Economist calls for effective competition policy
Economist calls for effective competition policy
JAKARTA (JP): The government should complement the success of its deregulation measures with an effective competition policy to further reduce irrelevant business practices, economist Mari E. Pangestu believes.
Mari, head of the economic department at the Centre for Strategic and International Studies (CSIS), said at a seminar yesterday that although deregulation and privatization have caused favorable competition to develop in some areas, superfluous business practices are still rampant.
"Oligopolies and monopolies in many of our industrial structures, a high industrial concentration in a number of sectors, inefficiency in our economy, rigid prices and low quality products are the results of these irrelevant practices."
She noted that restrictions on domestic competition are still prevalent, and most of them are created by the government or with its consent.
They include cartel-like practices in the cement, glass, plywood and paper industries; the pricing of cement, sugar and rice; entry controls on the automotive and plywood sectors; exclusive licensing in the clove and wheat businesses; the domination of state-owned firms in the steel and fertilizer industries and the government's ad-hoc policies which benefit certain companies.
In addition, some products, such as cars, are still protected by high tariffs and others, such as rice, cloves, wheat, flour, milk, milk-products and sugar are safeguarded by trade regulations.
"There are also inconsistencies in giving industries protection and a tendency to introduce non-transparent measures," Mari told the seminar, hosted by the CSIS to coincide with its 25th anniversary.
Yesterday's seminar also featured Djisman S. Simandjuntak, executive director of the Prasetiya Mulya School of Management and Kelly Bird, a doctoral student at the Australian National University, Canberra.
Mari stressed that to eradicate the irrelevant practices, an efficient competition policy is needed in Indonesia.
Competition policy usually encompasses three areas, namely anti-trust regulations, consumer protection and controls on business practices, and should be part and parcel of the whole economic reform process that Indonesia is undergoing, she continued.
"Such competition policy should also address foreign companies as they are participating in local markets. Besides, foreign firms are often the biggest practitioners of anti-competitive behavior."
Mari also said a competition policy should not be burdened with multiple objectives such as controlling large businesses, or protecting small and medium enterprises from the onslaught of large businesses.
"Such multiple objectives will deviate competition policy from its original objectives and make the policy ineffective," Mari said, pointing to the poor performance of state-owned companies caused by their multiple objectives as evidence to support her case.
The main reasons for adopting competition policy, Mari said, are to develop national economic efficiency and the optimum welfare of the customers, improve productivity and stimulate entrepreneurship among business people.
To ensure that such competition policy would be able to meet its objectives, Mari suggested that an independent watchdog on competition be established to monitor the implementation of policy on business practices.
Then the government should consider drafting a competition bill to provide a strong legal basis for upholding fair competition among businesses.
"As we have no competition law right now, what we should do is urge the government to continue its deregulation measures and prevent non-transparent measures as well as ad-hoc policies which benefit only certain people," Mari suggested. (rid)
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