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)