WORLD TRADE ORGANIZATION
ORGANISATION MONDIALE DU COMMERCE
ORGANIZACIÓN MUNDIAL DEL COMERCIOWT/TPR/M/117/Add.1
11 September 2003
(03-4723)
Trade Policy Review Body
27 and 30 June 2003Original:  English/
                 anglais/
                 inglés
TRADE POLICY REVIEW
INDONESIA
Minutes of Meeting
Addendum
Chairperson:  H.E. Mrs. Mary Whelan (Ireland)
This document contains the advance written questions, and replies provided by Indonesia.1
__________________________________________________________________________________
Organe d'examen des politiques commerciales
27 et 30 juin 2003
EXAMEN DES POLITIQUES COMMERCIALES
INDONESIE
Compte rendu de la réunion
Addendum
Président:  S.E. Mme Mary Whelan (Irlande)
Le présent document contient les questions écrites communiquées à l'avance et les réponses
fournies par l'Indonésie.1
__________________________________________________________________________________
Órgano de Examen de las Políticas Comerciales
27 y 30 de junio de 2003
EXAMEN DE LAS POLÍTICAS COMERCIALES
INDONESIA
Acta de la reunión
Addendum
Presidente:  Excma. Sra. Mary Whelan (Irlanda)
En el presente documento figuran las preguntas presentadas anticipadamente por escrito,
junto con las respuestas facilitadas por Indonesia.1
                                                     
1 In English only./En anglais seulement./En inglés solamente.WT/TPR/M/117/Add.1
Page 3
ADVANCE WRITTEN QUESTIONS BY MEMBERS
AND REPLIES PROVIDED BY INDONESIA
REPLIES TO QUESTIONS RAISED BY ARGENTINA
Trade Policies and Practices by Measure
Question 1:
The Report by the Secretariat states in paragraph 3 of section III that "in 2002 applied tariff rates on
41 nine-digit HS items  exceeded their final bound rates by up to 20 percentage points".  Could the
reasons that led to this situation be explained?  Similarly, could Indonesia explain why "bound tariff rates
tend to be substantially lower than applied rates"? (section III, paragraph 20).
Answer:
Up to date there is no tariff exceeded Indonesia bound rates. In the case of alcoholic beverages, tariff rate
of 170% is intended to prevent the people from potential moral hazard. This level of tariff is still in line
with Indonesia bound rates as they are reduced to 150% in 2004. With regard to dispersion of bound and
applied tariff rates it can be explain as follows. The statement in para 20 of section III should be read as
“Bound Tariff Rates tend to be substantially higher than applied rates and the gap has widened since 1998as a result of scheduled tariff cuts”. The reason for this is the aggressiveness of Indonesia to reduce
applied tariff to accelerate tariff liberalization as well as to encourage domestic industries to increase their
efficiency. The gap between bound and applied tariff will be bigger as Indonesia continues to implement
its tariff reduction program
Measures Directly Affecting Imports
(e) Tariff quotas
Question 2:
The Report by the Secretariat states in paragraph 26 that Indonesia has established tariff quotas for milk
and cream and its products, but the tariff rate applied out-of-quota is lower than that applied in-quota.
Could Indonesia explain the reason that has led the authorities to make this differentiation?
Answer:
Tariff quotas for milk and cream have been abolished since 1998. The current tariff for these products is
5% with no quota.
Standards and other technical requirements
Question 3:
The Report by the Secretariat states in paragraph 76 that in 1999 new requirements were approved
specifying that food products must be labelled exclusively in the Bahasa language, Arabic numbers andWT/TPR/M/117/Add.1
Page 4
Latin letters.  Could Indonesia state whether other requirements were introduced in addition to those
indicated?  If so, could it indicate which is the corresponding notification?
Answer:
Labelling in Indonesian language, Arabic numbers and Latin letters is stipulated in Government
Regulation Number 69 of 1999 on Food Labelling and Advertisement, it was notified to the WTO July2000. In addition to the above requirement, this regulation requires (1) labels that clearly describe
ingredients used, especially food additives, beside other non-SPS requirements; (2) certain treatments
applied to products, such as irradiation, shall be informed on the label as irradiated food, including other
related technical information; (3) the same requirement is also applied for GMO product labelling.
