Mixed reactions follow cement price decision
Mixed reactions follow cement price decision
JAKARTA (JP): Mixed reactions from the country's business analysts and politicians greeted the government's decision on Monday to lower cement prices, deemed an unusual intervention on the part of Golkar, the ruling political group.
"The decision still falls short of our expectations. We are not satisfied and we will continue to fight for a complete annualization of the cement pricing mechanism," Yusuf Sjakir, a legislator of the Moslem-oriented United Development Party (PPP), told the press yesterday.
The Ministry of Trade on Monday announced a decree to contain the spillover of its own decision, made two weeks ago, to raise cement "reference prices" by at least 40 percent to around US$4.06 per 40-kilogram sack.
Due to market distortions in the cement trade, however, the "reference pricing" policy proved unenforceble with retailers selling the product two weeks ago at prices well above the so -called reference prices.
New decree
The new decree, which does not include penalties for violators, stipulates that cement retail prices should be set at 10 percent below the new reference prices.
Economist Mari Pangestu was quoted yesterday in Bisnis Indonesia as saying that the new decree would have no significant impact on the economy given that inflationary pressures were already created when the government raised cement reference prices by 40 percent two weeks ago.
Meanwhile, the Indonesian Association of Real Estate Developers confirmed Monday that it will not retract its decision to raise low cost housing prices, which were raised by 14 percent two weeks ago.
Economist Anwar Nasution, a lecturer at the University of Indonesia, said yesterday that the entire cement controversy proves that the industry, constrained by excessive government regulations and licensing, lacks efficiency.
"The consumers lose out because of the structure of our cement trade," he told reporters. "It is difficult to solve the problem as deregulating this industry will touch upon various political factors."
Indonesia's cement industry has been plagued by two years of market distortions which have created inflationary pressures on the country's economy.
The government has forecasted that demand for cement will reach 26 million tons this year, while production will fall short and reach only 24.5 million tons.
Several economists, including Kwik Gian Gie and Rizal Ramli, blame the distortion on excessive regulation and on the dominance of several major cement producers, who, it is believed, control distribution and bar new arrivals from entering the industry.
Both Kwik and Ramli called for the abolition of the cement pricing policy.
The leading cement producers, PT Indocement Tunggal Prakarsa and PT Semen Cibinong, are both publicly listed but their majority shares are controlled by politically well-connected businessmen.
Last weekend, following Golkar's announcement that it had set up a special "cement team", the ruling group's executive Siti Hardiyanti Rukmana -- President Soeharto's eldest daughter -- voiced her criticism of the country's cement policies in a televised statement.
Golkar has never made such a move since Soeharto became Indonesia's president in 1967. Soeharto is also chairman of Golkar's board of patrons.
Some observers believe that Golkar's political maneuvering was beneath the recent cement debacle.
Warno Hardjo, a Golkar executive who welcomed the new decree, denied any suspicions Monday and said: "Golkar knows no political benefits and losses since it strives only for the people's aspirations". (hdj)