International -- Asian Business: INDONESIA
AN INDONESIAN NIGHTMARE MAY SOON RECUR
The famously corrupt customs service is getting its job back
Veteran shippers to Indonesia still remember the bad old days of red tape and graft at Tanjung Priok, the port of Jakarta. The 15,000-member customs service opened every single package and container that came in, hopelessly backing everything up. "For one shipment, we had to get 37 signatures on one document, and then at every table we had to give a little lubrication. We paid maybe $250 per document, maybe 20 or 30 documents a month," recalls Amirudin Saud, Chairman of the Indonesian Importers Assn., referring to his own textile factory. The nightmare ended in 1985, when President Suharto hired a Swiss firm to replace the corrupt customs service.
CLEAN UP. But now, to the horror of many companies, Suharto is returning customs duty to government control on Apr. 1. The official reason has to do with national prestige and cost-cutting, and the government says the arrangement with Geneva-based Societe Generale de Surveillance was only meant to give customs officials time to clean up their act. But economists in Jakarta say the change has more to do with the fact that Customs and Excise Director-General Soehardjo is married to a distant relative of the President--and perhaps SGS failed to cozy up to the Suharto family. "If there's no first-family interest [in a project], it's easier to scrap it," explains one economist.
Nervous importers are rushing to stockpile equipment and materials from abroad, in some cases raising inventories by 600%, ahead of the deadline. "A lot of importers are very worried about what could happen," says Frank Messer, president director of Mercedes-Benz Group in Bogor, West Java, which imports more than $10 million worth of parts per month. Amirudin's association had offered to bear the cost of extending the SGS contract--which customs officials say costs the Finance Ministry more than $100 million a year--and begged for a transitional period before the handover. It didn't happen. Says Amirudin: "We are preparing for our worst nightmare."
But Indonesia's notorious customs service, which has performed other tasks at airports and elsewhere since 1985, claims to have changed its stripes. Soehardjo, now in his 37th year as a customs officer, says he has "retired" 4,000 officials, trained the remaining 11,000 to do their jobs better, and started using computers to track containers. He says the ports won't get backed up because customs officials will only inspect containers at random. Companies with "a good reputation" can expect no delays, he says. His pledges have the support of Brussels-based World Customs Organization Secretary General J.W. Shaver, who says the Indonesian service has "a much improved management."
IMPERFECT. To be fair, things haven't been perfect under SGS. Some foreign investors said they gave up trying to apply for duty-free privileges for heavy-equipment imports because it still involved paying bribes to government officials. "I don't see how the process could get any worse," says an executive of a power plant project that is importing $1.5 billion in equipment. SGS says it has little to do with the duty-free program.
Yet SGS is partly credited with helping bring in more than $147 billion in foreign investment since 1985. SGS's joint venture with the Finance Ministry, called Surveyor Indonesia, literally prevents Indonesian customs officers from touching imports. Shipments valued at $5,000 or more are inspected at the port of origin, whether San Francisco or Singapore, and containers are sealed with a laser-printed steel bolt that gets cut at the doorstep of the importer.
Executives in Indonesia wonder what the Suhartos will do next. The 75-year-old President seems intent on increasing his family's wealth and clout in his declining years, and has put key industries into the hands of his children and charitable trusts. Now comes the customs deal, which economists say is a victory for the customs director. Suharto's rearrangement of the economy seems far from over.By Michael Shari in Jakarta