Indonesia Presentation

Transcription

1 Indonesia Presentation Abuse of Dominant Position (Monopolization) and Several Cases in Indonesia By Rustam Effendi S Ho Chi Minh,, Viet Nam August, 3 rd -5 th,2004

2 Indonesia Population : 211,000,000 No. of island: 16,766 Coast line: 880,000 km No. of provinces: 33 Neighboring countries: Malaysia Papua New Guinea The Philippines East Timor Australia Brunei

3 MACRO ECONOMIC INDICATORS INDICATORS GDP Growth (%) Inflation (%) Interest rates (%) Export (US$ Billion) Import (US$ Billion) Exc. Rate (Rp( Rp/US$) GDP/capita (US$)

4 ECONOMIC ENVIRONMENT GDP/Capita (2003) : US$. 970 GDP growth ( ) 2003) : 3.2% Population (2003) : 216 million Pop. Growth ( ) : 1.49% Unemployed rates (2002) : 9.5 % Total Area : 1,919,440 sq Km Number of Island : Adult literacy : 90.93% Life Expectancy : 68 years

5 INDONESIA S FOREIGN TRADE (in US$ Billion) Year Exports Imports Balance

6 Introduction Economic practices in Indonesia had been contrary to the spirit of the constitution Law no. 5 of 1999 concerning prohibition of monopolistic practices and unfair business competition, was launched to ensure effective business competition The introduction of competition law did not automatically result in an improvement in conditions for consumers

7 The Indonesian Constitution of Envisaged a democratic economic system Article 33 states: 1. The economy shall be organized as a common endeavor based upon the principles of the family system. 2. Sectors of production which are important for the country and effect the life of the people shall be controlled by the state. 3. The land, the waters and the natural riches contained therein shall be controlled by the State and exploited to the greatest benefit of the people.

8 LAW NO. 5 0F1999 Aims: - To safeguard the public interest and improve the efficiency of National Economy - To create a conducive business climate - To prevent monopolistic and or unfair competition - To create an affective and efficient business activity

9 RELATED POLICIES WITH LAW NO. 5 - Revoke policies concerning the decision of monopoly : e.g: Cement and wheat - Opening the market in several sector e.g.:pharmacy, telecommunication, mining

10 Number Cases Overcome by Commission (KPPU) Number cases had overcome - 28 Number cases based on report 19 Number cases based on initiative 9 Number cases finished decision -15 Number cases need to follow-up -7 Number cases on going process - 6

11 Some Cases Overcome by Commission (KPPU) Semen Padang and Semen Tonasa Factory were merged to Semen Gresik, and most of its share was sold to foreign company Duopoly about Indosat and Telkom in Telecommunication industry. It ended up with selling Indosat s share by STT Singapore in 2002.

12 Some Cases Overcome by Commission (KPPU) KPPU urged strongly the revision of the Decision Letter of the Minister of Trade and Industry on sugar import because the regulation might cause cartel practice. that the investigation revealed that there was indication the Anti-Trust Law No.5/1999 had been violated. Department of Trade and Industry gave licenses to import 405,000 ton of sugar to five companies: PT Perkebunan Nusantara IX,X,XI, PT Rajawali Nusantara Indonesia, and PT Perusahaan Perdagangan Indonesia (PPI).

13 Some Cases Overcome by Commission (KPPU) Commission for Supervision of Business Competition (KPPU) conducted investigation and compiled decision for case No: 08/KPPU-L/2003, allegation of violation of Law No: 5 Year 1999 about Prohibition of Monopolistic ic Practice and Unfair Business Competition which was conducted by Office of Public Accountant (KAP) Drs. Hadi Sutanto & Partners - so called now KAP Haryanto Sahari & Partners- representing firm member of Foreign Public Accountant Office of PriceWaterhouse Coopers ( Pwc) ) is hereinafter referred to as the Reported party. This case emerged after receiving report which was basically stated ted the Reported action in purpose providing unreliable interpretation Reported to PT. Telkom,, PT. Telkomsel,, and US SEC concerning American Audit Standard particularly AU 543. The Reported action resulted unexpected-audit quality conducted by KAP Eddy Pianto of Consolidation Financial Statement of PT. Telkom year book 2002 so that hindering KAP Eddy Pianto to compete with the Reported related to provider audit service for big companies which are registered in exchange-stock floor ( BEJ). Pursuant to conclusion and fact, Commission Council decided to announce the Reported party is proven validly and convince violating provision Article 19 letter r (a) and (b) Law of No. 5/1999, and punish the Reported party to pay fine equal to Rp ,-( ( twenty billion rupiahs).

14 Some Cases Overcome by Commission (KPPU) The process tender of selling two tankers was conducted by Pertamina,, KPPU received a report consisting allegation of unfair business competition in the tender process, having conducted a series examination and clarification to some parties, KPPU Commision for Supervision of Business Competition decides that the report is taken to preliminary investigation.

15 Some Cases Overcome by Commission (KPPU) Investigations process began on January 5, 2004 for allegation of violating monopolistic practices and unfair business competition on monopolizing loading-service of copra and copex on Belawan port, North Sumatera,, and finally it enters to decision formulation.

