Govt urged to fix high-cost economy ahead of AFTA

Adianto P. Simamora The Jakarta Post Jakarta

The Indonesian government must act swiftly to eliminate the obstacles that have created a high-cost economy for local businesses hoping to survive competition amid the looming regional free trade area, experts said on Friday.

"This is a critical problem, the government must work all out to help local businesses ... to save them from bankruptcy," Gadjah Mada University (UGM) economist Sri Adiningsih told The Jakarta Post.

Several business associations have repeatedly called on the Jakarta to take action -- in particular to curb illegal levies and rampant extortions against businesses here.

Business owners and managers have also complained about the high taxes imposed by newly empowered regional governments.

Sri said that both the legitimate and the illegal levies will only exert upward pressure on production costs, rendering exports less competitive against imports by the time the ASEAN Free Trade Area is implemented in January 2002.

Thomas Darmawan, chairman of the Indonesian Food and Beverages Association (GAPMI) said earlier that the number of levies had been on the rise following implementation of the regional autonomy law last year.

If this problem continues, he added, it would be difficult for local businesses to compete with regional ones.

Thomas illustrated pointed to the example of truck drivers who transport oranges from Medan to Jakarta.

A driver could pass at least 14 "check points" where he must pay a levy of Rp 20,000 (about $2) at each point, he said, along with another 28 subdistrict check points.

In addition, the driver must pay bribes to various groups along the route to avoid trouble and further, a huge sum of money at the ferry port in Bakauheni, Lampung, he added.

"Don't be surprised, upon arrival in Jakarta, to find that a kilogram of oranges from Medan will be more expensive than those imported from other countries," he said.

Meanwhile, Pande Raja Silalahi, an economist at the Centre for Strategic and International Studies (CSIS), urged Jakarta to review the regional autonomy law to keep regional governments from taking unilateral action which could seriously hurt the business sector.

The high cost of doing business here, he added, could be a serious hindrance for local entrepreneurs hoping to compete in the AFTA era.