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)