The trauma of importers

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.