PRICES OF GOODS AND SERVICES INCREASING BUT NOT SIGNIFICANTLY

Business circles urged the Government and Land Transportation Organization [Organda] to mediately increase public transportation prices after fuel price increase. For information, after oil-price increase, Organda proposed public transportation tariff to be increased up to 30%. Business people complained about public transportation drivers who loosely increased tariff, while there was still no consensus between the Government and Organda. Chairman of the Association of Indonesia Businesspeople [Apindo] Sofjan Wanandi stated in Jakarta on Tuesday [2/7/13] that in the last 5 years Organda never increased public transportation tariff. So now as the government increased fuel price was the right momentum for Organda to increase tariff up to 30%.

               

Sofjan rated that transportation played an important role in promoting distributing of goods and services. With increased prices of public transportation, traders would be able to adjust prices of goods and services which they sell. However, Sofjan guaranteed that although public transportation cost was increased by 30%, traders could only adjust their prices at not more than 5%. “The price increase of 5 percent would not significantly affect consumer’s purchasing power “ Sofyan remarked.

               

Sofyan estimated that the shock of fuel price increase was only momentary and would no be too significant. He further remarked that if price of subsidized oil were not increased, while the fund for subsidy was obtained by borrowing, it would in the long run injure the businessworld and the people. He believed that increase of oil price would be advantageous in the long run. “The state’s asset must not be drained for subsidy while the subsidy Waa borrowed money” he said.

               

To the businesspeople, it would be more advisable for the government if the fuel subsidy be rechanneled for other sectors whereby to propel economic growth. Sofyan believed that infra structure development would eventually step up national economic competitiveness in terms of transportation cost so the businessworld could be more efficient. Infra structure building, which was an urgent matter was not only building roads and harbors traffic of goods but also electricity, water supply and irrigation system for farmers. Therefore sofyan believed that the Government’s policy to increase oil price was right. Furthermore the Government’s task was to distribute social aid for the poor.

               

The same opinion was expressed by Franky Sibarani, Secretary General of the Association of Indonesia Food & Beverages Producers [GAPMI]. Franky said that increase in distribution cost where transportation was not the main component, the impact on total production cost was notably small; so the increase of oil price did not bring significant impact. Franky disclosed that the portion of distribution factor to production factor to production cost was only around 0.5% - 2%. However, according to Franky, Gapmmi had agreed that price adjustment of that percentage would be affect price to be paid by consumers – because the 0.5% - 2% cost would be divided again into 3 parts which contributed 30% respectively.

               

The division was for driver and co-driver, ve-hicle’s maintenance, and also oil. If increase of solar oil price was 22%, increase of distribution cost was only 6%. Franky was hoping that the government could help business people to control pricing to keep it from rising too high. He expected that traders start to seek for new strategies to maintain company’s stability. To maintain quality of goods and services was a way to ensure that products were needed by consumers. If products or services were of good quality in the eyes of consumers, increase of price could be ignorable. (SS)

 Business News - July 05,2013