The bogus export scandal

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?