More deregulation

More deregulation

In what has become a custom at this time of year, the
government announced yesterday another package of economic
deregulation measures. The timing, ahead of the meeting of the
Consultative Group on Indonesia in Paris later this month, may
leave the impression that the measures are intended to sweeten
the nation's creditors preparing to gather in the French capital.
Judging by its content however, the package reflects a
consistency in the government's goal of making the economy more
competitive, the very objective of the series of economic reforms
that was started in the mid-1980s. And as with previous packages,
there is something for everyone in yesterday's measures, from
importers, manufacturers and exporters to local and foreign
investors.

The package injected an element of certainty by setting
schedules for when the various tariff cuts that have been
promised will be implemented. This is a significant improvement
over the May 1995 package, which only set deadlines of cutting
tariffs to a range of between 5 and 10 percent. The schedule in
essence makes longer-term business planning much easier.

The package sets out a ruling on how the government intends to
meet the threat of increased dumping practices, a common side
effect of import liberalization measures. A new anti-dumping
committee will make all the decisions concerning when to impose
such tariffs, hopefully in a transparent way and based on
objective criteria. There is a valid argument that our
manufacturers must be shielded from unfair trading practices from
abroad but we hope this will not be abused by local companies
which wield strong political clout. The anti-dumping committee
must be allowed to work independently and objectively.

In the export sector, the government did away with export
declaration forms for exports worth up to Rp 100 million, the
limit was previously Rp 10 million, and also eliminated the need
for a surveyor's inspection. The new measures also greatly
simplified the procedures for obtaining certificates of origin
and established a third agency to issue such documents. In
addition, selected exporters who meet the various criteria would
be entitled to a whole range of special facilities in tax,
customs and banking services.

There is also a whole range of measures designed to make the
local investment atmosphere more appealing, These range from the
elimination of many kind of permits for companies who operate in
industrial zones to new regulations regarding bonded zones and
allowing foreign joint ventures to import complementary products
and sell them locally under certain requirements.

Each time the government announces its deregulation packages,
there are always those who feel that they do not go far enough
and that the government is moving too slowly in reforming the
economy. Certainly, the export slowdown and import surge we saw
last year are strong reasons to encourage Indonesia to move fast
to remain competitive. But on the other hand, there is also the
lingering fear that moving too fast could lead to an overheating
economy. Whichever of these analyses is true, what is certain is
that yesterday's package will not be the last.

The deregulation package may not be as sweeping and
comprehensive as many would have expected, especially given the
barrage of statements and media publicity in the run up to its
announcement. But it is not necessarily a token gesture either.

In the final analysis, these deregulatory measures are only as
good as how those who stand to benefit take advantage of them,
and how those who administer them implement the regulations.