The trauma of importers

The phasing out of the Swiss Societe Generale de Surveillance (SGS) for the customs inspection of Indonesian imports at points of loading, although planned since 1991, is still worrying businessmen. As July, 1995 -- the expiry date for the present working contract between the government and SGS -- nears, businessmen are again troubled by the trauma of dealing with corrupt customs officers in the period before April 1985.

The new wave of front-page stories in the mass media over the last few weeks about the excesses of the bureaucracy at seaports and bonded areas and the arduous, costly processing of duty rebates and other regulatory paperwork is further aggravating the businessmen's concern about the full restoration of the customs inspection authority to the civil service.

Businessmen and the government have often commended SGS for doing its job well since April, 1985. The two main objectives of the SGS work contract have been achieved. The flow of imports has been smooth and under-invoicing and over-invoicing of import prices have been reduced sharply, thereby protecting the domestic market from unfair import competition and increasing government receipts from import duties and other levies.

Official statistics, for example, show that even though the country's imports have consisted mostly of industrial basic materials and capital goods, which are either exempted from import duties or subject to low tariffs, government receipts from import duties and levies increased steadily from Rp 544.5 billion in 1984 to Rp 2.65 trillion last year.

During the first five years of the SGS assignment, $4.5 billion in foreign exchange was saved through the correction of the prices of imported capital goods and materials for the petroleum industry and investment projects.

Despite the great benefits of using SGS, it runs counter to the nations' sense of pride and it obviously does not make any economic sense to maintain the customs inspection authority in the hands of a foreign entity for an unlimited period of time.

In addition, the SGS fee from its inspection services reportedly amounts to 15 percent of the total value of inspected imports and reached as high as Rp 450 billion (US$209 million) last year. Therefore, from the outset, the hiring of SGS in April, 1985, soon after the Directorate General of Customs and Excise Duty was stripped of its customs inspection authority, was meant to be a temporary measure. This allowed ample opportunity for the restructuring and streamlining of the customs service, which had become notorious for its corrupt practices.

Theoretically, the preparations for the phasing out of the SGS service have been quite adequate. A great number of customs officials, who had little else to do anyway, have been retrained by SGS. A new surveying company, PT Surveyor Indonesia, was set up in August 1991. This company, which is 76 percent owned by the Ministry of Finance, 20 percent by SGS and four percent by another state company, PT Sucofindo, is designed to take over the bulk of customs inspection in July, 1995.

What is worrying businessmen, however, is not the technical competence of Indonesian officials but the attitude of the Indonesians who staff and manage PT Surveyor Indonesia. After all, not many state companies can be commended for efficiency and accountability.

It is nonetheless too early to make a final judgment and, therefore, it is unfair to presume that the attitude of PT Surveyor Indonesia's executives will be as bad as the public perception of what to expect from the customs service. After all, SGS has been actively involved in the recruitment for the new company and in the establishment of its inspection procedures.

It is, however, wise for the government to take the businessmen's concern into serious account by seeing to it that PT Surveyor Indonesia develops as an independent and highly capable inspection and surveying company and does not, instead, turn into the old directorate general of customs in a corporate suit. That requires the government to ensure that all recruits for the company are technically competent and that their pay is high enough to enable them to maintain integrity, to work professionally and to eventually get additional jobs overseas.