C i i f th S i i fCommission for the Supervision of Business Competition, Republic of Indonesia

Relation between Regulatory ReformRelation between Regulatory ReformRelation between Regulatory Reform Relation between Regulatory Reform and Competition Policyand Competition PolicyM S h dh k A i t t E ti Di tM S h dh k A i t t E ti Di tM. Syuhadhak, Assistant Executive DirectorM. Syuhadhak, Assistant Executive Directorfor the 5th East Asia Conference on Competition Law and Policy for the 5th East Asia Conference on Competition Law and Policy Ulanbaatar, Mongolia, 29 June 2009Ulanbaatar, Mongolia, 29 June 2009

Goals and Strategies of Regulatory ReformGoals and Strategies of Regulatory ReformGoals and Strategies of Regulatory Reform Goals and Strategies of Regulatory Reform

• to create stable and • To improve efficiency,

Macro Economic Reform Micro Economic Reform

sustainable macroeconomic condition;

• to decrease inflation and

To improve efficiency, increase productivity and improve competitiveness through abolishing high• to decrease inflation and

creating monetary stability including foreign exchange through establishing

through abolishing high cost economy; implementing more competition; deregulatingthrough establishing

independent central bank to achieve specified inflationary rate target;

competition; deregulating policy barriers for investment; building i i i i hrate target;

• to implement sustainable fiscal policy through tax, b dgeting treas r and p blic

institutions to supervise the operation of sound market mechanism.

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budgeting, treasury and public debt management reforms.

The Objective of Regulatory ReformThe Objective of Regulatory ReformThe Objective of Regulatory ReformThe Objective of Regulatory Reform

• The main goal of Indonesia's regulatory reform is to minimize regulatory burdens on citizens and businesses while at the same time achievingbusinesses while at the same time achieving necessary public objectives.

• This involves not just deregulation or eliminating obstructing regulations but also instituting "smartobstructing regulations but also instituting smart regulation.“

• The ultimate objective is to develop a high quality regulatory regime

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regulatory regime.

Recent Reforms in IndonesiaRecent Reforms in IndonesiaRecent Reforms in IndonesiaRecent Reforms in Indonesia

• the Government launched three broad policy reforms:

– policies reforms intended to improve investment li tclimate;

• streamline investment services, synchronize central and regional regulations and improvecentral and regional regulations and improve customs, excise, and taxes services

– boost the infrastructure development;– boost the infrastructure development;

• cross-sectoral and sectoral reforms that transparently spell out the rule of the game intransparently spell out the rule of the game in infrastructure investment.

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Recent Reforms in Indonesia (2)Recent Reforms in Indonesia (2)Recent Reforms in Indonesia (2)Recent Reforms in Indonesia (2)

t th th fi i l t– strengthen the financial sector;• to strengthen the institutional set up to enhance

financial sector stability; y;• to diversify funding sources for business activities, not

only from the banking industry but also from the capital market and non bank financial institutions; andmarket and non-bank financial institutions; and

• to improve the safety and efficiency of the financial markets, including non-bank financial institutions and the capital market

– policies to empower the SMEs;• enhancing the SMEs' access to finance market skilled• enhancing the SMEs access to finance, market, skilled

labor and technology as well as at improving the regulatory environment for the SMEs.

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Indonesia’s PoliciesIndonesia’s PoliciesIndonesia s PoliciesIndonesia s Policies

• Repositioning the role of government as the regulator and provide wide opportunity for the private sector to participate in economic developmentparticipate in economic development

• Deregulation, liberalization and privatization for economic sector in which competitiveness and efficiencyeconomic sector in which competitiveness and efficiency are the main perquisites;

• The enactment of competition law (Law No. 5/1999) to e e act e t o co pet t o a ( a o 5 999) toprovide and maintain fair competition within Indonesia

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Institutional Setting for ReformInstitutional Setting for ReformInstitutional Setting for ReformInstitutional Setting for Reform

Credible and effective regulatory and supervisory bodies will• Credible and effective regulatory and supervisory bodies will be established, more than a mere codification and transfer of the functions currently performed by ministers I i i l I d i C titi A (KPPU)• In principle, Indonesian Competition Agency (KPPU), Indonesian Broadcasting Commission (IBC)), the Indonesian Toll Road Agency (ITRA), and the telecommunication regulatory agency (TRA) are already established as providedregulatory agency (TRA), are already established as provided under the competition law and sector laws;

• Such regulatory bodies will be provided each with adequate human high autonomy and transparency and financialhuman, high autonomy and transparency, and financial resources to undertake its functions

• Regulatory bodies will be responsible for overseeing tariffs and ensuring that tariff demands meet both the needs of theand ensuring that tariff demands meet both the needs of the public and that of private investors

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Latest Development in ReformLatest Development in ReformLatest Development in ReformLatest Development in Reform

• A new telecommunication law adopted in 1999 (Law No 36/1999)• A new telecommunication law adopted in 1999 (Law No. 36/1999) has paved the way for the progressive introduction of competition in all markets.

• In 2001 a new oil and natural gas law (Law No 22/2001) wasIn 2001, a new oil and natural gas law (Law No.22/2001) was passed as well, introducing downstream competition and market pricing.

• The Enactment of Road law (Law No. 38/2004) ends the ( )monopolistic position of the state-owned toll-road company, and toll-road industry is widely open for private sector.

• The water supply industry has seen progress in implementing a debt li f h l l i ’relief program to strengthen local government water enterprises’

finances, and a broad opportunity for private sector to participate in the development and operation of water industry currently exists.