16 Before Competition Law Dominance in sectors of the economy by individuals and certain families Control of huge conglomerates by individuals and certain families. These conglomerates dominated various business branches from initial production through to sales in related industries. This was indicative of inequitable distribution of development results. Economic progress in Indonesia was enjoyed by certain groups of people Availability, quality and price controlled by dominant market players

17 Before Competition Law Political elite involved in business and the creation of monopolies The abuse of power was apparent at every level: whoever, whenever, wherever! Corruption, Collusion and Nepotism Increase in Economic Power of Elite Increase in Political Power of Elite

18 After Competition Law Commission for the Supervision of Business Competition (KPPU): Established in July 1999 as an independent institution to supervise the implementation of Law no. 5 of 1999 Since its establishment the KPPU has received 144 cases and an additional 8 cases which were initiated by the KPPU. The KPPU has given 22 rulings since its establishment. 4 of these rulings were appealed by the companies. In 3 of the 4 appeals the court found that there had been procedural violations and set aside the rulings of the KPPU. The court never considered the substance of the cases.

19 After Competition Law Commission for the Supervision of Business Competition (KPPU): The other 18 rulings of the KPPU were accepted by the corporations at stake. In the case of the Airline Rates War the KPPU succeeded in changing the policy relating to ceiling prices so that the ceiling price is now determined by the government rather than the association of Airline providers. The commission is hampered by lack of adequate infrastructure, funding and human resources KPPU needs to be seen as taking action against violations if potential violators are to be deterred

20 After Competition Law Airline Rates War: Minister of Transport decree based on up and down corridors to be obeyed by airline operators in fixing the rate Unfair business competition in ticket sales for the Jakarta- Surabaya route - prices dropped from Rp. 600,000 to as low as Rp. 333,000. PT Garuda has a dominant position in Indonesian Airline markets KPPU sent a letter to the Minister of Communication and Transportation to stop tariff fixing made by INACA (Airline Providers Association) as it considered the tariff should be set by the Minister for Transportation

21 After Competition Law Airline Rates War: The result of KPPUs ruling: ACCESS - Number of domestic passengers: in 2000 = 7.6 million in 2003 = 15.3 million -Number of fleet: In 2000 = 148 In 2003 = 244 -Operation fleet: In 2000 = 122 In 2003 = 192

22 After Competition Law Airline Rates War: The result of KPPUs ruling: AVAILABILITY -Number of Airline companies: From 1950 to 1971 = 5 After 2000 = 20 -Quantity of aircrafts: 2000 = Number of daily flights, Jakarta-Surabaya: 2000 = 24 flights (5 companies) 2003 = 46 flights (9 companies)

23 After Competition Law Airline Rates War: The result of KPPUs ruling: AFFORDABILITY -Price, Jakarta-Surabaya 2000 = Rp 600, = Rp 250, ,000 -Price, Jakarta-Medan 2000 = Rp 700, = Rp 460,000 -Price, Jakarta-Solo 2000 = Rp 460, = Rp 270,000

24 After Competition Law Competition in the Sugar Industry: Sugar manufacture and distribution was previously state controlled with tariffs to support local sugar farmers Opening the market up to competition resulted in significant rises in the domestic price of sugar Competition policies and open market practices also resulted in crisis in access to sugar for consumers living on islands other than Sumatra and Java

25 Conditions necessary for Implementation Conducive Business Culture - In Indonesia as a hangover from corruption, collusion and nepotism there is a tendency for businesses to seek unfair advantage and quick profits - Unfair methods will likely remain a part of the business culture of Indonesia for a while yet - A switch to a new culture of respect for the law is required if competition principles are to be adopted amongst the business community

26 Conditions necessary for Implementation Determining which sectors government involvement - Each nation has specific characteristics which determine what industries require state intervention - In Indonesia many consumers are living below the poverty line hence a concentration on access to basic needs such as rice, sugar and salt is imperative - Need explicitly identified indicators to be used in determining when a particular sector no longer requires government intervention

27 Conditions necessary for Implementation Inventory of national laws that contradict principles of competition law - Competition law is new and there is a need to identify contrary laws and then move towards harmonizing these with principles of competition law - In Indonesia we see that this role is best carried out by KPPU as it possesses both a law making and judicial function in that it can make regulations and issue guidelines related to competition

28 Conditions necessary for Implementation In Indonesia specifically: KPPU needs judges who really understand the anti-monopoly law There needs to be better co-operation operation with police, the Supreme Court and the Ministry of Justice and Human Rights A special anti-trust trust court should be established by the KPPU

29 Conditions necessary for Implementation Inventory of cases handled by Competition Authority Empowering community participation in monitoring of unfair competition NGOs and Public monitoring of Competition Authority Need for studies into competition issues Education of consumers, businesses government officials and judicial officers

30 Is Competition Law the Way to Go? Dilemma of determining whether inefficient monopolies created as a result of corruption, collusion and nepotism should be made to change behind a protective wall wiped out by foreign competition Both competition and consumer law are new to Indonesia and are not known or understood by much of Indonesian Society Research over time is required to determine whether competition law has resulted in overall benefits to consumers

31 Is Competition Law the Way to Go? In assessing the viability distinction needs to be made between basic needs and non-essential products and services At this stage based on consumer experience in Indonesia there needs to be exemptions made for industries that supply the basic needs of countries consumers.

32 Is Competition Law the Way to Go? The Indonesian consumer experience demonstrates that competition law does not automatically guarantee an improvement in conditions. Much rests upon effective administration, education of government officials and an informed judiciary. These are preconditions to ensuring that competition law is implemented and those breaching such law are brought to account.

33 Conclusion The KPPU, after learning from the research of NGO and other parties, introduced a new scheme for Indonesia called Regulated Competition a change from the previous strategy called Free Competition because in practice actually Free Competition = Anarchist competition

34 Conclusion From a consumer organizations perspective it is better to start the process towards enactment of competition law now as in time implementation problems can be addressed. Learning from Indonesian experience its better to have competition law from the beginning. In time one can recognize what is the good and bad for the country.

35 Thank You