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Competition Policy in Indonesia and the New
Anti-Monopoly and Fair Competition Law
Thee Kian Wie
To cite this article: Thee Kian Wie (2002) Competition Policy in Indonesia and the New Anti-Monopoly and Fair Competition Law, Bulletin of Indonesian Economic Studies, 38:3, 331-342, DOI: 10.1080/00074910215540
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ISSN0007-4918 print/ISSN1472-7234 online/02/030331-12 ©2002IndonesiaProjectANU
INTRODUCTION
Theory suggests, and experience has shown, that free and open market com -petition forces firms to improve their ef -ficiency and product quality, and to innovate in order to attract new custom -ers or keep existing ones by offering low -priced but high quality products or services. For example, the experience of the East Asian newly industrialising economies, particularly Korea and Tai -wan, has shown that strong market com -petition led manufacturing firms in these countries to enhance their competi -tiveness by investing more in technol -ogy upgrading (World Bank 1996a: i). In general, inefficient and uncompetitive firms that are not responsive to con -sumer needs will be forced out of busi -ness (Bloch 1992: 1).
After the end of the oil boom in the early 1980s, the Indonesian government undertook a wide-ranging deregulation
and structural adjustment program
aimed at improving incentives for the private sector to raise efficiency and com -petitiveness. This was considered crucial because the state-dominated oil sector could no longer function as the major source of export earnings and engine of economic growth. The program included
measures to maintain macroeconomic
stability, and introduced pro-competition economic policies—particularly the de -regulation of the trade regime to reduce its highly restrictive anti-trade bias, and of the equally restrictive foreign invest -ment regime in order to attract a larger flow of foreign direct investment.
COMPETITION
POLICY
IN
INDONESIA
AND
THE
NEW
ANTI
-
MONOPOLY
AND
FAIR
COMPETITION
LAW
Thee Kian Wie*
IndonesianInstituteofSciences(LIPI),Jakarta
Thispaperexplorestheroleofcompetitionpolicyinshapingabusinessenviron
-ment thatwill encourage firmstoimprove theirefficiencyandcompetitiveness.
Afterdiscussing thescopeand objectivesofcompetition policy,and whether a
liberal trade andinvestmentregime cansubstitutefor,orshould complement,a
competition law,the paperoffersanassessment ofIndonesia’s newcompetition
law.Itsshortcomingsincludeaseriouslackofclarityaboutobjectivesandaconfu
-sionbetween objectivesand themeanstoachieve them;afailure todistinguish
betweenvariouskinds ofmonopoly;atendencytoprohibitcertainactivitiesand
agreements between firmswithout aclear analysis ofthe underlyingeconomics
involved;unnecessaryandcounterproductiveexemptionsfromtheprovisionsof
thelaw;andfailuretoconfronttherealitythattheprincipalobstacletocompeti
-tioninthepasthasbeenunwarranted governmentinterventioninmarkets.
While successive trade reforms from the mid 1980s through 1996 did lead to greater import competition, domestic competitionand trade were still subject to extensive regulations and restrictions introduced by the central and regional governments,and sometimes by officially sanctioned trade and industry associa -tions. These restrictionstook many forms, including price controls, entry controls, provisions for public sector dominance, the sanctioning of cartels, and adhocin -terventionsin favour of specific firms and sectors (Iqbal 1995: 14). Such policy-gen -erated barriers to domestic competition were justified on grounds of national in -terest, revenue raising requirements, the alleged desirability of promoting infant industries and ‘value adding’ processing activities, and the distribution of ‘essen -tial’ commodities supposedly too impor -tant to be left to the market (World Bank 1996b: 45).
The proliferationof policy-generated barriers to competition may have re -flected the government’s lack of aware -ness of, or plain indifference to, the principle that healthy domestic competi -tion was essential to creating a favourable incentive system for businesses. On the other hand, McLeod (2000) argues that these regulationsand restrictions were introduced precisely because of the ‘rent -harvesting’ opportunities they created. In any case, they not only adversely af -fected the efficiency and competitiveness of firms, but also restricted business op -portunities for firms that were not po -litically well connected, including small and medium-scale enterprises(SMEs).
At the macro level, the opportunity costs to the national economy of these regulations and restrictions were quite high. In the absence of competitive pres -sures, firms were not strongly motivated to raise productivity and improve the quality of their products. At the micro or firm level the regulations raised the cost
of doing business, giving rise to long -standing complaints about Indonesia’s ‘high-cost economy’.
