Govt may end SGS contract this year

Govt may end SGS contract this year

JAKARTA (JP): Minister of Finance Mar'ie Muhammad said
yesterday that the government might not extend the contract of
the Geneva-based Societe Generale de Surveillance (SGS) to
inspect Indonesia's imports at points of loading.

"If the company is still needed, we will hire it only for
technical assistance," the minister told the Budgetary Commission
of the House of Representatives during a hearing.

Mar'ie said that the termination of SGS's contract would not,
however, mean the end of the pre-shipment inspection system now
used by Indonesia for examining its imports.

In 1985, the SGS took over responsibility for inspecting
Indonesian imports, using the pre-shipment inspection system. In
1991 the government assigned to the newly-established government-
controlled company, PT Surveyor Indonesia (SI), the job of
inspecting the country's imports at ports of loading. That
company in turn appointed SGS as its sub-contractor to carry out
its inspections on the condition that the Swiss company provides
technical assistance and know-how, so that SI could gradually
take over the job.

SI is 76 percent government-owned. Twenty percent of the
company belongs to SGS and four percent to the state-owned
domestic surveyor PT Sucofindo. SI is likely to take over SGS's
functions when the latter's contract ends later this year.

SI has already founded 14 chapters worldwide and is now
preparing another six in Asia and the United States to anticipate
the transfer of the inspection jobs from SGS.

The government has been widely criticized for using the
foreign surveyor to inspect Indonesia's imports. Critics say that
using the foreign surveyor is not only too expensive, but also
violates the principles of the General Agreement on Tariffs and
Trade.

Some analysts have suggested that the government stop pre-
shipment inspection and instead use a post-audit system in order
to further smoothen the flow of imported goods into the country.

Minister Mar'ie said that replacement of the pre-shipment
system with the post-audit system would lengthen the time
required, given the limited receiving capability of Indonesia's
ports.

Mar'ie said that given the present condition of Indonesia's
sea ports, pre-shipment inspection was still much better than the
post-audit system.

"The handling capacity of most Indonesian ports is still too
small for post-audits of imported goods," the minister said.

He said that the government had paid a total of Rp 2.22
trillion (US$1.03 billion) to SGS for its services since 1985,
with an average fee of about Rp 222 billion per year.(hen)