Streamlining bureaucracy beats tax incentives: Mar'ie

JAKARTA (JP): Streamlining bureaucracy is more important than tax incentives in enhancing the competitiveness of local firms, Minister of Finance Mar'ie Muhammad said here yesterday.

Speaking at the opening of a leadership workshop for executives of state-owned firms, Mar'ie suggested instead that any efforts to improve corporate competitiveness be pursued through efficiency-driven measures.

"Any effort to secure tax exemption will lead to inefficiency because tax incentive is a premium to inefficiency," Mar'ie noted, adding that many firms had asked the government for tax facilities.

Efficiency

The first step toward efficiency, he said, is dismantling unnecessary bureaucracy.

"A multi-layer organization is already out-of-date; what is getting more popular in the current era of globalization is a lean organization with a quick policy decision process," Mar'ie said.

This organizational principle is not only for business. Mar'ie called for government institutions to become more lean so that they can become more efficient and "customer-oriented."

"If the government officials are required to behave like entrepreneurs, so will the executives of state-owned firms," Mar'ie said.

Director General of State-owned Firms Bacelius Ruru agreed, saying that state firms should operate as business entities rather than as agents of development.

He said that when the government injects new funds into state companies in the form of equity shares it is not ordering them to carry out the government's missions, but rather to improve their financial capabilities.

Because the government is facing financial constraints, it will become more selective in putting up more capital for state- owned firms, Ruru said.

In addition, Ruru said, the government will continue to restructure inefficient state firms and perhaps even merge them so that they will become more efficient and profitable.

The government recently finished an in-depth study on the possible restructuring of state firms under the Ministry of Trade and Industry.

However, Ruru declined to go into details. "It is not ethical for me to disclose the results of that study now, while the government is still preparing regulations to implement the planned restructuring." (rid)