Despite widespread anger about the policy-generated barriers to domestic competitionthat had led to the emergence of huge conglomerates under the patron -age of the Soeharto government,the num -ber of these barriers increased rather than declined in the 1990s.Although the Co -ordinating Ministry for Economic, Finan -cial and Industrial Affairs prepared a set of measures in the early 1990s to improve domestic competition, little progress was made because of a lack of political sup -port at the highest level.
It was only after the onset of the finan -cial and economic crisis of 1997–98 that the government was forced, as part of its initial assistance agreement with the IMF, to lift policy-generated barriers to domes -tic competitionand trade. As part of its second agreement with the IMF in Janu -ary 1998, an expanded range of structural reforms was unveiled that were intended to transform Indonesia’s ‘high-cost’ economy into a more open, competitive and efficient one. To this end foreign trade and investment were to be further liberalised, domestic economic activities further de -regulated, and the privatisationof state -owned enterprises (SOEs) accelerated (Governmentof Indonesia 1998a).
Aside from further trade reforms, in -cluding tariff reductions and the elimi -nation of all remaining quantitative import and export restrictions, the gov -ernment committed itself to dissolving all restrictivemarketing arrangements and internal trade restrictions, and removing various monopolies, including those of the logistics agency, Bulog (other than that for rice). In its third agreement with the IMF in April 1998, the government also committed itself to enacting a com -petition law to establish guidelines for fair business practices and to ban anti
-competitivebehaviour (Government of
Indonesia 1998b). Although the enact -ment of this law was indeedaccelerated because of the government’s agreement with the IMF, it was widely welcomed—
Competition policy encompasses all
government policies that preserve and protect competition among independent buyers and sellers in relatively unregu -lated markets (Boner and Krueger 1991: 1). Its objective is to enhance consumer welfare by encouraging the efficient al -location of society’s resources, given the fundamental principle that under com -petitive conditions, firms that provide consumers with the most preferred com -binations of price and quality will pros -per (Bloch 1992: 3).
Competition policy includes both
market-openingpoliciesthat promote com -petition in local and national markets, notably by measures such as trade lib -eralisation, privatisation of SOEs, and liberalisation of foreign investment policy, and a competitionlaw(sometimes referred to as an anti-trust or anti -monopoly law) designed to prevent anti -competitivebusiness practices by firms (Khemani and Dutz 1996) and, in the view of the author, to prohibit unwar -ranted government intervention in the marketplace, especially the introduction of barriers to competition.
ACompetitionLaw
Indonesia enacted a Law Banning Mo
-nopolistic Practices and Unhealthy
Business Competition (hereafter ‘the
Competition Law’) on 5 March 1999. Chapter VI calls for the establishment of a Business Competition Supervisory
Commission (hereafter ‘the Commis
-sion’) to implement the law; this was
effected by the issue of a presidential decree on 7 June 2000. Thus Indonesia now has a comprehensive competition policy in place, given the competition -promoting policies introduced through various deregulation measures since the mid 1980s. The competitionlaw went into effect exactly one year after its promulga -tion. Before turning to consider it in de -tail, it will be worthwhile briefly to discuss the other component of compe -tition policy: market-opening policies.
Market-openingPolicies
During the New Order era the major threat to free and open market competition in Indonesia was the government itself, which introduced a variety of regulations and restrictions on competition. Perhaps with this in mind, Hill (1999: 24–6) ques -tors, particularlyits manufacturingsector, to be characterisedby high levels of seller concentration.This may be caused by pro -tectionist policies favouring early entrants or by small domestic markets providing scope for only a limited number of pro -ducers. But since almost all agricultural and industrial activities produce tradable goods, Hill argues that an open trade re -gime would be the most effective and ad -ministratively simple means of handling potential monopoly problems. In other words, high concentration ratios in many manufacturingindustries should not pose a problem if these industries are ‘contest -able’ by virtue of low barriers to import competition and the entry of new domes -tic competitors. Thus liberalising foreign trade would render a competition law largely irrelevant in Indonesia’s relatively small open economy.
