Herb PlunkettandAnwar Pasinringi1
The cement industry in Indonesia has often experienced seasonal shortages and high prices. This has bought forth widespread public criticism of the industry and its regulatory arrangements. There have been accusations of cartel control, hoarding and speculation, and calls for the industry to be deregulated. Cement is considered a strategic commodity because of its importance to the building and construction sectors and the centrality of these sectors in the Indonesian economy. The aim of this chapter is to describe the regulatory arrangements that prevailed in the mid-1990s, outline some important economic features of the demand and supply of cement, and discuss the consequences of some alternative regulations.
Existing regulatory arrangements in the Indonesian cement industry have three distinguishing characteristics: (a) use of guiding prices, (b) use of distribution quotas, and (c) a mix of private and state-owned firms.