Competitive Advantage and Competition Policy in Developing Countries

Competitive Advantage and Competition Policy in Developing Countries

The CRC Series on Competition, Regulation and Development

Edited by Paul Cook, Raul Fabella and Cassey Lee

The book discusses competition from different theoretical perspectives and examines the implications these viewpoints have for policy. The contributors assess competitiveness in domestic markets and the impact of foreign competition. They also review the experiences of a range of countries in developing competition policy and examine both the strengths and weaknesses of these policies.

Chapter 9: Competitive Markets and Competition Policy in Indonesia

Efa Yonnedi

Subjects: development studies, development economics, law and development, economics and finance, competition policy, development economics, public sector economics, law - academic, law and development


Efa Yonnedi INTRODUCTION Theoretical and empirical research reveals that the industrial sector in the Indonesian economy is highly concentrated (Hill, 1987; Bird, 1999). The World Bank in its 1994 and 1995 reports suggested that cartel practices occurred in some sectors such as cement, sugar processing, paper production, fertilizer distribution, rice and cloves. The view that the industrial market is highly concentrated is also well established amongst the general public particularly since the early 1990s, when it was obvious that the patrimonial nature of business–government relations had distorted economic policies, and there had been a complex interplay among key business players and the governments to impede the competitive process (Yonnedi, 2002). Market structure and industrial concentration is an important issue in Indonesia because of the size of industrial sectors, the prevalent level of government protections and a traditional deep suspicion of large-scale enterprise (Hill, 1987). Industrial concentration is expected to remain high because government protection restrains competition from both domestic and international sources. Added to this there have been widespread views that big business contributed to undesirable market concentration, excessive diversification and lack of governance and transparency. An ‘antibigness’ can be traced to the early years of independence when President Sukarno nationalized a large part of the economy (Hill, 2000). The rise of the private sectors in Indonesia has been characterized by the emergence of konglomerat (conglomerate) and large-scale firms, which have received privileges from various protectionist policies. Mainly in response to the oil prices crisis in the 1980s,...

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