Preshipment inspection

Preshipment inspection

The government's decision to extend the contract for import
inspection with PT Surveyor Indonesia for another two years
starting yesterday should be welcomed. The move also
automatically guarantees the continued use of the preshipment
inspection system for Indonesian imports until at least 1997.

Over the last few weeks, the House of Representatives'
deliberations on the customs bill have been dominated by debates
over the continuation or abolishment of the preshipment
inspection system. Importers and almost all other port users are
fully in favor of the maintenance of the present system, while
the customs service naturally wants to reinstate the previous
system of on arrival inspection.

Importers, who apparently still suffer from the trauma of
dealing with what they called bureaucratic inertia and corruption
in the customs service in the period before June, 1985, are
obviously among the happiest with the government's decision.

We should also remember that in as far as Indonesia is
concerned, when we refer to importers we do not talk about
traders as in most developed countries, but about industrialists
and investors. That is because 50 percent of Indonesia's non-oil
imports, which are handled by PT Surveyor Indonesia, consist of
industrial basic and intermediate materials, 43 percent of
capital goods and only 7 percent of consumer goods.

The composition of the imports also indicates how crucial
import facilitation is for the country's manufacturing sector,
which now accounts for more than 70 percent of total non-oil
exports, and for the implementation of investment projects. The
pivotal role of smooth import flows also can be judged from the
export-led development strategy the government has been pursuing
to expand the economy.

The continuation of the present inspection system, which was
introduced in the middle of 1985, also means that the government
has been satisfied with the performance of PT Surveyor Indonesia
and its sub-contractor, the Geneva-based Societe Generale de
Surveillance (SGS).

PT Surveyor Indonesia, which is 76 percent owned by the
government, did not take over the responsibility for the
inspection job from SGS until early in 1992. But now, after less
than four years, the company is handling 85 percent of
Indonesia's non-oil imports through its offices in 18 countries.
That means that the process of transfer of technology from SGS
has been running smoothly.

It is nonetheless too early to expect PT Surveyor Indonesia to
do the job wholly by itself. Moreover, we think, it is
economically inefficient for the company to further extend its
overseas branches or offices to countries from which Indonesia
makes only small volumes of imports. Hence, it made a lot of
business sense that PT Surveyor Indonesia also extended its
technical-assistance agreement with SGS for another two years.
Hopefully, PT Surveyor Indonesia will be able to further improve
its capability so that it will no longer have to depend entirely
on the government contract, but will eventually be capable of
getting jobs from private companies.