No monopoly, cartel in cement trading: Association

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)