Economists warn of unfair competition

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)