Last act of mismanagement

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.