The puzzle of cement price

The puzzle of cement price

If there's a puzzle that could baffle a nation of some 190
million for weeks, then it must be the mystery of the cement
price here. For weeks, following the government's decreed price
hike of cement retail reference price by over 40 percent early
this month, the public was kept in the dark on the real reason
behind the decision.

After all, a few weeks ago the association of cement producer
had asked an increase of only 20 percent, which according to
their calculation will bring enough profit margin to them.
Understandably, when suddenly the government decreed an increase
of over 40 percent, the decision had caused a public outcry. And
since the government never satisfactorily explained the reason
behind the magic 40 percent number, the mystery has deepened, and
understandably rumors and speculations were soon began flying.

The popular belief is that there was some kind of collusion
behind the price hike. Since the official reason, that the over
40 percent price hike is to woo foreign investors and to lure
more imports, sounds too superficial even to many government's
true believers, many suspect that the cement producers are the
actors behind the scheme. The fact that only a handful of
business groups control both the production and distribution of
cement has further fueled the speculation that the price hike is
just a ploy to reap a big profit.

Interestingly, among those who cried out and protested the
price hike were the ruling party Golkar. Golkar has even went as
far as setting up a special task force comprised of legislators
to inquire into the cement price. According to Golkar's chairman,
Harmoko, the increase in cement reference price should be around
20 to 30 percent.

What confounded the public is, how come a decision made by the
government --which notably comprised of Golkar people-- was
attacked by Golkar's executive board? Is there no coordination,
or some kind of understanding, before the price increase was
decided?

Then the turning point came, but the shrouded mystery remains.
In a speech in Madura over the weekend, Siti Hardiyanti Rukmana,
deputy chair of Golkar, said that on the instruction of Golkar
Chairman Harmoko, she recently reported to President Soeharto,
who is also the Chief of Golkar's Board of Patrons, and who
happens to be her father, about the cement situation. The
President was reportedly very concerned with the high price which
has burdened the people.

The effect of the statement was sudden and immediate: the
other day acting Minister of Trade Tunky Ariwibowo (Trade
Minister S.B. Joedono is still out of the country) announced that
retail price of cement should be 10 percent below the new
reference price.

Has the puzzle been solved? Obviously, no. For the mystery has
even gone deeper. While Golkar leadership was soon triumphant and
hailed the new decision and claimed it as a success of its
endeavor, the public was jolted by the reaction of Sudwikatmono,
the president of PT Indocement Tunggal Prakasa, the country's
biggest cement producer. He welcomed the cut of the cement price
and admitted that the new reference price is still adequate to
encourage businessmen to make investment in the cement industry.

What is this all about then? A storm in the cup? Or, is there
really some kind of ploy behind the price increase? If 20 or 30
percent price hike is considered adequate by investors, where is
the 40 percent magic number came in the first place? If the price
hike was aimed to close the gap between domestic price and the
international market price, then why the government bow the
public (Golkar) demand and lower the price? Was the decision to
drop the price based on political reasons rather than economic
one? And what for?

A hundred more questions can be raised, but we guess the puzzle
will remain unanswered. What we can guess is that, perhaps, for a
long time to come cement users will remain at the mercy of
producers as long as the present monopoly system prevails.