Protection never benefits people

JAKARTA (JP): Protected industries never help the people and never become competitive, said noted Japanese business and political expert Kenichi Ohmae.

When speaking to local journalists here yesterday, the visiting expert pointed out that the protection given to Indonesia's automotive industry and Japan's rice business serve as good examples.

"The protection of the automobile industry here is very strange because the price of automobiles is very high here. Who are you protecting, auto importers or auto companies?" Ohmae asked.

In Japan, he said, protection was given to the automobile industry until the industry was competitive. Domestic automobile firms are now forced to compete and consequently automobile prices are very low and not subsidized by tariff barriers.

"You see, here it is very strange because the tariff barrier is very high and everyone raises the prices of automobiles to that level and enjoys it. This way, you give the privilege to the licensed companies only," Ohmae contended.

Under last May's deregulatory measures, tariff barriers on sedans and station wagons, which are assembled domestically, were reduced to the current level of 125 percent. Import tariffs on pickups and minibuses were cut to 50 percent and 75 percent respectively.

He noted that such protection is often given in the name of national sovereignty and based on political consideration, not business sense.

Rice

"We have the rice policy in Japan, that is the worse example. It was given in the name of sovereignty. What is the benefit of growing rice in Japan? Nobody asks. They just said that we have to have food independence. That's bull," Ohmae remarked, adding that Japan has to earmark US$60 billion a year in subsidies for its rice farmers.

"Do they become competitive as a result of the protection? No, they have become less and less competitive in the world market," Ohmae said, adding that the production cost of a kilo rice in Japan currently stands at 350 Japanese yen (US$3.50), compared to 25 yen in Australia.

Known as "Mr. Strategy" in his native Japan, Ohmae is a well- known public speaker and the author of over fifty books on business and politics, including The Mind of the Strategist (McGraw-Hill, 1982), Triad Power (Free Press, 1985), Beyond National Borders (Dow Jones Irwin, 1987), The Borderless World (Harper Business, 1990) and The End of the Nation State: The Rise of Regional Economies (Free Press, 1995).

He was in the city to give a series of speeches, including one at the two-day seminar entitled "Asia Pacific Exchanges in the Borderless World," organized by the Jakarta Stock Exchange and another at the Center for Strategic and International Studies.

Ohmae suggested that given its large size and diversity, Indonesia needs to consider giving more regional autonomy and freedom to its regions and provinces in order for them to prosper.

"I think regional autonomy is a very crucial element for large countries like Indonesia because you cannot lift up everything from the central government," Ohmae said, adding that such a size is the main barrier to an equitable distribution of wealth.

Like a company, he said, a country has its optimal size. If a country has grown to be so large, it needs to reorganize itself by attaining more regional autonomy. A small company with better management is better than large but unmanageable one, he added.

"Optimum size is when people get excited about the vision, meaning that the vision is shared within the community. Optimum size is when you don't sacrifice one group of people over another," Ohmae said.

He explained that Japan had its optimal size for the entire country until about 20 years ago, when the population stood at 100 million people.

Now Japan has its problem because it is no longer has an optimal size. Today in the information era, it is no longer possible to centrally manage the country.

"That's why I'm proposing to the government to decompose Japan into 11 autonomous republics," Ohmae said. "Therefore, instead of Tokyo defining a single solution for the entire Japan, let each autonomous region define its own solution."

He said the standard was changing, but that 10 million to 11 million people per autonomous region was an optimal size. (rid)