Question 4:
According to the Report by the Secretariat, Indonesia  has maintained State involvement "with a view to
assisting domestic production and/or promoting or exclu sively controlling/restraining trade in virtually
all important sectors".  Could Indonesia explain  what forms such St ate involvement takes?
Answer:
No, that is not the case applied out quota tariff is 210%, whereas applied in-quota tariff is 0%. However,
Indonesia never implemented the out quota tariff rather our applied tariff is 0-5%.
REPLIES TO THE QUESTIONS RAISED BY AUSTRALIA
Overview
Australia is concerned at the apparent increase in protectionist sentiment in Indonesia since the last Trade
Policy Review. Indonesia has increased tariffs on a number of products over the past few years. Indonesia
has also developed more sophisticated anti-dumping, quarantine and standards regimes, which have, at
times, been used as non-tariff barriers. Australia would welcome a more transparent regime in these areas.
Wheat Flour
Question 1:
On 1 May 2003, Indonesia introduced an applied five per cent tariff on wheat flour for a limited period –
until 31 December 2004. What plans does Indonesia have to improve the competitiveness of the domestic
industry? On what basis did Indonesia determine the duty rate for this product? Will Indonesia considereliminating the tariff before the scheduled deadline?
Answer:
To improve the competitiveness of domestic wheat flour industries, Indonesia has urged the industries to
improve production process and to increase efficiency. In the mean time , the tariff increase from 0% to
5% will prevail on the temporary basis just to give the industries enough time to compete over imported
wheat flour. There is no plan to eliminate the tariff before the schedule deadline although monitoring of
the tariff implication to consumers is made regularly.WT/TPR/M/117/Add.1
Page 5
Rice
Question 2:
The Indonesian government increased applied tariffs on rice to an equivalent ad valorem rate of 35 per
cent. The increase was reportedly implemented to protect the domestic industry from competition.
Nonetheless, Australia notes that such tariff increa ses have raised prices for consumers but may not have
effectively protected the interests of domestic rice producers. What plans does Indonesia have to improve
the efficiency of the domestic industry and distributi on system? Would the government consider lowering
the applied tariff rate for rice to at least previous levels?
Answer:
The current import rate for rice is RP 430,- /kg; raw sugar Rp 550,-/kg; refine sugar Rp 700,-/kg; corn
0%; soybean 0%. It is considered low compared to the bound rate. This low applied tariff rate could
discourage our farmers in increasing their productivity, and hence the production, thereby will threat ourfood security.
Sugar
Question 3:
On 3 July 2002, the Indonesian government introduced an applied import duty of RP550/kg for raw sugar
and RP700/kg for refined sugar. This equates to a 30 per cent ad valorem equivalent rate on raw sugar(from 20 per cent previously) and 35 per cent ad valorem equivalent rate on refined sugar (from 25 per
cent previously). Australia considers that the increase in tariffs will do little to improve the efficiency of
the domestic sugar producers and will increase prices to consumers. Australia notes that inefficiencies in
the Indonesia sugar distribution system have caused as many problems as international competition for
domestic producers. What is the Indonesian governm ent’s plan to make the domestic sugar industry and
its distribution system more internationally compe titive? Will Indonesia consider lowering the import
tariffs on sugar?
Answer:
The changing of tariff on sugar from ad- valorem  to specific rate was not intended to increase tariff rate
but was mainly to prevent the importation of low quality and under invoiced imports. The introduction ofspecific rate might has implications to the effective ad- valorem  rate due to the change of Rupiah exchange
rate.
In the short run, there is no plan to reduce the import tariff of sugar  to give incentive for domestic
industry to modernize its factory as well as to maintain the income level of sugar cane farmers. As part of
the sugar policy, tariff measure is accompanied by some arrangements in the in the distribution  process.
Improvement of sugar production:
To make the domestic sugar industry more internationally competitive, the Indonesian
government plans to improve management and rehabilitation of cane sugar plantation owned by
farmers with high yielding variety, rehabilitation and development of cane sugar nursery.WT/TPR/M/117/Add.1
Page 6
Distribution system:
Efficiency of sugar distribution can be achieved through managing importation and at the same
time improving sugar productivity.
