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.