Economists cool on new reforms

Economists cool on new reforms

JAKARTA (JP): Local analysts have given a lukewarm reception to the new deregulation package, arguing that the government has failed to address the key problems hindering exports.

"Generally speaking, I think the measures will help improve the country's export performance. But they are not enough. The government has yet to deal with the key problems," Chairman of the Indonesian Business Data Center Christianto Wibisono told The Jakarta Post over the weekend.

Christianto said the country's high-cost economy is related to the issue of clean government. "Our government officials and businesses still have many vested interests. Corruption is thus unavoidable."

He blamed the small salaries of civil servants, particularly in provincial administrations, as one of the main reasons for widespread corruption.

Chairman of the Institute for the Development of Economics and Finance Didiek J. Rachbini concurred that the new package of deregulation measures would not be effective in bolstering exports.

"The measures only cut import tariffs but do nothing about the market distortions which have affected the production of almost all goods," Rachbini contended.

Umar Juoro, research chief of the Center for Information and Development Studies, shared Didiek's view, pointing out that the main problem facing the economy is not import tariffs.

"The biggest barriers to exports are illegal levies collected at the various steps of official regulatory procedures, and market distortions caused by monopolies and oligopolies in various products," Juoro noted.

Both Rachbini and Juoro suggested that the government design a deregulatory package to facilitate access for new competitors to enter the sectors currently dominated by one or several players.

Didiek cited the market distortions in the wheat business as an example.

The Econit economic research agency also called the package inadequate to significantly strengthen the competitive edge of Indonesian exports.

A lot of non-tariff barriers have yet to be dismantled to improve economic efficiency, said Econit researcher Arif Arrymann.

Complaints

Christianto questioned a number of components of the new package. It's not clear if the exporting firms, which can now be set up by wholly foreign-owned companies, can also handle the exports of plywood which are now monopolized by the industry's association, Apkindo.

On textiles, he said that the government should ensure that the management of textile and garment export quotas is transparent.

"The government should not allow the trading of licenses among businesses. It should give the export quotas to those who really have the capacity to do the business and not to those who only want the quotas for fees," he said.

He also said that many businesses, particularly at the medium scale level, are still forced to make donations to the Yayasan Dana Sejahtera Mandiri (Self-reliance Prosperity Fund Foundation).

On the one hand, he said, the government has pursued deregulations to improve efficiency. However, he added, it has also issued new regulations that saddle businesses with more burdens.

"I think the minimum after-tax profits for eligibility to donate to the foundation should be raised from Rp 100 million to Rp 500 million or even Rp 1 billion ," he said. (13)