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.