The consideration for lowering the applied tariff rate for sugar will mainly depend on production
cost, exchange rate, and international price.
Steel Tariffs
Question 4:
The Indonesian government introduced a temporary (12 month) applied import tariff on cold rolled coil
in November 2002. Will Indonesia remove these temporary tariffs by the scheduled deadline? Would
Indonesia consider removing the duties before the scheduled deadline?
Answer:
The temporary increase of cold rolled coil tariff was intended to rescue domestic industry from declined
import price. This measure is followed by a monitoring system to evaluate the effectiveness of the
safeguard measure especially to avoid unnecessary burden to downstream industries.  The removing of
the temporary tariffs would be done by the scheduled deadline.
Standards
Question 5:
The registration of foreign food products (the “Makanan Luar Negeri (ML)” legislation) by the
Indonesian Department of Health (Food and Drug Control Agency – BPOM) continues to cause delays
for Australian companies. According to BPOM, it should take only three months to receive a ML number,
the same time as required for domestic producers to receive registration for domestically-produced food.
We understand that delays of between three months and one year are more realistic. How will Indonesiastreamline measures to ensure the registration of imported food products takes an equivalent time to that
for domestically produced food? Will Indonesia consider exempting importers of bulk products from this
process?
Answer:
Under the Health Minister Decree No.382/Menkes/ Per/Vi/89 on Food Registration,  all processed food
that is produced domestically as well as imported must be controlled through pre market control  and post
market control .
At pre-market control, the requirement equal goes into effect of domestic and exported food. Processed
food can be approved to be save if comply with food safety requirements and food labeling. Evaluation is
implemented  by evaluating all attached document among others food composition, nutritional facts and
certificate of analysis (CoA) especially for biolog ical hazard and chemical hazard. CoA can be issued by
the accredited laboratory from international or national.WT/TPR/M/117/Add.1
Page 7
Food labeling and its claim is harmonized with international labeling (codex and others), except it is
mentioned in our law that all the information should be in Bahasa Indonesia, Arabic and Latin. Proof of
the processed food complies with all requirement, the Government issues registration number MD
(domestic product) and ML (imported product). This  approval will be valid for 5 years and will be
renewed after during this period.
For imported bulk products, the government makes approval through Health Certificate but not follow the
regulation of food registration (ML) because this product not directly to consumer.
Question 6:
Some Australian companies have had difficulties in relation to the application of Indonesian standards
(SNI) regulations. The application of standards retrospectively to cover already discontinued products
has damaged the reputation of some Australian com panies. How will Indonesia ensure that the SNI
regulations not be used as non-tariff barriers and improve the transparency of such regulations to ensurethis does not occur? Will Indonesia consider the use of independent authorities to undertake the testing of
these types of products?
Answer:
Regarding to the application of Indonesian Standard (SNI) regulation for Australian companies, on this
occasion we would like to inform you mostly Indonesian standards are voluntary, and only several aremandatory. Mandatory has done into effect due to health, security, environment and safety reasons among
others iron, helm, passenger car tyre, fertilizers, fortified flours, iodized salt, and sealed water drinking.
Customs Procedures
Question 7:
Australia respects Indonesia’s efforts to curb smuggling and is actively engaged in bilateral cooperation
to assist Indonesia’s customs reform efforts. It  would appear, however, that there are unintended
consequences as a result of this policy. Since the end of 2002, the Indonesian Customs Service appears to
have moved away from the “transaction price” toward s a representative “Customs price” in determining
value for duty. Prices used in the Indonesian Customs database appear to be considerably higher than
what exporters claim to be genuine transaction prices. Will Indonesia consider using “transaction price”for the value for duty unless the state import price is  significantly below the known price for the product?
On what basis are prices derived in the database used by the Indonesian Customs Service? Can the
Indonesian government provide details on appeal provisions in relation to estimating the value for duty?
