KPPU to focus on sectors like banking, energy

JAKARTA. Commissioners from the Business Competition Supervisory Commission (KPPU) have vowed to step up the fight against monopolistic practices, particularly in sectors that affect public interests, to ease inefficiency in Southeast Asia’s largest economy.

Newly appointed KPPU chairman Nawir Messi recently said under his leadership the institution would focus on strategic sectors pertaining to public needs, such as banking and energy, as well as highly-sensitive markets affected by supply and demand such as rice and other staple foods.

“We want to scrutinize business activities that have a pervasive impact upon our economy,” Nawir said, adding that the monopoly watchdog would take more of an initiative to investigate cases rather than awaiting reports from the public.

Among the top priorities to be addressed are the high interest rates applied to bank loans, which have created obstacles for businesspeople who want access to capital as well as ordinary customers who want credit.

Indonesia’s banks have long enjoyed sizeable profits as indicated by their high net interest margin, which is the gap between lending rates imposed on customers and interest rates distributed to deposit holders.

The margin enjoyed by the local banking industry is the highest in the ASEAN region and among the highest in Asia.

Lending rates remain high despite moves by the Central Bank to lower its benchmark rate in the past years; analysts attribute the high credit rates to the control held by a few major banks.

Currently, the 10 largest banks, out of the 120 banks operating in the country, manage 63 percent of the country’s total assets of Rp 3,652 trillion (US$378.36 billion).

As for the highly-sensitive staple food commodity market, which experiences volatile prices, Nawir said his office would take significant steps to address the situation.

As suggested by the National Economic Committee (KEN) in its report to President Susilo Bambang Yudhoyono last week, the price, stock and supply of key food commodities — rice, sugar, soybeans, corn and beef — are allegedly controlled by a food cartel. The committee argued that the cartel pushed up domestic food prices and created an inefficient market structure in the country.

Launched in 2000, the KPPU has been lauded for significant rulings on the monopolistic practices by the Indonesian National Air Carriers Association (Inaca) and Singapore-based Temasek Holdings, which controlled prices in the domestic airline service and telecommunication services respectively.

The rulings had positive consequences as they eventually pushed down service charges considerably and laid the foundation for a healthier business environment.

Following the rulings, the nation saw a surge in the number of airline passengers and mobile phone users, not to mention the arrival of new players in both industries.

Syarkawi Rauf, one of the new commissioners, said that the watchdog also aimed to solve infrastructure and public service bottlenecks in support of the government’s efforts to accelerate economic expansion in the run up to 2025. The shipment cost of goods from the overseas market is often cheaper than between certain parts of the archipelago.

“Our most crucial problem is closely related to logistics and connectivity. We want to explore why logistics are costly,” he said.

In terms of logistics performance, Indonesia lags behind its Asian peers. Indonesia ranked 59th in the World Bank’s 2012 logistic performance index, lower than fellow ASEAN members Vietnam and the Philippines. (Linda Yulisman/ The Jakarta Post)