KPPU: Fair Player

The KPPU’s Syarkawi Rauf has worked hard to level the business playing field.

SYARKAWI RAUF has been the head of the Business Competition Supervisory Commission (KPPU) since July 2015, with his term slated to end in December. At 43, he is the youngest ever head of the KPPU, out of 14 so far for the organization. From 2000 to 2016, the KPPU conducted 342 cases, out of 2,561 reports made to the organization. One recent high-profile case was in February, when the KPPU fined Astra Honda and Yamaha Indonesia for colluding to fix motorbike prices, at Rp 25 billion and Rp 22.5 billion respectively. The two firms dominate the Rp 70 trillion motorbike market, with Honda holding 70% market share and Yamaha nearly 25%. With a doctoral degree in economics from Universitas Indonesia, Syarkawi also previously worked as chief economist at Bank Negara Indonesia Makassar. The following is a transcript of a wide-ranging discussion he held with Forbes Indonesia.

Forbes Indonesia: What are the priority areas for the KPPU?

Syarkawi Rauf: We mainly monitor five strategic sectors: food commodities, manufacturing and logistics, financial services, education and health. Food commodities is the most crucial one, because prices constantly fluctuate. For example, the price of bird’s eye chili is currently around Rp 160,000 per kilogram. Its normal price is Rp 25,000. Why is this? There are allegations of cartel practices in the distribution chain, so customers have to pay more because of these cartel practices.

President Joko “Jokowi” Widodo has repeatedly said the KPPU must focus on this sector and in early March we signed an MoU with Finance Minister Sri Mulyani Indrawati to tackle cartel practices in beef and chicken. Later, we will expand to 11 other food commodities. We will also touch other sectors, but for short-term we are focusing on the agricultural sector.

FI: What are the biggest challenges for the KPPU?

SR: In Indonesia, the cartels sometimes originate from regulation, as some of the government policies facilitate anti-competition practices. Therefore, we urgently need to have market reform. First, we should do a review of policies that are anti-competition in nature. Second, we should shift the market structure to encourage new players, because now all the strategic commodities are highly concentrated in the hands of a few. Third, we need to create a pro-competition culture in the market, although this needs a long time to cultivate.

FI: What should be done to improve Indonesia’s anti-competition regulation?

SR: The fines for anti-competition violations are too small, with the maximum amount only Rp 25 billion. Meanwhile, the profit gained from violations is much bigger. We want to revise the regulation. In U.S., the fines are based on the profit. They count how much profit the company made from the cartel, and use that to calculate the violation. But it’s impossible to apply that rule in Indonesia because we lack the data related to the profit, especially for privately held companies. Hence, we believe the fine should be a maximum of 30% of sales during the cartel period. We plan to finish the amendment of the regulations by mid-year.

FI: What else will be included in the amendment?

SR: We want to be an independent state institution with stronger authority. KPPU currently has four areas of regulation: policy advocacy, law enforcement, merger notification, and partnership monitoring. In policy advocacy, we give the government policy suggestions, and hence the KPPU should be equal with other institutions. In law enforcement, our authority is weak. We cannot do wiretapping. So all the evidence we get is leaked. For example, in the Honda-Yamaha case, we got leaked emails. We will fix that in the amendment.

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