RI's non-tariff import barriers remain high

JAKARTA (JP): Despite its continuing deregulation measures, Indonesia still maintains a relatively high level of non-tariff import barriers, economists said yesterday.

William E. James, a senior international economist at the Washington-based Nathan Associates Inc., told a one-day seminar here that the government is still imposing barriers within a number of sectors, especially in the agriculture and agro-based processing industries, as well as in the services sector.

"In spite of progress in deregulations, a number of sectors are characterized by protection," James said at the seminar, organized jointly by the Association of Indonesian Economists and the United States Information Service.

"We must remember that it is not the average level of protection that we are concerned about ... but the costs to consumers," he added.

To illustrate, James pointed out that a number of agricultural commodities which play a significant part in most people's lives -- including rice, wheat, flour and sugar -- are still largely controlled by the National Logistics Agency.

As a result of such protection, sugar prices in Indonesia are well above international prices. In addition, the country's food processing industry is running at a high cost structure, as their imported raw materials are obstructed by both tariff and non- tariff barriers.

While commending the government's decision to transfer import duty surcharges into the existing tariff structure, James expressed his dissatisfaction over the latest? deregulation policy, which did not effect other existing non-tariff barriers such as those on local content requirements, investment licensing, state procurement procedures and export restrictions on certain products, especially logs.

He said the log export restriction, in the long run, could cause uncertainty for investments, export prospects and the future performances of companies operating in the downstream industry.

He noted that the services sectors here -- especially banking, insurance, capital market and distribution -- are still highly regulated.

"The financial market has been liberalized, banking in particular. But there is much that still has to be done," James said.

Not alone

Indonesia, however, is not alone in protecting the services sectors and in preserving a number of non-tariff barriers, said Gary Hufbauer, a Reginald Jones senior fellow of the Washington- based Institute for International Economics.

He said industrialized countries like Japan, the United States, Canada and South Korea are also maintaining their non- tariff barriers, either through quantitative restrictions, technical standards and conformity assessment, customs house tyranny or anticompetitive practices.

He noted that rice exports to South Korea and Japan, for instance, are very much restricted by 500 percent tariff- equivalent barriers. Also, exports of dairy products to Canada are restricted by 300 percent tariff-equivalent barriers.

To eliminate such quantitative restrictions, Hufbauer suggested that governments transfer all the restrictions into tariffs, which are then reduced gradually.

Speaking on non-tariff barriers in the form of technical standards and conformity assessment, Hufbauer said their by- products are more costly to businesses entering a country which imposes such standards.

Pharmaceutical products exported to the United States, for instance, have to undergo a set of laboratory tests before entering that country. One set of such tests can cost the exporter some US$200 million.

"And the United States has over 90,000 such technical standards," Hufbauer said.

To reduce such technical standards, he suggested that governments continue with their technical assistance projects, allow open participation from other countries and agencies and build mutual recognition.

Touching on the customs tyranny, Hufbauer suggested the introduction of preshipment inspection for imports -- a practice which has been abandoned by all industrialized countries -- random inspection and an electronic customs clearance system.

He then encouraged governments to gradually remove all non- tariff barriers so that there will be more and more efficient investment, more rapid introduction of new processes and products as well as quicker upgrading of skills.

"A continued reform promises Indonesia a generation of economic growth by 5 percent to 6 percent annually, and per capita income of $3,000 to $4,000 by 2010," Hufbauer said. (rid)