Other economists have argued that trade liberalisationcannot always be an
effective substitute for a competition law, however. The pro-competitive effects of trade liberalisation are unlikely to be ef -fective in the case of non-tradable goods and services,1while interfirm contractual arrangements and vertical integration may also prevent the developmentof new eign direct investment, domestic firms will be forced to compete not only with foreign firms offshorebut also with those that will locate onshore.2Pushing this line of reasoning further, to the extent that the production and distribution of both tradables and non-tradables are subject to onerous regulations and re -strictions, deregulation is called for and, indeed, this general principle it -self should be incorporated in the com -petition law. In the absence of such a provision the competition law will re -main very limited in scope: it certainly cannot substitute for continuing efforts to deregulate and liberalise the economy. But even if the economy or a particular sector has been liberalised by encour -aging greater import competition and/ or by lifting barriers to entry by both foreign and domestic firms, competition law and its enforcement can still play the role ofmaintaininga competitiveen -vironment by acting against anti-com -petitive practices of such firms (Ahmed 2000: 1–2). In other words, a competi -tion law can be thought of as a mea -sure of last resort in competition policy—a method of enforcing compe -tition when other policies have not
succeeded in making markets fully
competitive (Lloyd 2000: 1). By pre -venting the creation of artificial barri -ers to entry and facilitating market access, a competition law thus comple
-ments and supports other market
-opening and competition-promoting
policies (Khemaniand Dutz 1996). In arguing for reliance on trade liberalisation rather than a legalistic approach to promoting competition, Hill (1999)lists a number of additional con -cerns about a competition law in the In -donesian context. He argues that a complex legal structure—specifically, an anti-trust agency—would be expensive to operate, in terms of both direct oper -ating costs and those related to business
compliance; that it would overload
high-level judicial and bureaucratic re
-sources and divert them from more the bureaucratic skills necessary to draft and implement a workable com -petition law will simply not be available. Problems will be inevitable if the law is poorly designed and open to different interpretations, and if the Commission is staffed by persons who do not have a jective the maintenance and protection of free and open market competition. This should involve the prevention both of anti-competitive business practices and of the introduction of policy-gener -ated barriers to competition that ad -versely affect consumer welfare.
The primary focus of a competitionlaw should be actual or potential anti-com -petitive business conduct by firms, not market structure or the absolute or rela -tive size of particular firms. A review of
competition laws around the world re -veals that the priority of anti-trust or anti -monopoly agencies is the regulation of dominant firms’ conduct (Boner and Krueger 1991: 21). This requires the anti -monopoly agency to act against a firm (or group of firms) only if careful investi -gation reveals that it exploits its market power to engage in restrictiveor anti-com -petitive business practices, rather than to penalise it just because it is large or because it operates in a highly concen -trated industry (Khemani 2000: 6).
Two important types of business con -duct threaten the competitive process, and therefore require the scrutiny of an market entry by potential competitors (Goodpaster 1998: 2–3).
Certain kinds of business conduct are sometimes intended to achieve out -comes similar to those produced by car
-tels and monopolies. These include
mergers by major competitors that
create a monopoly or strengthen an
oligopoly, and the establishment of
cross-shareholdings and interlocking boards of directors among major com -petitors (Goodpaster 1998:3). Thus in many developed countries, including the US, Germany, France and the UK, competition laws require prior notifi -cation of intended mergers involving large firms, to enable the anti-monopoly agency to scrutinise such proposals and to prevent their implementation if they seem likely to lessen competition
substantially (Boner and Krueger 1991: 25–37).
INDONESIA’SNEW COMPETITIONLAW
The new Competition Law has several shortcomings, including vague provi -sions open to varying interpretations,and exemptions for certain kinds of enter -prises, both of which may impede rather than promote competition. The law also hints at the reality that in the past it was governments that were the major source of restrictionson competition,rather than anti-competitivepractices of private firms, but it makes no practical attempt to con -and to improve national economic efficiency as a means to improve people’s welfare;
(b) to create a desirable3business
climate by regulating to ensure
healthy business competition in or -der to maintain equal business op -portunities for large, medium and small firms;
(c) to prevent monopolistic prac
-tices and/or unhealthy business
competition practices on the part of businesses;
(d) to encourage effectiveness and efficiency in business activities. It can be seen that article 3 is unnec -essarily unwieldy, and that it confuses objectives with the means of achieving them. There is really only one objective, namely: to maintain and promote mar -ket competition as a means to achieve economic efficiency and thus improve the welfare of the general public. Regu -lating to ensurehealthybusiness compe -tition is, of course, the same as preventing
unhealthy business competition. This, and preventing private entrepreneurs from engaging in monopolistic prac -tices, are means of achieving the true objective of the law. The confusion of ends and means is likely to give rise to misinterpretation of this objective.
