Top economist proposes changes to law on levies

Top economist proposes changes to law on levies

JAKARTA (JP): Senior economist Sumitro Djojohadikusumo, 78, said yesterday that local administrations need to freeze levies which generate market distortions and hamper national economic growth.

Sumitro told reporters that various levies at the local level should be temporarily "frozen" to allow the Ministry of Home Affairs to select and approve "only those which are important and do not endanger the national economy."

"Some provinces, for example, regulate the trade of certain commodities. This should not be allowed because what we want is a perfectly market-oriented economy," Sumitro said.

Businesses have been increasingly vocal in criticizing levies -- both legal and illegal -- which are imposed by local administrations across the country. According to some critics, the volume of funds levied locally on various goods is significant enough that it is causing market distortions and a high-cost economy.

Sumitro said that local administrations often issue rules which require levies on certain business activities or commodity trading in order to collect the greatest possible revenue from their regions.

While apparently sympathetic to administrations' need to raise funds, Sumitro said that the local levies would harm the national atmosphere business, given that most businesspeople conduct their activities in more than one region of the country.

"Imagine how much entrepreneurs would have to pay if they did business in the regencies of all the 27 provinces," he said.

"I understand that decentralization and local autonomy are important, but the benchmark should be the national, not the local, market," he said.

Sumitro, who recently received an honorary doctoral decree from the Erasmus University in Rotterdam, said that many improvements still need to be made to the country's infrastructure facilities.

"It's time Indonesia 'overhauled' its physical, institutional and administrative infrastructure," he said.

Sumitro said that administrative infrastructure, in particular, was needed within the government.

"Times have changed. What we once considered appropriate, at the beginning of the first Five-Year Development Plan period in the 1970s may no longer be relevant at the present time," he said.

Sumitro, whose book The Evolution of Economic Thoughts wads published last year, held two ministerial posts in the government of the late president Sukarno -- as minister of industry and trade and minister of finance -- and two ministerial posts under Soeharto -- as minister of trade and state minister of research and technology.

"How should we deal with the administrative system now? Should we maintain the present ministries or do we need a review, a centralization or a division of them?" Sumitro asked.

He said that making such fundamental changes needed sound studies and thorough assessments. He said it would take more than a year or two to make such changes.

"It will be a tough job, but hopefully (administrative changes) can be made in the seventh Five-Year Plan period or the Eighth," he said. The seventh Five-Year Plan period will begin on April 1, 1999.

Sumitro declined to explain the basis of his remarks, merely emphasizing that such changes are needed to keep up with new trends, such as the opening up of the global market, the formation of the Asia Pacific Economic Cooperation (APEC) forum and the emergence of new international trade rules.

He emphasized that his comments not been suggested by other people. "I am only observing the developing situation," he said. (pwn)