IMF joins calls for readoption of PSI

IMF joins calls for readoption of PSI

The Jakarta Post, Jakarta

The government is facing mounting pressure to apply the
preshipment inspection (PSI) system on imports with the
International Monetary Fund (IMF) joining calls for the
readoption of the system.

IMF representative in Jakarta David Nellor said on Monday the
fund had recommended the use of the PSI system as part of an
overall reform drive on the country's customs office.

But he was quick to add that the decision would be in the
hands of the government.

The proposal to apply the system -- stated in the Aide Memoire
III -- was among several other key points recommended by a team
of experts set up by the IMF and assigned to help reform the
customs office in curbing flourishing illegal practices.

The proposal would renew debates on whether or not the country
readopts the PSI system to take over the authority of the customs
office in inspecting imports.

While some businessmen oppose such a plan as it would require
additional costs in importing raw materials or capital goods,
support for implementing the PSI system has been on the rise,
particularly from manufacturing firms whose businesses have been
undermined by cheaper smuggled products.

Minister of Industry and Trade Rini MS Soewandi is among the
supporters, saying that such a move could help curb the smuggling
of overseas textile products into the country. The rampant
smuggling has been seen as a serious threat to local textile and
garmentmakers.

But Permana Agung, who was last week dismissed from the post
of customs office chief, opposed the PSI system, arguing that the
system had failed to curb smuggling as shown by the experience of
other countries.

The PSI system means that imported goods would be inspected at
the port of origin before entering Indonesia. The government
currently uses a post-audit system, in which the customs office
conducts inspections when the goods arrive at the ports.

In 1985, the government applied the PSI system to imports amid
rampant corruption in the customs office, but then ended it in
1995 following the enactment of the 1995 Customs Law. The import
inspection authority has been returned to the customs office
since then.

Meanwhile, Eddy Abdurrachman, the new director general of
customs and excise, said on Monday that the office was in the
process of reviewing the possibility of applying the PSI system.

He said, however, that the final say would rest with the
finance minister.

Minister of Finance Boediono declined to provide a detailed
comment, saying only that he preferred that the reform drive at
the customs office be completed first before adopting the PSI
system.