Moreover, key parts of article 3 are so imprecise as to allow diametrically opposite interpretations. In particular, what exactly is meant by the reference to maintaining ‘equal businessoppor -tunities for large, medium and small firms’? One would have thought that the only sensible interpretation of this is that all firms have an equal right to compete in all markets, regardless of their size. An alternative interpretation, however, might be that each size group should end up holding some arbitrarily determined share of the market in ques -moting competition:that in the absence of anti-competitive conduct, market share should go to the firms—of what -ever size—that best serve the demands of their customers.
The specification of maximum mar -ket shares for monopolies (article 17), monopsonies (article 18), oligopolies (article 4) and oligopsonies (article 13) that would trigger action by the Com -anti-competitive business conduct. Ex -emptions from the provisions of the law
This issue is graphically illustrated in one of the earliest decisions of the Commission, ordering Indomarco Pris
-matama, operator of the Indomaret
mini-market retail chain, to cease its ex -pansion into locations where there are a large number of small traditional re -tailers. The Commission’s rationale for this decision was that Indomarco was
suspected(emphasis added) of engaging in ‘monopolistic practices’ as defined in article 1.2 of the law (BisnisIndonesia, 5 July 2001: 2). This article defines ‘mo -nopolistic practice’ as ‘the concentra -tion of economic power by one or more firms resulting in the control of produc -tion and/or distribution of particular goods and services that, in turn, results in unhealthy business practices harm -fulto the public interest’.
The Commission’s decision is a wor -risome development. It clearly reflects a concern to protect the market share of
existing small traditional retailers
against the expansion of the Indomaret chain, made possible by the latter’s su -perior ability to serve the needs of re -tail customers; its statement failed to identify any anti-competitive business
conduct committed by Indomarco. In
short, the Commission appears to be more concerned with protecting exist -ing small businesses from competition than with protecting the public inter -est by affirming its support for the com -petitive process.
ProhibitedActivities
Competition laws elsewhere generally contain conduct as well as structural provisions regarding business activity (Khemani and Dutz 1996), and most are primarily concerned with business con -duct or practices rather than market structure. For instance, the Australian Trade Practices Commission stated in
1986 that ‘The objectives of the Commis -sion are to administer Part IV of the Trade Practices Act with an emphasis on the preservationand the encouragementof competition and the elimination of busi -ness practices which, unchecked, will work major economic harm in the com -munity, that is to suppliers, buyers, and consumers’ (Boner and Krueger 1991: 21). In general, structural provisions govern only mergers and acquisitions that produce a monopoly or entrench an oligopoly, as well as interlocking di -rectorates and cross-shareholdings
among major competitors—both of
which can increase their market power and therefore lessen market competi -tion (Goodpaster 1998: 1–2).
Chapter IV of the Indonesian law con -tains several provisions on activities that may be prohibited by the Commission, including: maintaininga monopoly (ar -ticle 17) or monopsony (article 18); exer -cising market control—specifically through market-blocking conduct by a monopolistic firm to deter entry by po -tential competitors (articles 19 through 21); conspiracy, for example, where competitorsagree in advance on which of them will submit the winning bid for a contract for which competitive bids are sought (article 22); abuse of a dominant
position—a firm using a dominant
position to deter entry by potential competitors (article 25); maintaining in -terlocking positions—interlocking direc -torships or cross-shareholdings among competing firms (articles 26 and 27); and mergers, consolidations and acquisi -tions (articles 28 and 29).
These provisions, especially article 17 on monopoly, have some serious short -comings. Article 17.1 ‘prohibits a busi
-ness entity from controlling the
production and/or distribution of goods and/or services such that this is likely to create a monopoly and/or introduce unhealthy business competition’, while
article 17.2 states that a ‘business entity
nopoly—natural monopoly; monopoly
due to the control a firm exerts over some scarce and essential resource, such as its ownership-specific advantage resulting from strong technological or marketing capability;and a monopoly created by a fiat of the government without a clear economic rationale (Fischer and Dorn -busch 1983: 229).
Each of these types of monopoly needs to be handled in a different way.
