Last act of mismanagement

The move by Ministry of Finance secretary general Widjanarko to abruptly end state-owned PT Superintending Company of Indonesia (Sucofindo)'s contract to inspect non-oil exports at preshipment points on Aug. 1 is bizarre indeed.

Even though such impulsive and erratic decisions were the hallmark of mismanagement under the previous government of Abdurrahman Wahid, the motive and rationale of the hurried measure with such wide and far-reaching impact on export flows are highly questionable.

The policy decision is extremely unethical in view of the demitted status of the administration and is a major violation of the instruction from President Megawati Soekarnoputri one day after her installation on July 23 ordering all ministers and senior officials to reserve any major policy decisions until the formation of a new Cabinet.

Moreover, judging from bureaucratic procedures, the official memo that ended Sucofindo's contract seemed to be legally defective because it was signed only by the secretary general and not by the finance minister.

It should be recalled that the contract was awarded on a biennial basis under former president Soeharto's Instruction No.4 in 1985 and, has since, always been extended due to its great contribution to facilitating export flows.

One is simply flabbergasted when trying to comprehend why such an important policy concerning annual export shipments worth more than US$45 billion was changed in such a hurried manner. The finance ministry must be fully aware that the measure will adversely affect non-oil exports, which, besides private consumption, have been the main locomotive of economic recovery since last year.

The export inspection duties of Sucofindo were awarded in 1985 as part of a widely acclaimed reform program that stripped the then highly venal customs and excise duty directorate general of its inspection authority for both imports and exports. The inspection of non-oil imports at preshipment points was assigned to Swiss Societe General de Surveillance (SGS), but this contract was concluded in 1995 and import inspection authority was returned to the customs service.

True, the drastic measure imposed additional burdens on the state budget as both Sucofindo and SGS charged fees for their services. But the business community thoroughly welcomed the policy as it spared them the pains of having to cope with excessive red tape and haggling with highly corrupt customs officials.

Official studies in the early 1990s also concluded that the benefits gained -- stronger competitiveness of exports, proper collection of import duties and export taxes, and prevention of smuggling -- more than offset the fees paid to the two companies.

Widjanarko's argument that the customs service was now fully capable of taking up the export inspection job is strikingly contrary to the mounting complaints among the exporters and importers regarding the poor service they receive from customs officials.

In fact, the customs service appeared to be "incorrigible", as recognized by the ministerial taskforce set up early this year to work out a new mechanism that would transfer non-oil import inspection from the customs service to Sucofindo. This new policy, according to the caretaker Minister of Industry and Trade Luhut Pandjaitan, was deemed necessary to crack down on the increasing incidence of export and import smuggling, as well as underinvoicing of imports and exports.

The termination of the job contract will certainly hurt Sucofindo as about 1,800 of its 4,000 employees were involved in the export inspection service. It may also cancel its plan to divest about 20 percent of its shares to SGS, which now owns 5 percent of Sucofindo.

But the loss to this state company is negligible compared to the damage that will be inflicted on the effort to woo back foreign investors who have written Indonesia out of their business plans due to the political uncertainty experienced under Abdurrahman Wahid.

Therefore, it is needless to suggest that the first act of the new finance minister should be to annul the memo from the finance ministry's secretary general and extend the contract of Sucofindo.