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.