations and distributions cost Indonesian firms in 1993 around US$10 billion more than they would have had to pay at international prices for their intermediate inputs.
Dominance
Rizal also said yesterday that the package does not address trade regulations or policies which have contributed to the dominance of certain producers and distributors over various industrial and agricultural commodities such as cement, wheat flour processing and the crushing of soybean.
"The monopolistic policies on wheat, soybean and sugar are especially worrisome since they directly affect the welfare of the people...These inefficient policies also benefit certain parties only," Rizal said.
The importation and distribution of sugar, soybean and wheat grain are controlled by the National Logistics Agency (Bulog) as part of an import substitution drive.
In addition, the processing of wheat grain and soybean is conducted by two firms which, so far, hold exclusive contracts.
Contrary to the expectations of various observers, the deregulation package issued yesterday maintains existing Bulog policies, save for the importation of rice-sacks.
"Instead of dismantling it, the new package seems to enforce such a monopolistic policy," Rizal said.
The analyst's criticism was echoed yesterday by legislator Tadjuddin Noer Said from the ruling political group Golkar.
"Although the package shows our commitments to tariff reduction, it fails to address the root of our recent problems," said Tadjuddin, who is a member of the House's budgetary commission.
"It does not address monopoly at all," he said.
In the meantime, James Castle from the consulting firm Business Advisory Group, said the package came as he expected.
"The package's tariff reductions and relaxations on some investment procedures are good as expected, but I knew that it would not be earthshaking in regards to distribution and some domestic trade policies," he said.
Iman Taufik, a leading businessman, also welcomed the deregulation package's schedules on tariff reduction because it gives businessmen an opportunity to anticipate and make adjustments.
"We appreciate such a gradual mechanism," said Taufik, who is a member of the executive board of the Chamber of Commerce and Industry. (hdj)