Natural monopolies form when the
most efficient scale of operation is as large as or larger than the market in question; breaking up such monopolies would necessarily result in higher unit costs of production.Thus the appropri -government decree without any reason -able economic rationale—as was the case, for example, with the infamous clove trading monopoly controlled by
Tommy Soeharto (Hutomo Mandala
Putera), the youngest son of former
mended. The purpose of promoting
competition is to put pressure on firms
The law contains several provisions on prohibited agreements, including oli -gopoly (article 4); price fixing (articles 5, 6, 7 and 8); market allocation (article 9); boycotts (article 10); cartels (article 11); trusts (article 12); oligopsony (article 13); vertical integration (article 14); closed agreements (article 15); and agreements with foreign parties ‘that contain provisions likely to create a monopoly or introduce unhealthy busi -ness competition’ (article 16). Of particu -lar concern here are the provisions relating to vertical integration.
Unlike anti-trust rules governing ‘horizontal restraints’(such as price fix -ing, bid rigging, market allocation and group boycotts), the basis for anti-trust rules governing ‘vertical restraints’ (such as agreements between an assem -bler and a supplier of parts that bar the assembler from buying from other parts suppliers, or that bar the supplier from selling to other assemblers) is less clear -cut. As a result, vertical relationships per seare not necessarily illegal in legisla -tion elsewhere (SBA 1985: 12). Uncer -tainty about rules governing vertical restraints arises because they can both promote competition,by facilitating the efficient distribution of products, and reduce competition, by facilitating col -lusion or forestalling entry into a mar -ket (SBA 1985: 13). Careful scrutiny is therefore needed to determine whether
a vertical restraint promotes or impedes competition. In practice, the bureaucracy in Indonesia is unlikely to have the skills required to make well-founded determi -nations in such cases.
In the particular case of the engi -neering goods assembly sector (encom
-passing motor vehicles, bulldozers,
excavators, rice hullers, diesel engines and the like), the Commission should not automatically assume that existing verti -cal integration agreements reflect anti -competitive behaviour on the part of assembly firms. These agreements were ef -fectively forced on them by government policy from the late 1970s through mid
1993, when links between downstream
and upstream firms in the engineering goods industries were being encouraged by the mandatory ‘deletion programs’ (lo -cal content programs) of the Department of Industry as part of its ‘industrial deep -ening’ strategy. To force firms to abandon agreements they only entered into in re -sponse to government pressure would be disruptive and arguably unfair. In any case, what matters now is whether the agreements are harming competition— for example, by barring the entry of new potential suppliers.
Exemptions
The law contains several clauses ex -empting certain actions and agreements from its provisions. These include agree -ments related to intellectual property rights (article 50b); the determination of technical standards for goods and ser -vices that do not restrain competition (ar -ticle 50c); and research to improve general living standards (article 50e). The activities of small-scale enterprises (article 50h) and cooperatives (article 50i)are also exempt.
The developmentof viable SMEs and cooperativeshas been a major develop -ment objective of successive govern -ments for economic and social reasons.
To achieve this objective the current
government is preparing new effi
-ciency-and market-oriented, demand -driven SME programs (that is, programs based on actual needs as articulated by the SMEs themselves rather than on bu -reaucrats’ perceptions) which, it is hoped, will be more effective than the more interventionist, welfare-oriented programs of the past. These new pro -grams, if designed and implemented correctly and consistently, should be adequate to encourage further develop -ment of a broad layer of viable SMEs. action against anti-competitivebehaviour by dominant large firms or by other SMEs competitive advantage over large firms. All that will be achieved will be to give a green light to SMEs and cooperatives to engage in anti-competitive behaviour at the expense of their peers.
NeglectofPolicy-generated BarrierstoCompetition
In view of the proliferation of policy-gen -erated barriers to domestic competition during the Soeharto era, it is a cause for concern that the law does not prohibit governments from introducing new bar -riers to domestic competition.This is par -ticularly surprising since the general explanatory notes to the law point out that in the past ‘the development of the private sector was adversely affected by various erroneous government policies that caused market distortions’. Indeed, it was governmentsrather than private
entrepreneursthat, through various regu -lations and restrictions, were chiefly responsible for impeding domestic com -petition and trade. An indicative list in -cludes: officially sanctioned cartels (as in the cement, plywood, paper and fertiliser industries); price controls (ce -ment, sugar and rice marketing); entry controls (plywood manufacturingand re -tail trade); exclusive licensing (clove mar -keting and wheat flour milling); public sector dominance by government fiat (the steel and fertiliser industries); adhocar -rangements in favour of certain firms (preferential tax privileges accorded to the so-called ‘national car’ firm); and con -trols and taxes on intra-country trade (Iqbal 1995: 14; World Bank 1997: 118).
