Minister Rini declares war on smugglers to save industries

Dadan Wijaksana, The Jakarta Post, Jakarta

Minister of Industry and Trade Rini Soewandi warned on Wednesday that smuggled goods coming into the country had risen so dramatically that it created serious problems for the domestic economy and could destroy it as a whole.

"Smuggling cases are thriving these days and have definitely had a deleterious impact on our economy," Rini was quoted by Antara as saying during a series of market inspections in North Sumatra's capital city of Medan.

Tighter coordination among related institutions and stiffer sanctions for those responsible for the crimes should be a top priority to deal with the smuggling problem, Rini said.

Although there is no exact data as to the volume and value of the smuggled products entering the domestic market, many businessmen have long complained that the illegal practice was strangling domestic businesses as they could not compete with the less expensive, higher quality smuggled products.

There are already reports that several businesses, especially textile firms, had already filed for bankruptcy largely due to a failure to compete with smuggled goods.

Experts have also said that the rampant smuggling is discouraging new investors from coming into the country.

Echoing these complaints, Rini said that if this trend continued unchecked, the current system would provide little opportunity for local firms trying to operate in an honest way.

Rini did not elaborate further, but her statement came days after the government announced that it would give more attention this year to help solve the various problems faced by domestic businesspeople to help increase exports and attract new foreign investments, all of which would be crucial to fueling economic growth, which for the past two years had been mainly driven by domestic consumption.

The government has announced a fiscal stimulus policy in the form of tax breaks on some 41 product items, mainly electronics, partly to help electronic manufacturers compete against smuggled products. The tax cut would make locally produced goods cheaper, and hopefully discourage smugglers by limiting their profit margin.

A similar tax break has also been prepared for export-oriented industries to help improve their competitiveness abroad.

Another effort being mulled to hinder smuggling, is that the government is reviewing the possibility of re-applying the pre- shipment inspection (PSI) system.

Because the current smuggling has been made possible by collusion between smugglers and local officials from the customs office, the PSI system is seen as the answer to help limit the illegal practices.

Under the system, imported goods which have often been a target of smugglers must be inspected at the port of origin before entering Indonesia.