Present situation hampers efficiency of RI economy

JAKARTA (JP): Legal uncertainty, a cumbersome bureaucracy and a lack of transparency in government policies will hamper Indonesia's efforts to increase its economic efficiency when facing tighter competition in the globalization era, a noted economist has said.

The managing director of the Institute for Economic and Financial Research, Sjahrir, told a seminar yesterday that effective bureaucracy, transparent policies and legal certainty are prerequisites for Indonesia's economic reform should it want to fully enter the free trade era.

Indonesia, together with the other members of the Association of Southeast Asian Nations, has been committed to liberalizing its trade by the year 2003.

And together with the other member economies of the Asia Pacific Economic Cooperation forum, Indonesia is also committed to further liberalizing its trade and investment by the year 2020.

Sjahrir told the seminar, which discussed business ethics in the era of globalization, that there have been many complaints of arduous bureaucratic procedures which cause inefficiency.

Quoting a neo-classical theory of Milton Friedman, Sjahrir said that too much government interference through the bureaucracy may encourage vested-interest groups to influence the government to create certain regulations favorable for their operation.

The government, for example, has issued a new regulation on the development of a "national car" for the benefit of a single party.

In February the government issued a regulation allowing PT Timor Putra Nasional to produce a "national car" in cooperation with Kia Motors Corp. of South Korea. Timor Putra, owned by President Soeharto's son Hutomo Mandala Putra, will enjoy exemption on import duty and luxury sale tax on the condition that it can increase the car's local content from 20 percent at the end of the first year of operation to 40 percent at the end of the second year and to 60 percent at the end of the third year.

Timor car

Earlier this month, the government even allowed Timor Putra to produce its "national" cars at Kia's industrial plant in South Korea with workers and some of components from Indonesia.

"Such policies can create rent-seekers and motivate unproductive profit-seekers," said Sjahrir.

"An ineffective bureaucracy, coupled with untransparent policies, will become a barrier to improving the economy's efficiency," he said, adding that transparency of policies always requires legal certainty.

He reiterated that bureaucratic problems in Indonesia should be solved to support the development of the country's market- oriented economy.

Meanwhile another speaker, A. Sonny Keraf of the Atma Jaya University's center for ethics development said that a free market system can guarantee economic justice.

He acknowledged that the free market is not without regulation and free-fight liberalism, but demanded greater fairness and equal opportunities to run businesses.

"In the global market system, certain industries surely need protection against overseas competitors but protectionist measures must be objective," he said.

He also highlighted the government's regulation on the "national car" as an example of subjective measures. (kod)