No monopoly, cartel in cement trading: Association

JAKARTA (JP): The Indonesian Cement Association flatly rejected yesterday claims that it was a cartel or that the Indonesian cement industry was oligopolistic.

At a hearing with the Trade and Finance Commission of the House of Representatives, the association's chairman, Soepardjo, denied that monopolistic cement trading occurs in Indonesia, saying that people were free to choose whatever brand of cement they like.

"If what is meant by monopolistic practices is something like the distribution of electricity and oil by the state-owned electricity firm PT PLN and the oil firm Pertamina, cement distribution is not like that," Soepardjo said.

Concurring with Soepardjo, Daddy Hariadi, a director of Indonesia's largest cement producer, PT Indocement Tunggal Prakarsa, said his company did not monopolize the country's cement market because its market share was less than 40 percent.

Indocement's current annual production capacity stands at 9.2 million tons of cement, or 35 percent of Indonesia's total annual production capacity of 25.62 million tons. By 1997, Indocement, which is in the process of expanding production plant in Cirebon, West Java, will have a total annual output capacity of 11.3 million tons.

Oligopoly

However, Soepardjo did not explicitly deny the accusation of oligopoly in the cement industry, which has been made by a number of observers, including economist Rizal Ramli of the Econit think tank.

By definition, a monopoly exists when one firm has exclusive control of the supply of a product or service in a particular market. An oligopoly exists when a market is controlled by a few producers.

Soepardjo rejected the argument that the cement trade in Indonesia was cartel-like, saying that it was the government that set reference prices for cement, while the cement association only helped enforce the reference system.

Asked about the agreement among cement producers regarding cement distribution zoning, Soepardjo said it was designed to ensure evenness of the cement price throughout Indonesia.

"Imagine if there was no zoning policy: people living far away from a cement factory would have to pay more money for a sack of cement, compared with those living close to a cement plant," Soepardjo said.

He rejected the suggestion that the Indonesian Cement Association was a cartel of cement producers, which could control production, distribution and prices.

According to the World Bank's annual report on Indonesia, which has not yet been officially released, Indonesia's cement industry is run like a cartel.

And no less than Sudwikatmono, chief commissioner of Indocement, acknowledged last month that the cement association was, indeed, run like a cartel.

"It's true, it's like cartel. However, as long as the cartel is good, it doesn't matter," he said.

By definition, a cartel is an institution in which several firms agree on joint action in relation to matters such as the restriction of production and competition, the joint purchase of raw materials, the joint distribution of products and prices. (rid)