Levies reach 30 percent of building consultancy costs

JAKARTA (JP): Construction consultants complained to the House of Representatives yesterday that illegal levies, on top of legal fees, account for 30 percent of the fees for their services.

"To win a consultancy project through a tendering process, a consulting company has to pay about 30 percent invisible costs. But as they are invisible, it's rather hard to quantify and identify them," chairman of the Association of Indonesian Consulting Companies, Poedji Rahardjo, said.

He said that the levies are on top of payments for 18 legal levies consultancy companies have to pay for their businesses.

Asked to elaborate, he noted that the 18 legal levies include, among others, those for business operation licenses, notarial documents, certification for qualification, certification for tender selection, company registration, licenses for construction services, licenses for office building and taxpayer registration.

"Sorry. I can only remember eight of them," he told The Jakarta Post after the hearing with House Commission V, for transportation, public works, housing and tourism.

Poedji stressed that the all-enveloping red tape has made businesses in the construction sector inefficient.

In response to explanations from the association, members of the commission said that the illegal levies had already harmed much construction quality.

They also expressed concern that illegal levies paid by contractors trying to win government projects could be even bigger. But they did not elaborate.

Construction projects are first assessed by consulting companies before being built by contractors. Consultants and contractors have to participate in tenders for projects.

Burhanuddin Napitupulu, a commission member, suggested that such a high cost economy has forced many contractors to reduce the quality of their services in their efforts to make profits.

"During our recent working visits to provinces and districts, we found that many people complained over the quality of construction projects, such as public school and hospital buildings. We're very concerned over such practices," he said.

Marsinggih Marnadi, another member of the commission, noted that the association should disclose the obstacles it faces, particularly concerning the illegal levies, so that the House can ask the government to address the issue.

Poedji, in answering questions from commission members, admitted the illegal levies worth about 30 percent of their revenues have raised construction costs.

On Tuesday, Director General of International Trade Anang Fuad Rivai told the House Budgetary Commission that the imposition of 4,396 levies and the existence of rampant red tape have hampered the development of Indonesia's exports.

"In spite of a series of deregulation measures issued by the government in recent years, a total of 4,396 levies are still imposed on business activities at various levels," he said.

Poedji suggested yesterday that the government reduce the 18 levies in the construction consultancy sector to improve efficiency.

"Some of the licenses for consultancy businesses, for example, can be made into one," he said.

He said the simplification is needed to sharpen the country's competitive edge to face the implementation of the ASEAN Free Trade Area agreement in 2003.

The Asia Pacific Economic Cooperation forum, of which Indonesia is a member, also aims to liberalize trade and investment by 2010 for its developed member economies and by 2020 for its developing members. (13)

Editorial -- Page 4