Saturday, September 12, 2020

The Indonesian Competition Commission (ICC) encourages the creation of efficiency in the procurement of government goods and services, one of which is the procurement of government goods through Electronic Catalog (e-Catalog). Based on the assessment conducted by ICC with regard to e-Catalog, mainly with regard to the participation of business actors in terms of participation in the procurement of Government goods through e-Catalog, several things that need to be improved have been found in order to better materialize a sound business competition for all business actors, especially those engaged in small and medium enterprises (SMEs).

This has been conveyed by ICC to the National Public Procurement Agency (LKPP) through 2 (two) letters of recommendation and consideration submitted on March 19, 2020 and July 24, 2020. ICC puts emphasis on the following points in its first suggestion:

  1. In enhancing participation and engagement of SMEs in the procurement of goods/services, ICC advises LKPP so as to be capable of doing various things as follows:
    1. Spur and facilitate SME actors as the closest producers/chains of principal producers to join in the national electronic catalog for certain products on a procurement basis in each region.
    2. Spur Regional Governments with the approval of LKPP to publish local electronic catalogs, which prioritize SME actors in regions as providers.
    3. Spur Regional Governments to publish packing lists the procurement of which must use electronic catalog, so that for the procurement of other goods, Regional Governments can use other procurement methods such as auction/tender or direct appointment in accordance with the applicable laws and regulations, the participants of which are prioritized for local SME actors.
    4. Spur Regional Governments to develop a procurement system with a separate model in each region in accordance with the characteristics of the relevant SME actors and regions, by continuing adhering to the applicable laws and regulations. This is for example has been done in the Province of DKI Jakarta and West Java Province.
  2. LKPP can improve the provision of one of the requirements for electronic catalog providers which require that the price of goods offered by electronic catalog is lower or equal to non-government price, so as to become a competitive price. This is for the sake of removing barriers for non-government consumers to get better price, as well as eliminating pricing strategy barriers for goods providers that do not only pay attention to the cost aspect in setting the offering price.

ICC in its second suggestion focuses on findings related to the registration process and the requirements that must be met by small and medium enterprises to enter the system, as provided foe by Article 13 sub-article “f” of Regulation of the National Public Procurement Agency No. 11 Year 2018 regarding Electronic Catalogs. The article regulates that one of the requirements for providers in the electronic catalog provides foe that if a provider is in the form of an individual business entity, the provider constitutes a principal producer or the closest supply chain to the principal producer. This means only principal producers and main distributors can enter as providers of goods in the said system.

The said clause is considered to have obstructed access to small- and medium-scale entrepreneurs (especially in regions) to become providers in the national and regional electronic catalog systems. Such requirements in a competition perspective serve as a factor that prevents other business actors from entering the market (entry barrier), namely small- and medium-scale entrepreneurs spreading in various regions. Therefore, ICC judges that the regulating in Article 13 sub-article “f” needs to be reviewed so as to be capable of further giving opportunities to small- and medium-scale enterprises in various regions.

Law No. 5/1999 regarding Prohibition of Monopolistic Practices and Unfair Business Competition, particularly Article 35 sub-article “e” has assigned ICC to give advices and considerations with regard to Government policies related to monopolistic practices and/or unfair business competition. Therefore, ICC spurs LKPP to immediately respond to the suggestions and considerations related to the Electronic Catalog.