Government monopolies

Government monopolies

Patrick Guntensperger
Business Consultant
Jakarta
ttpguntensperger@hotmail.com

Polls indicate that the quality of services provided by
government utility monopolies is among the most frequent
complaints here in Indonesia. A fresh government could take those
complaints and turn them into an opportunity for real progress in
this country.

While publicly owned and operated utilities, if run well, can
be the most efficient way of providing necessary services to a
large population, Indonesia has a dilemma on her hands. The sad
truth is that the Indonesian government is simply incapable of
running any large corporation efficiently. The inexperience of
the bureaucrats, the instability of any given political party
and, let's face it, the appalling and rampant corruption that
typify Indonesian government make it a virtual certainty that any
national utility provider, or any government monopoly, will be a
black hole into which money disappears and out of which nothing
(including services) ever returns.

On the other hand, privately owned utilities would have to be
closely monitored and regulated. In Indonesia, this would mean
enormous amounts of bribery and graft to the bureaucrats who
would be responsible for that control and a few government
officials and their pet corporations would get wealthy while
services remained non-existent at worst and undependable at best.
What to do?

The simple answer is that there is no simple answer. Each type
of service would have to be evaluated to determine whether it is
in the countrys best interest to maintain or grant a monopoly.
Some services and products, if allowed to compete freely and
honestly, are best left to private entrepreneurs; the competition
provides a free market control over price gouging and encourages
constant improvement and ongoing research & development in an
effort to maintain a competitive edge.

Other types of businesses should be run by or at least be
directly accountable to the government. In Indonesia, there
should be as few as possible of these and each government
corporation, particularly if it is granted a monopoly, should be
supremely transparent and absolutely accountable to the public.

In those cases, that is, the vast majority, where it is deemed
to be more appropriate to allow free competition for the
provision of goods or services, there must be rigidly enforced
laws regarding price-fixing and other attempts to influence the
market artificially.

In those few government monopolies that are licensed, we must
be constantly vigilant to ensure that the services and goods
provided are of acceptable quality and price and that no
government officials are milking it for their personal gain.

One need not be cynical, merely realistic, to point out that
here in Indonesia, every tool we have in the box will have to be
deployed in order to combat corruption, both in privately owned
businesses and government controlled ones. We can rest assured
that without stern preventive measures, a government monopoly
will be initially perceived as a cash cow for the fortunate civil
servants entrusted with its administration.

But equally, it will be necessary to exercise extreme
vigilance against attempts at market control by privately owned
corporations. Some countries take such a strong position against
collusion among competitors to fix prices, that, for example, it
is a criminal offense for two Realtors to agree to charge any
given commission rate to their clients. Price fixing must be
eliminated if the market forces are to be allowed to have their
say.

What goods and services should be provided by government-
controlled monopolies and which should be allowed the freedom of
the marketplace? The answer to that question defines the type of
country Indonesia will be.

Indonesia needs to have as few government controlled
monopolies as possible. The government and the civil service
simply don't have the experience or the trust of the public that
is necessary to run big corporations. We couldn't have the
government run in any effective manner corporations that provide,
say, the manufacture and distribution of consumer goods.

The government must, however, be responsible for control of
the military and the police. We must at all costs avoid the
development of private armies or armed security forces that can
easily become paramilitary groups. The Nazis in 1930s Germany
started out by merely creating their own force as security for a
political party. Eventually they controlled most of Europe and
almost the entire world.

Every voter must consider the pros and cons of having the
government manage businesses like electrical and gas supply,
airlines, telephone and other communications services, health
care and internal transportation. Do we believe that the
government is capable of the honest and efficient management of
these enterprises?