The rent seekers

The rent seekers

To protect the public, governments often intervene with
measures which seem to limit business or restrict a particular
group of people. For example, the Indonesian government collects
Rp 250,000 (US$108.5) every time an Indonesian resident travels
overseas. This discourages wasting foreign exchange, and prevents
people from entering neighboring countries illegally.

To further safeguard the public, medicine, food and beverages
must be registered at the Directorate General for Drug and Food
Control before being permitted to be sold on the market. Excise
taxes, in addition to value added tax and luxury sales tax, are
levied on cigarettes and liquor.

Numerous other measures are enforced for the public good by
competent and adequately-equipped government agencies in a
transparent and accountable manner. Most important of all, these
measures all serve to protect Indonesians.

However, the case is entirely different when private companies
use the same argument to legally collect levies on tradable goods
without performing a service. That is blatant rent seeking.

Arbamass, a private company, is now profiting from levies
imposed on beer sold in Bali and from imported Chinese medicine.
Another private company, PT Aryo Seto, has been authorized by the
Ministry of Agriculture to collect a levy from pesticides
beginning of April. The only function the private companies
perform is selling the required stickers.

What makes the practice totally absurd is that the private
companies claim to perform functions that are entirely the
responsibility of the government. It is also strange that a
private company could be more competent than the local police or
military command in Bali in preventing young people from falling
under the influence of liquor. How a private company, which was
set up only two years ago, can guarantee that Chinese medicine
and pesticides are genuine by simply slapping a sticker on the
package is even more perplexing. The job is the responsibility of
the government and the producers, not a private company that
doesn't even have a testing laboratory.

What makes it all more preposterous is that the companies have
been granted this privilege by the local administrations at a
time when the central government is working hard to reduce the
cost of doing business in Indonesia through economic and
bureaucratic reform. The governor of Bali surely is not so naive
as to have missed the futility of the beer sticker scheme.

Likewise, the minister of agriculture, after noting the recent
debacle caused by the hasty and massive introduction of urea
tablets to replace prilled urea, must have enough common sense to
realize that stickers cannot protect the farmers from imitation
pesticides.

There is simply no relation between the stickers, to be
printed by PT Aryo Seto -- which also has the monopoly for urea
tablets -- and the quality of the pesticides. In reality, the
stickers will only add to the cost of real pesticides, which will
widen the price difference and encourage the sale of bogus
products.

Moreover, who gave the agriculture minister the authority, as
stipulated in his Nov. 20, 1995, sticker decree, to revoke the
production license of pesticide companies which refuse to buy the
stickers?

The only logical, though worrisome, inference to be drawn from
these insensible measures sanctioned by the governor of Bali and
the minister of agriculture, is the dangerous tendency among
certain officials to behave irrationally when dealing with
politically-connected businesspeople.

Hopefully, other officials will not discard their consciences
and common sense when facing lobbying from companies with
connections -- particularly after Minister of Industry and Trade
Tunky Ariwibowo announced yesterday that he would soon prohibit
all levies imposed by private companies.