Govt promises to cure cement trading network
JAKARTA (JP): Minister of Finance Mar'ie Muhammad announced here yesterday the government plans to abolish the widely criticized cement marketing system.
The minister said the order to review the cement marketing system came directly from President Soeharto and that the change is essential to stabilizing the country's cement trade.
"The improvement of the cement trading network is essential as the unstable market could disturb the nation's development as a whole," the minister told the Budgetary Commission of the House of Representatives (DPR) during a preliminary deliberation of the state budget for 1995/1996.
Under the current trading system, cement producers are required to sell their products in designated areas at the government-set local reference prices. The semi-monopolistic system has been widely criticized as it enables cement producers not only to control the distribution system but also the prices.
Bambang Warih Koesoemo of the Golongan Karya (Golkar) faction said that the current trading system benefits only the producers, which mainly control the ownership of most cement distribution companies.
He said he suspected that the recent waves of cement price hikes were planned by the producers in a conspiracy with their distribution companies.
Cement prices in Jakarta and the country's other major cities reached Rp 10,000 (US$4.5) per 40-kilogram sack in October, 35 percent above the reference price of Rp 7,200.
Government officials and cement industry executives said that the sharp increases in cement prices, the second wave of price hikes since July, were caused by the "too high demand". They said the low reference prices had also prompted retailers to raise the wholesale prices for higher profits.
Cement prices still stand high at between Rp 8,500 and Rp 9,000 per sack.
Bad debts
When asked about problem loans, both doubtful and bad loans, at state-owned banks, the finance minister said that they reached around 19.7 percent of their outstanding credits as of August this year, lower than the 21.2 percent recorded in October last year.
He said the problem loans at both state and private banks reached around 13.6 percent of their outstanding loans as of August, as compared to 14.4 percent in October 1993.
Mar'ie, who established a special team last year to oversee the bad loans of state banks, did not explain the reason behind the decline in the problem loans.
Bank Indonesia (central bank) Governor J. Soedradjad Djiwandono said recently that the loan arrears in state banks reached Rp 7.76 trillion as of August this year, as compared to Rp 5.9 trillion as of December 1993.
The country's state banks, which control more than a half of the bank lending market, have become notorious due to the bad loan scandal, which broke into public view with the arrest of businessman Eddy Tanzil last year. Eddy, the president of a chemical business group, is now serving a 17-year prison term for his part in raising loans of over Rp 1 trillion from the state- owned Bank Bapindo trough illegitimate procedures.
Eddy is one of 50 businessmen who were reported to have incurred bad debts of above Rp 100 billion each from the country's six state-owned banks -- Bapindo, Bank Negara Indonesia, Bank Bumi Daya, Bank Dagang Nasional, Bank Ekspor Impor Indonesia and Bank Rakyat Indonesia. (hen)