Economists warn of unfair competition

JAKARTA (JP): Economists warned yesterday that the government's excessive market-driven policies would only widen the gap between the haves and the have-nots if the government could not ensure fair competition.

Speaking at a seminar hosted by the National Resilience Institute, economists Dorodjatun Kuntjoro-Jakti and Anwar Nasution from the University of Indonesia, said the current liberalization of Indonesia's economy, if not well controlled, could lead to liberalism which would benefit only certain groups of people, especially those who already controlled economic resources, including capital and accesses to markets.

Dorodjatun noted that only such groups could gain from a series of the government's economic deregulatory measures, while those living in the economically "marginal" position would remain untouched.

"Therefore, I don't think the government's efforts to bring more equal distribution of wealth by applying a progressive taxation system will be fruitful because it does not touch assets and market access," Dorodjatun said.

He noted that big companies, especially rent-seeking companies and those running like cartels, made market entry in Indonesia more difficult. "Besides, they also create an imperfect market."

Concurring with Dorodjatun's argument, Anwar blamed rent- seeking companies for the absence of market "discipline" in Indonesia because they were not encouraged to compete on the domestic market, let alone the international market.

"It happens because economic rent in Indonesia is allocated based on connection (between businessmen and officials), not on capability. It is not an incentive for successful companies," Anwar said.

He noted that a number of economic deregulations which only relaxed barriers to market entry and liberalized imports were not enough to restore market competition.

"Market competition has to be mended through a fair competition law and a number of government regulations," Anwar said. "The regulations needed to restore market competition are those which can encourage the creation of more companies in whatever economic sector."

Dorodjatun suggested that Indonesia take a more careful approach to market-driven economic liberalization, which was highly recommended by developed countries.

"We should not bow down to developed countries' call on economic liberalization. They have everything on their hands, technology, capitals and accesses to market. But what do we have? ... Therefore, don't be too hasty to overhaul our economic system," Dorodjatun asserted.

He explained economic globalization was driven by "triple-T" factors, namely transportation, telecommunication and travel, all of which were still controlled by developed countries.

"I am not enthusiastic about the idea of globalization if, in the end, it only impoverishes this country," Dorodjatun noted.

He said the proponent countries of economic liberalization insisted that governments should loosen their control over the market and privatize state-run companies.

"They even want all public or common-pool goods and services changed with private goods and services, in which they will be involved," Dorodjatun said. "However, we still need public goods and services, such as elementary schools, public hospitals, railways, clean water, funds for the least-developed villages."

The government, through its strong bureaucracy and state-run companies, would be still needed to provide common-pool goods and services, he said. (rid)