Why imported goods sell cheaper at Glodok?

Why imported goods sell cheaper at Glodok?

Adianto P. Simamora, The Jakarta Post, Jakarta

Which is the cheapest: an imported Sony television set or an
Indonesia-made one?

All things being equal, one would expect the former to be more
expensive because aside from paying import duty, importers also
have to pay higher transportation costs.

But, strangely, The Jakarta Post, which has visited several
electronics markets in Jakarta following reports about rampant
smuggling of electronics goods, found that in the Glodok shopping
center in West Jakarta -- the country's largest electronics
center -- an imported Sony TV set sells cheaper than the same
Indonesian made product.

For instance, an imported 21-inch Sony TV set costs Rp 4
million (about US$400), while the same locally made product costs
Rp 4.2 million.

"Here in Glodok, imported electronics goods are usually
cheaper by about Rp 100,000 to Rp 200,000 than the same locally
made ones," a vendor, who refused to be identified, told the Post
on Wednesday with a smile.

No wonder imported goods in Glodok sell better than locally-
made products.

Glodok vendors sell their merchandise based on three different
categories, namely locally made goods, imported goods supplied by
big importers, and imported goods supplied by small importers.
The first of these are the most expensive of all, while imported
goods supplied by big importers, though cheaper than locally made
goods, are still more expensive than similar goods supplied by
small importers.

According to the vendors, locally made goods are more
expensive than the others because they are guaranteed by their
suppliers, while the imported products have "questionable"
guarantees or have no guarantees at all.

Buyers of local products which possess warranty certificates
enjoy free repairs for between one and three years.

Imported goods supplied by big importers also have warranty
certificates valid for one year, but the importers normally
provide poor after sales service.

"Once your purchase is broken, it may take months to repair
it. Usually, the importers excuse themselves by saying that spare
parts are difficult to find," one vendor said.

Meanwhile, goods supplied by small importers have no warranty
certificates at all.

"The small importers usually come with a small container truck
loaded with electronic goods, drop the goods here, then go...
There are no guarantees at all," he said.

When asked whether the imported goods were contraband, the
owner of the Tampil Baru electronics shop said: "That's not my
business. I only buy electronics goods from importers. We don't
know whether the goods are smuggled or not."

According to the Glodok vendors, they are mostly supplied with
imported goods by a company located on Jl. Gunung Sahari, North
Jakarta.

When the Post visited the office of the company in question,
workers there said it was only a service center.

"We don't even know where the head office is," claimed one
worker.

Smuggling stories have been abundant in the local press over
the past few days following reports of widespread smuggling of
various goods, the confiscation of smuggled goods by the customs
and excise office, and the disappearance of smuggled goods from
customs and excise pounds.

Analysts blame the rampant smuggling on corrupt customs and
excise officials who collude with unscrupulous businessmen, who
in turn are mostly backed up by rogue military or police
personnel.

Minister of Industry and Trade Rini M. Suwandi recently warned
that smuggling was greatly damaging local industry and was likely
to force many manufacturing companies, including electronics
makers, to go bust, close their operations and lay off their
workers.

She thus called for a coordinated effort among government
agencies to curb such illegal activities.

Realizing the seriousness of the problem, the government
recently formed a task force comprising several government
agencies, including the military and police, to crack down on
smuggling.

The government, however, has only started to show its
seriousness about the problem recently, while smuggling in fact
has been widespread for many years and has caused severe damage
to the country's industrial sector, including the electronics
industry, said Lee Khan Hyun, the general manager of PT Samsung
Electronic Indonesia.

Lee said electronics manufacturers had long been complaining
about the situation and asking for government action, but to no
avail.

"I estimate that between 30 percent and 50 percent of the
electronics goods sold in Jakarta are illegal," he told the Post,
adding that local manufacturers had lost much of their domestic
market share over the past several years due to the presence of
smuggled goods.

While local electronics producers have to pay luxury tax of
between 10 percent and 70 percent to the government, illegally
imported products can be sold cheaper as no such taxes are paid.

"That's why we can't compete with them," Lee said, adding that
the industry had repeatedly called on the government to revoke
the luxury taxes to enable them to compete with the illegally
imported products.