HIGH COST ECONOMY, A PROBLEM TO THE BUSINESSES

Some business operators believed that to en­hance domestic industry competitiveness, the govern­ment is expected to eliminate high-cost economy and illegal levies and to solve licensing problem. So far, illegal levies collected by government officials have added 7.5% to company's cost. While, a complicated licensing process makes investment in industry sec­tor to lessen and investors to relocate their funds to other countries. In addition to that, bad infrastructure is a problem that must be solved by the government. Integration between industry and trade policies must be parallel so that it will increase competitiveness of domestic industry.

Chairman of Infrastructure, Transportation and Shipping Division of the Indonesian National Ship­pers Council (Depalindo), Hendrik Sitompul, in Jakar­ta (Monday, 1/14/2013) stated that based on reports received by Depalindo concerning illegal levies and high cost in ports in Indonesia at the time of loading & unloading of cargoes, it becomes a hot issue which is frequently discussed in the meetings among users of port services, whether shipping association (INSA), exporters association (GPEl), Indonesian Forwarders Association (Gafeksi), and other maritime entrepre­neurs. “We cannot just ignore this matter because it is a problem to the businesses”, Hendrik said.

Hendrik was in the opinion that the national logistics system is not efficient. Logistics cost reaches 24% of GDP. In neighboring countries, logistic cost could be less than 20% of GDP. High logistics cost causes low product competitiveness. Quot­ing the World Bank's website, Indonesia's Logistics Performance Index (LPI) currently stood at rank 75 among 183 countries. Indonesia gets a 2.76 score (1-5 scale) or less than the scores of its neighboring countries, like Singapore, Thailand, Malaysia, Viet­nam, and the Philippines.

He mentioned that some LIP-forming indica­tors show that Indonesia lags behind in its logistics system. One of the factors that causes high logistics cost is unavailability of an integrated internode trans­portation.

According to Hendrik, port's role is increasing vital within the context of Indonesia as an archipelago country with around 17,000 islands. Distribu­tion plays an important role in economy. What we require is a port with prime services. If a port does not provide prime services, high-cost economy will still become a problem to the businesses.

Port's quality must continually be improved by new investment, whether in hard infrastructures (such as channel dredging) or soft infrastructures (ap­plication of modern information technology). He men­tioned that investment in port sector have at least 2 benefits. Firstly, it reduces high-cost economy in order to increase business competitiveness. Second­ly, it stimulates economic activities in order to open work opportunities. Additionally, it could accelerate economic growth, reduce logistics cost, and control inflation.

He explained that the role of the port in re­ducing logistics cost is very vital. A port not only plays a role in creating an efficient logistics system to support domestic trade, but it could become the main buffer in making Indonesia an important play­er in the global market. In addition to manufactur­ing industry's performance, favorable regulation, a friendly bank interest rate, a factor that could en­hance export performance is a port with prime ser­vices. “We expect that the ports in Indonesia could eliminate illegal levies that end up in high-cost econ­omy”, he said.

Business News - January 16, 2013