• Reforms will also be introduced in seaport airport and railway• Reforms will also be introduced in seaport, airport, and railway industries to ensure that they operate in a more efficient way, efficiency gains resulted from the reforms are effectively transferred to consumers.

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Lesson Learned from Regulatory Reform Lesson Learned from Regulatory Reform ProcessProcess

I f hi E t l i iti l• Increase sense of ownership. External pressure is critical but programs need to be internalized;

• Reform plan has to be in details with a clear measuredReform plan has to be in details with a clear measured target, along with time for accomplishment and the PIC for the implementation;

• Implementation is key for success. Needs independent monitoring team to verify it;Involve stakeholders from the very beginning but• Involve stakeholders from the very beginning but maintain focus on the objectives and priorities

• Need strong leadership from the highest level;Need strong leadership from the highest level;• Require strong media and public relations to gain

effective political support.

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Specific example in relation between competition agency and regulatory bodycompetition agency and regulatory body

“Telecommunication Sector”

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Reform in Telecommunication SectorReform in Telecommunication SectorReform in Telecommunication SectorReform in Telecommunication Sector

I t d ti f L N 36 f 1999 T l i ti ith th i it f• Introduction of Law No 36 of 1999 on Telecommunications, with the spirit of leaving in any form of monopoly practices towards the full multi-operator market for telecommunication industry;

• Cellular mobile business has started to be competitive market since early 1990`s and shows remarkable growth; as well as the internet business which started in the late 1990`s;which started in the late 1990 s;

• Early termination of the exclusivity right for PT TELKOM on fixed local call, and for PT INDOSAT on long distance call and exclusivity right g y ginternational/overseas call; and both becoming Full Network and Services Providers for fixed local, long distance and international/overseas call:– Local exclusivity right from originally Dec 2010 to August 2002;– Long distance exclusivity right from Dec 2005 to August 2003*;– International/overseas exclusivity right from Dec 2004 to August 2003* ;Note: In actual implementation was from 1 April 2004.

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Benefit of Reform in Telecommunication SectorBenefit of Reform in Telecommunication SectorBenefit of Reform in Telecommunication SectorBenefit of Reform in Telecommunication Sector

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Legal BackgroundLegal BackgroundLegal BackgroundLegal Background

L N 36 f 1999 ti l 4 i th E l ti t t d• Law No. 36 of 1999, article 4 in the Explanations stated :– The Ministry of Communication could authorize a regulatory agency to

regulate, control, and supervise the telecommunication sector.

• Ministerial Decree No. 31 of 2003:Establishment of Badan Regulasi Telekomunikasi Indonesia (BRTI)– Establishment of Badan Regulasi Telekomunikasi Indonesia (BRTI) –Indonesian Telecommunication Regulatory Agency;

– To ensure of transparency, independency, and fairness int l i ti t k d i titelecommunication network and service operations;

– BRTI was effective as of 5 January 2004;– As the transitional regulator towards full independent

regulatory agency .

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Organization of Sector RegulatorOrganization of Sector RegulatorOrganization of Sector RegulatorOrganization of Sector Regulator

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Regulatory Functions (1)Regulatory Functions (1)Regulatory Functions (1)Regulatory Functions (1)

R l i i f i i d• Regulating; consists of organizing and stipulating the provision of the telecommunications network and servicestelecommunications network and services implementation, as follow:

– Licenses of the telecommunications network and services implementation;services implementation;

– Operational Performance Standards; – Quality Services Standards; y ;– Cost of Interconnection; – Telecommunication’s tools and equipment standards.

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Regulatory Functions (2)Regulatory Functions (2)Regulatory Functions (2)Regulatory Functions (2)

S i i f th t l i ti t k• Supervision of the telecommunications network and services implementation, such as:– Operational performance;Operational performance; – Business competition; – Utilization of telecommunication equipment.

• Control of the of the telecommunications network and services implementation, such as: p ,– Dispute settlement between telecommunications network

operator and telecommunications services operator; – Utilization of telecommunication equipment; q p ;– Quality services standard compliance.

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Interrelation between KPPU and Ministry of Interrelation between KPPU and Ministry of Communication and Information TechnologyCommunication and Information Technology

MOU (Memorandum of Understanding) on communication• MOU (Memorandum of Understanding) on communication, information and technology :– Signed on 16 Oct 2006

• The implementation of MOU :– Working team formation if necessary– Regular meeting– Regular discussion on competition issues

• Scope of MOU activities :– Monitoring and analyzing

Regulatory harmonization– Regulatory harmonization– Data and information access– Dissemination of competition policy

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The Role of KPPUThe Role of KPPUThe Role of KPPUThe Role of KPPU

I i i l KPPU i ibl t titi b h i i• In principle, KPPU is responsible to ensure competitive behavior in any industry;

• Even though telecommunication industry shifted from monopoly to competitive behavior, the role of KPPU is still significant in this sector;

• KPPU takes regulatory action ex-post based on the competition law, after determining that there has been anti-competitive behavior in the market;

• KPPU is entitled to provide advices and suggestions concerning government policies related to monopolistic practices and/or unfair telecommunication business competition.

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Positioning of Competition Agency and Positioning of Competition Agency and Regulatory BodyRegulatory Body

Obliged to watch the competition structure of

Obliges to enforce the regulation enhancing a

conducive climate ineach sector conducive climate in related sector

The synergy between both institutions will definitely lead the implementing of competition model in regulated industries to accomplish its objectives

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.thank you.

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