RI's non-tariff import barriers remain high

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)