Answer:
Value for duty is based on the transactions price. The use of customs data base (which is derived from
various import price of the same products for a certain period) is mainly for imports that is suspected
conduct under invoicing practices.WT/TPR/M/117/Add.1
Page 8
Domestic taxes on luxury goods
Question 8:
On 8 January 2003, the Indonesian government announced a package of proposed exemptions and
reductions in luxury tax on a number of goods-including a significant range of electronic products, as
well as packaged tea drinks. Packaged tea drinks compete directly in the beverage market withcarbonated soft drinks produced by Australian-owned companies, and the exemption to these products
unfairly discriminates these companies.
Will Indonesia consider expanding the luxury goods tax exemption to like products such as carbonated
soft drinks ?
Answer:
Since tea drinks have been used as a daily consumption of most Indonesian people, we  could not treat
these products as luxury good anymore. On the other hand, the Indonesia government still consider thatcarbonated soft drinks is as luxurious goods. Howeve r, we are not thinking that those above treatments
could be considered as an unfairly discriminates, since the luxurious tax on carbonated soft drinks is not
imposed only to ones produced by Australian-owned  companies, but also to any other companies.
Investment
Question 9:
Australia supports Indonesia’s aims of protecting its environment. We note, however, that some aspects of
Forestry Law 41 of 1999, prohibiting open cut mining in areas designated as “protected forest”,
contradict mining companies’ existing contractual rights. Will Indonesia consider revising Forestry Law
41 to address the inconsistencies between its designation of “protected forest” areas and the pre-existing
contracts allowing mining companies to operate in those areas?
Answer:
In the future, to overcome the mining concession in the conservation area, a Presidential Instruction will
be issued with the approval of People's Representative (Assembly/DPR) regarding the change of forest
utilization in the area where there has been a mining concession in the area which has been operated
before the enactment of Forestry Law 41 of 1999.
REPLIES TO QUESTIONS RAISED BY BRAZIL
Anti-dumping and Countervailing Measures
Question 1:
In paragraph 57 (page 49) of Section III of Document W/TPR/S/117, it is mentioned that a new regulation
on anti-dumping and countervailing measures was appro ved in 2001 and that the Indonesian authorities
indicated that the regulation would be notified to the WTO. Could Indonesia elaborate further on the
amendments that were implemented ?WT/TPR/M/117/Add.1
Page 9
Answer:
Indonesia has amended its antidumping regulation to simplify the procedure for application and the
requirement, to clarify the proceed of investigation  and time period for application. Furthermore,
Indonesia will notified its amended regulation.
Question 2:
In paragraph 17 of the Summary Observations  of Document W/TPR/S/117, it is mentioned that “ of 27
cases initiated since 1998 ( until June 2002), 15 resulted in provisional measures and 9 in definitive anti-
dumping duties; 7 remained in the operation  in February 2003”. On the other hand, in paragraph 41 of
the W/TPR/S/117, Indonesia stated that “ as far as Anti-dumping measures are concerned, the
Government of Indonesia has investigated on 20 cases. However, the Government of Indonesia has
imposed anti-dumping duties only on 7 cases….”. Could the Indonesian authorities elaborate on the
information provided in these two paragraphs?
Answer:
Referring to the confusion caused by different number of investigations contained in both report,
Indonesian Committee of Anti Dumping (KADI) would like to correct those statements. Since 1998,
KADI has been conducting 32 investigations in which only 15 investigations are imposed the definitive
measures and 11 investigations terminated.
Safeguard Measures
Question 3:
As far as paragraph 59 (page 49) of Section III of  Document W/TPR/S/117 is concerned, could Indonesia
explain if its safeguard mechanism allows for the extension of safeguard measures after the period of four
years mentioned in the cited paragraph ?
Answer:
Under Indonesian Safeguard law, it accommodates the extension beyond four years period.Question 4:
In Table A.III.2 (anti-dumping cases initiated by Indonesia, January 1998 – June 2002, page 8 of
Document W/TPR/S/117) it is indicated that info rmation about investigations on fero-silico manganese,
welded carbon steel pipe, calcium carbide, and pithalic anhydride (PA) are not available or the decision
is pending. Could Indonesia inform the status of each of these investigations?
