The bogus export scandal

A different viewpoint was put forward yesterday on the export credit scam which is said to have caused great financial losses to the state. As pointed out by Econit, an independent advisory group in economics, industry and trade, the much-talked-about bogus export scandal was primarily made possible by the weaknesses in the Indonesian export and import procedures, as well as the absence of a controlling mechanism.

The report goes on to say that since the procedures heavily depend on the function or malfunction of the "independent" surveyors (Sucofindo, SI and SGS), instead of the Customs and Excise arm of the government, the appointment of those surveyors should be reviewed in the first place. According to Econit, these surveyors are expensive and not efficient.

There is probably some substance to the argument against the use of private surveyors, especially SGS, a Geneva-based company which took over the basic function of the Customs and Excise office in 1985. Similar opinions have been frequently voiced, to no avail. Presumably because there is no guarantee that the Directorate General for Customs and Excise will do a better job, judging from past experiences.

On the other hand, one should not forget the fact that SGS functions only on the import side and its function has been much reduced over the years. The export side is the territory of PT Sucofindo and PT Survey Indonesia, in which the Indonesian government owns a majority stake.

We are of the opinion that the above argument can also be misleading, for several reasons.

The first is that the whole bogus export scandal is mainly the result of the linkage between the so-called exporters, commercial banks and the central bank. The "exporters" produce counterfeit export documents to illegally get import duty and value-added tax rebates from the Bapeksta (export service facilitating agency) and to obtain subsidized export credits, or the rediscount facility from Bank Indonesia, the central bank. This low interest loan is provided to the exporter through a commercial bank, which processes his bogus documents at the central bank. The commercial bank runs a very low risk because the loan is usually backed by strong collateral, in some instances even 100 percent cash collateral.

The focus of investigation in the case of the questionable export credits, then, should first of all be directed at that linkage, i.e. the exporter, the commercial bank, and the central bank. Or, in the case of the illegal rebates, at the linkage between the exporter and Bapeksta.

Second, it is still not clear how large the financial losses to the state are because of the wrongly-paid rebates. And it is probable that the disbursed low-interest loans will not result in bad debts.

There are reasons to believe that this kind of practice is a result of the tight money policy enforced by the government a few years ago. This policy threw many commercial banks into a very tight liquidity situation, and the export facility provides them with many loopholes.

Third, the bogus export scam is probably less of a problem in itself as compared to its implications in relation to the total efforts toward promoting non-oil exports. A case in point is the fact that Indonesian textile exports to Singapore in fiscal year 1993/1994 dropped by almost 50 percent from their level in the previous fiscal year. And apparently this is related to the fact that the authorities have been more scrupulous. This brings us to the conclusion that Indonesian export figures are very much questionable.

Of course the investigation into the bogus export scam should be pursued, in the right direction. However many other important questions should also be raised. If the export figures are not reliable, how about our balance of payments? Consequently, how much does this affect our strategy in promoting non-oil exports?