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09 March 2024
News Indonesia

Jakarta (6/2) - The elected Chairperson of the Indonesia Competition Commission (ICC), M. Fanshurullah Asa, has started to implement his 100-day programme commitment with various initiatives in three main sectors, namely energy (oil and gas), digital market, and food security.

Energy (Oil and Gas)

In the oil and gas sector, ICC has submitted recommendations to the Coordinating Minister for Maritime Affairs and Investment (Menkomarves) through a letter of advice and consideration on January 29, 2024, for several improvements in the supply and distribution of Aviation Fuel Oil (BBM) to improve the performance of the market. This is intended to follow up on the findings of the ICC study, which concluded that the Indonesian aviation fuel supply market has a monopolistic and vertically integrated structure, resulting in market inefficiencies and contributing to high aviation fuel prices. There are two major points in the ICC's recommendations to the Minister, namely encouragement for the implementation of open access in the aviation fuel supply and/or distribution market and a multi-provider system for aviation fuel at airports under certain conditions.

The problem stems from data obtained by the ICC showing that the price of aviation fuel in Indonesia is higher than the price of aviation fuel at 10 (ten) other international airports. In general, the range of differences in aviation fuel prices between airports in Indonesia and overseas airports reached 22% to 43% for the period December 2023. This is considered to have a direct effect on airplane ticket prices because, based on studies, it is known that the price of airplane tickets per kilometer in Indonesia is still higher than in other ASEAN countries, such as Thailand, Malaysia, and Vietnam. This condition received the attention of the Coordinating Minister for Maritime Affairs and Investment (Menkomarves), who asked the ICC, together with the Ministry of Transportation and the Ministry of Energy and Mineral Resources, to conduct a study on the formation of multi-provider aviation fuel in Indonesia.

The ICC study found that there are three groups of activities in the supply chain of aviation fuel supply, namely fuel procurement from refineries, which is then distributed to storage facilities (or fuel supply); distribution of fuel from refineries or ships via pipelines to storage depots in the airport area (or storage); and distribution to aircraft (or into plane services). Furthermore, the ICC study shows that the concept of competition can be applied to each group of activities or can be carried out in an integrated manner from fuel supply to fuel delivery. By taking into account the characteristics of the supply chain process for the provision of aviation fuel, a multi-provider system through open access and the principle of co-mingling is one system that is in accordance with the principles of business competition as an international practice and is recommended by the International Air Transport Association (IATA). The existence of multi-providers is intended to create competition in procurement and distribution, which is expected to increase efficiency and reduce the price of aviation fuel. Thus, there can be a decrease in airplane ticket prices, because the fuel cost component reaches 38%–45% of airplane ticket prices. However, to implement it, the ICC found that there are still government policies that need to be revised, namely the Regulation of the Downstream Oil and Gas Regulatory Agency (BPH Migas) Number 13/P/BPH MIGAS/IV/2008, especially regarding the provisions of business entities that can carry out activities to supply and distribute aviation fuel.

Based on the results of the study, the ICC generally recommends Menkomarves on the following:

  1. encourage the implementation of open access in the aviation fuel supply and/or distribution market as stipulated in the Oil and Gas Law and its implementing regulations.
  2. encourage the implementation of an aviation fuel multi-provider system for each group of activities at airports by taking into account several conditions, including infrastructure readiness, opportunities for auction or selection of partners, revision of BPH Migas Regulation Number 13/P/BPH MIGAS/IV/2008, and making technical regulations by BPH Migas on the utilization of fuel transportation and storage facilities in line with the principles of fair business competition.

The ICC hopes that with the adaptation of open access and multi-provider systems, competition in the aviation fuel market will be more open and efficient, thus contributing to lower flight ticket prices. The ICC itself will continue to monitor the market in accordance with its law enforcement authority for potential violations of business competition by operators.

In addition to the aviation fuel issue, ICC is also monitoring the management of the city gas network and the provision of liquefied petroleum gas (LPG), especially the 3 kilogram (3kg) package. This is a focus because this initiative is a government policy to reduce import dependence on certain types of fuel (namely kerosene). However, based on official data, the target of city gas network development set by the government through the 2019–2024 RPJMN of 4 million household connections (SR), has only been achieved by 800,000, or 20%. One of the reasons is the lack of investment in the city gas network (Jargas) in the form of government cooperation with business entities (KBPU). Currently, from the target of 633,930 Jargas SRs by 2024, only around 300,000 SRs have been built. This is only for household customers 2 (RT-2) and small customers 2 (PK-2).

For this reason, the ICC will focus on identifying business barriers in the field that hinder the construction and development of the city gas network. These obstacles are thought to have a direct impact on increasing LPG consumption, especially 3 kg of LPG. This fact is supported by data from the Ministry of Energy and Mineral Resources, which shows a 4.5% growth in 3kg LPG consumption in the 2019–2023 period, inversely proportional to the consumption of 5kg and 12kg packages, which fell by almost 10% in the same period. This is also reflected in the soaring LPG subsidy allocation in the 2023 State Budget, which reached Rp117 trillion. If the city gas network can be properly developed, people's consumption will switch from LPG to city gas, thus saving a significant LPG subsidy budget every year.

Digital Market

In the digital market, the ICC focuses its oversight on the alleged behavior of business actors or large technology companies as well as marketplaces, especially on the initiative of major cases decided by international competition authorities. In this case, the ICC will explore these decisions to determine whether similar conduct has been committed or occurred in Indonesia.

As a first step in enforcing the law in the digital market, the ICC has completed an investigation into the digital giant, Google, which is indicated to have used its dominant position to suppress the market through the implementation of Google Pay Billing. The ICC has also completed an investigation into one of the major market players in Indonesia and will soon determine its eligibility to enter the examination stage by the Commission Council.

Both cases are expected to be a warning for business actors in the digital market to pay more attention to the signs of business competition and immediately improve their behavior so that the Indonesian digital market can grow and develop in a healthy manner.

Food Security

In food security, the ICC continues to actively monitor price fluctuations in food commodities, especially the category of essential staples, as per Presidential Regulation No. 59/2020. The focus of analysis will be on the form of the trade system, import control policies, and distribution to consumers. The policy is suspected to have the potential to control commodity supply among a group of business actors and is prone to resulting in reduced supply and increased price fluctuations in the market. ICC will also pay special attention to the animal feed market, where there are allegations of high market concentrations that contribute to the high price of feed paid by farmers, especially independent farmers. In addition, the ICC will also optimize the supervision of core plasma partnership agreements in the agriculture, plantation, and livestock sectors to maintain a balance in partnerships between large/medium businesses and small/micro entrepreneurs.