Neraca Komoditas

Context

• When we heard about the Neraca Komoditas, we were shocked tremendously.
  • Which leads to Me and Deasy’s piece on The Jakarta Post.
  • Basically we were highly sceptical with the idea of using supply-demand discrepancy as a controlling tool.
• Upon further research, it gets a bit more nuanced:
  • NK is just an upgraded version of Indonesia’s current quota licensing system.
  • Therefore, it has a possible trade-improving effect.
  • The main goal according to PP28/2021 is to secure inputs for industry.
• The result of our NK paper is more of a mixed, less negative than what we first thought, considering the status quo.

What is Neraca Komoditas?

• At its core, NK is a database. It will be per goods, supposedly contain information on production and consumption of that good.

  • Cons – Prod = the amount of import quota
  • Prod – Cons = the amount of export quota

• Before NK: Importers -> Technical Ministries -> Mendag -> BC

• After NK: Importers -> Mendag -> BC

• The quota will be allocated by Mendag based on NK, not by technical ministries’ letter anymore.

• For the moment, only 5 goods will follow the new system: rice, beef, salt, sugar, and fisheries products.

• The rest (ie quota-restricted goods) will follow in 2023.

Is NK Good? More or less

The potential good:

• Faster: applying for technical ministries’ letter could cost around 1 week – a month (especially when pejabat is not present).
• Less corruption opportunity: Most of corruption cases we’ve heard are in the technical ministries’ step.
• One system: Previous system forced firms to log in to many online and offline systems controlled by many ministries and agencies.
• NK adds one-stop-solution portal for trade.
• Fiktif positif: No response after 5 days = auto accepted
• Easy justification: if NK is used without compromised, then there’s room for certainty on quota.
• Room for evaluation: the 5 goods are relatively simple to manage.
• Kemendag becomes very powerful(See Permendag 18,19,20 2021)

Is NK Good? More or less

The neutral:

• Data could still be inconsistent: Data is still collected by technical ministries.
• Still unclear how NK will solve problems regarding quota distribution among firms.
• Still unclear if NK will improve transparency.
• No NK yet = old system

Is NK Good? More or less

The, uh, not so good:

• PP28/2021 contains many goods currently not quota-controlled by the government. Does this mean the government can control it in the future?
• Less flexible: if NK is used without compromised, then it will hard to adjust changes in the global economic condition. Case in point: coal.
• Price is absent in the NK discussion (AFAIK). We know that price has been influential in government’s decision to open/close trade.
• One portal: merging many ministries & bodies’ online system into one system may not be as smooth. Traffic, compatibility, sectoral ego, etc.
• Illusion of power: just because we have the data doesn’t mean its good. Just because its good doesn’t mean it provides information we want. Just cuz we have the information doesn’t mean it is easy to control trade.
• Moving up to more complex, heavily GVC goods will increase NK’s complexity. Simple supply-demand data becomes even more nuanced.
• Kemendag becomes very powerful(See Permendag 18,19,20 2021)
• UU CK is under scrutiny by MK, which adds uncertainty regarding its legality.
• Unclear about Material Center.

Policy discussion

• There is a potential for pareto improvement compared to the status quo.

• quota is still bad

• NK as a data is good. Using it for quota, not so good.

• We recommend:

  • Be very careful using NK for setting quota, especially when moving up the value chain.
  • Make sure that transparency is improved especially regarding how much quota is available for who.
  • Prepare evaluation for the first 5 goods:
    • Is it really faster and more reliable compared to the old system?
    • Use firms’ survey to know the field.