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.