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(12/8/2008) In the midst of a world economic crisis of indeterminable duration, Indonesia has recently introduced policy shifts likely to inflict added pain on the national tourism sector and hobble the industry that was once second only to the natural resource in generating much needed foreign exchange.
Recent moves by the government to close a large, well-organized and, generally assumed, well-connected black market operation have made finding wine and liquor difficult, if not impossible, in Bali. Complicating matters further, the government has followed this crackdown by introducing draconian duties charges on imported alcohol of nearly 350%. And, if things were not bad enough, there are also indications that wine and alcohol importers may also be required to undertake time-consuming and very costly certification of every brand and type of wine and liquor via the national agency charged with food safety regulation.
While the Indonesian government has every right to safeguard the health of its citizens and do what it can to increase tax revenues, these recent shifts in policies are incredibly wrong-minded and will ultimately prove to be in opposition to the national interests on a number of levels.
When Does Shock Therapy Become an Electrocution?
On one level, the efficacy of the current crackdown is impressive, conclusively demonstrating the government's power and resolve in cleaning up a notoriously porous and corrupt national import apparatus. Given the former pervasiveness of the system which the government has suddenly dismantled, a huge vacuum now stands in its stead with liquor shops, restaurants and hotels approaching the coming holiday season with limited or no supplies of wine and spirits.
The scale of the now defunct import system, which in its heyday facilitated as much as an estimated 75% of the nation's consumption of imported booze, shamefully bespeaks the high level of bureaucratic collusion that once controlled illegal imports and the government's long-standing failure to establish an effective import system. The current desire to set things right in one swell swoop, is only compounding that earlier failure by deepening the current financial crisis, creating widespread unemployment and even threatening the continued existence of some tourism players as the tourism sector scrambles to find drinks to place on the table of foreign visitors.
Instead of designing a step-by-step and less painful clean-up of the customs and excise procedures for imported spirits and wine, members of President Yudhoyono's United Indonesia Cabinet have chosen instead to flex their legislative and executive muscle by adopting a devil-may-care attitude towards any damaging ripple effects that their decision are having on the wider economy. These leaders, proud of the power they wield, will insist "strong medicine" is needed to address the importation of black market booze. Perhaps so, but we wonder if the dosage of that medicine won't prove ultimately fatal to millions of workers dependent on the tourism sector?
Waiting Weapon of Self-Destruction
In response to those who may claim we are over-dramatizing the problem at hand, we hope the President and his Cabinet will consider the following:
● The lack of governmental coordination in addressing the ripple effects of the new importation policies means that many hotels and restaurants in Bali and across the rest of Indonesia will book lower revenues and entertain fewer guests seeking adult beverages to celebrate the coming Christmas and New Years holiday.
● That for most of the civilized world today, the enjoyment of wine and liquor in moderate amounts is not seen as sinful or evil, but merely an essential part of an enjoyable holiday meal.
● That less champagne and cocktails toasting in the New Year also means that the 11% tax paid to feed government coffers and 10% service charge paid to service staff applied to liquor will not materialize. How this helps the government or local workers is beyond our powers of comprehension.
● Bearing in mind that, in the past, dissatisfied EU tourists have successfully sued foreign hotel and tour operators for their failure to provide a sufficient variety of jams on a breakfast buffet, we wonder if hotels in Indonesia face similar legal actions when they try to toast in the New Year with rice and coconut wine?
● The lack of coordination and the absence of any systematic thinking in decision making within the National Cabinet on this issue is also suggested by, on the one hand, the Department of Tourism's call to focus on the conference and convention sector in 2009 and the resulting contradiction inherent in Indonesia's current situation. Import duties on alcohol approaching 350% mean the conference and convention sectors' de rigueur cocktail receptions and "open bar" dinners, when enjoyed in Indonesia, will be among the most expensive anywhere in the world. While this is bad news for Indonesia's conference and exhibition operators, such toady-mindedness on Indonesia's part must have competitors in Singapore, Malaysia and Thailand rubbing their hands and dancing in glee.
● The final failure and humiliation of the government's attempt to sort out the mess surrounding its alcohol import regime is the fact that duties of 350% and the continuing lack of wine and liquor supplies make it axiomatic that a black market for smuggled wine and liquor in Indonesia will soon be in operation. Lower taxes in combination with strong law enforcement have a much higher likelihood of enhancing control and raising tax revenues.
We fear that if the President Yudhoyono and his cabinet fail to urgently rethink the current situation in such a way that will maintain supply and keep Indonesian tourism competitive, our conference and convention centers will suffer a drought of both booze and visitors in 2009 and beyond.
[See: Customs & Excise Crackdowns Across Bali]