Moreover, in those cases where po -litically well connected entrepreneurs or industry associations were engaged in anti-competitive conduct, this was tac -itly and often officially sanctioned by the official powerholders at either the cen -tral or the regional government level.
This shortcomingtakes on added im -portance in view of the devolution of central government authority to local governments from the beginning of 2001. With this new regional autonomy a sub -stantial risk has arisen that, as during the late Soeharto era, local governments may again put up new barriers to com -petition and trade at the local level, by introducingtaxes and controls on inter
-regional trade and discriminatory
measures against out-of-region busi -nesses—for example, by reserving the local market for within-region busi -nesses, by introducing preferential gov -ernment procurement arrangements that favour local businesses, or by requiring in-region processing of raw materials (Goodpaster and Ray 2000: 2–9).
A clear example of competitionprob -lems created by provincial government policy is the establishment of a private cartel under a decree of the provincial
government of Central Sulawesi to con -trol the shipment of raw rattan out of the province (Marks 1999: 1, 5, 9). This ar -rangement generated large rents for members of the cartel and their official patrons. Thus, despite the agreement be -tween the government and the IMF in January 1998, which provided for the abolition of the various restrictions on domestic competition and trade at the national level, provincial governments continue to exert distorting and anti-com -petitive controls over the interprovincial and interisland trade in commodities.Re -grettably, the law does not contain any provision to counteract this problem.
CONCLUDINGREMARKS
The arguments for and against a compe -tition law in Indonesia have become largely academic, as the government has already enacted one. The best thing con -cerned economists can do now is to point out its shortcomings with a view to im -proving its provisions, and to monitor closely the decisions of the Business Com -petition Supervisory Commission to en -sure that it implements the law in a competent and transparentmanner.
The above notes on shortcomings of the competition law raise various issues that the Commission should take into account, lest the enforcement of the law yields effects contrary to its prime objec
-tive, namely the establishment of a truly competitive business environment for all market players, including SMEs and co
-operatives. Although the Commission
only began work in 2001, some of its early decisions suggest that it is more con -cerned with (arguably misguided) equity considerations—specifically, protecting small business rather than protecting the competitive process. If this is the case, the law will not be able to achieve the objec -tive of promoting and protecting free and open competition. Moreover, protecting small firms from the need to compete will actually have the perverse effect of hold -ing back their development.
It is to be hoped that as the shortcom -ings of the law become increasingly ap -parent, the relevant provisions will be revised. Such revisions should not be im -possible: South Korea’s Fair Trade Act has been amended no less than seven times since its enactment in December 1980 (Ji 1999:58), while Taiwan’s Fair Trade Act has been amended once (in 1999) since its enactment in 1991 (Shi 1999: 73). In the
meantime the Indonesian government
and local governments should press on with market-opening policies, lifting re -maining barriers to domestic competition and trade at both the national and local levels, and abolishing remaining restric -tions on import competition and foreign direct investment.
NOTES
* I wouldlike toacknowledge the valu
-ablecommentsofthreeanonymousref
-erees on an earlierdraft of thispaper.
Naturally,Ialoneamresponsibleforany
remaining errors andshortcomings.
1 Moreover,ifthesenon-tradablesareim
-portant inputs to the production of
tradables,lackofcompetitioninthemar
-ketsfortheformerwilladverselyaffect
theinternationalcompetitivenessofthe
latter.
2 Hill(1999:31–2)alsoarguesinfavourof
liberaliseddirectforeigninvestment,al
-thoughnotfromtheperspectiveofpro
-motingcompetition.Thepolicychanges
urgedbytheIMFalsoincludethisform
ofliberalisation.
3 Theoriginal Indonesianversion refers
toa ‘conducive’business climate, but
doesnotstatetowhatitshouldbecon
-ducive.Itisassumedtheintentionhere
is‘desirable’.
4 Indonesia is not alone, of course, in
gr an ting exemptions to mea su res
against anti-competitive business con
-ducttoaccommodate certaineconomic
andpoliticalgoals.
5 Theavailable empirical evidence indi
-catesthatthelackofalegalguaranteeof
non-discriminatory business practices
contributestothehegemonyoflargeen
-terprisesinsomemarkets, andtohigh,
andsometimes unpredictable, transac
-tionscostsforSMEs.Thusalawthatre
-duces entry barriers to all sectors is
importanttocreatingacompetitive,fair
andtransparent business environment
forSMEs(BrazierandSianipar1999:4).
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