Answer:
The status on those investigations are as follows, the investigation on fero silicon manganese is
terminated imposition of measures where as the other three investigations are know under consideration
by the government.WT/TPR/M/117/Add.1
Page 10
Technical Barrier to Trade
Question 5:
Are there any products subject to total or partial bans under Indonesian technical regulations?
Answer:
Government of Indonesia has already banned the importation of meat and chicken legs from several
countries.  The decision is take on due to the reason in maintaining Indonesia free from Foot and Mouth
Disease (FMD) in addition to Halal case.
Question 6:
How are standardisation bodies organized in Indonesia ? How does the central government participate in
the standardisation process?
Answer:
Standardization process is under the authority of central government. Most of standards and guidelines
are voluntary and on several cases are mandatory. In Indonesia, national standardization is coordinated by
the National Standardization Agency. Indonesia Na tional Standard (SNI) and its guidelines are
formulated by ministries and agencies concerned and be implemented by consensus among parties such as
government, private sectors, experts, NGOs as well as representative of universities.
Question 7:
How is the accreditation system organised in Indonesi a ? How does the central government participate in
the certification process?
Answer:
Accreditation system is managed by the National Accreditation Committee which  assesses and issues
accreditation to product certification body.  Furthermore, this body will issue the certificate of SNIidentity product based on the result of testing laboratory.
Question 8:
Under Indonesian regulations, which imported produ cts are subject to specific environmental
requirement ? Are there any standard concerning the environmental soundness of manufacturing
process?
Answer:
Imported products are subject to specific environmental requirement such as CFC material, pesticides,
methyl bromide and hazardous  waste disposal.  There are some standard concerning the environmental
soundness of manufacturing process such as pulp industry not allowed to use sulphate process, mercury
process as well as chlorine bleaching.WT/TPR/M/117/Add.1
Page 11
Market Access
Question 9:
In page 34 of the Secretariat Report, it is said that : “ Bound tariff rates tend to be substantially lower
than applied tariff rates and the gap has widened since 1998 as a result of scheduled tariff cuts”. Could
Indonesia elaborate on this information?
Answer:
We appreciate the quotation of Brazil in the gap of bound and applied tariff rates as stated   in the
Secretariat Report.  The statement should be “Applied  Tariff rates tend to be substantially lower than that
bound rates and the gap has widened since 1998 as a result of scheduled tariff cuts”.
With regard to the request for elaboration of this matter, we are proudly to mention that the gap showsIndonesia’s seriousness to fulfil its commitment to trade liberalization in line  with the WTO sprit.  The
tariff gap tend to be bigger as Indonesia continuously implement the tariff reduction programme.
Question 10:
In page 37 of the Secretariat Report it is stated that “ specific duties replaced “ad valorem duties for rice
and sugar seemingly to avoid under invoicing practices;  the authorities seem to favour specific duties
because they are based on  volume rather than a declared value, which may be false”. In the view of
Indonesia, is the Agreement on implementation of Arti cle VII of GATT 1994 not sufficient for dealing with
false declaration?
Answer:
It is true that the main consideration of replacing ad -valoren duties to specific duties for rice and sugar is
to ease customs administration and to prevent under -invoicing practices.  Indonesia views that the
agreement on implementation of Article VII of GATT 1994 is sufficient for dealing with false declarationand it is adapted in customs regulation.  However,  due to a certain condition of importation practices in
Indonesia, we come to the conclusion that the application of specific duties on rice and sugar will be more
effective to both importer and customs administration.
Question 11:
In the Secretariat Report, it is mentioned that there seems to exist a discrepancy relates to products
subject to prohibitions and restrictions. Where can we find official information about restrictions and
special licenses to the entrance of goods into Indonesia?
Answer:
Information about restriction and special licenses to the entrance of goods into Indonesia can be found in
the Minister of Industry and Trade Number 230/MPP/KEP/7/1997 that has been several times amended
and the latest by number 790/MPP/kep/12/2002.  The complete information of this matter can also be
obtained from Ministry of Industry and Trade Website on http:\\www.dprind.go.id.WT/TPR/M/117/Add.1
Page 12
Services
Question 12:
The Indonesian Government Report mentions that the “Manpower Law” would anticipate trade in
service liberalization.  Which would be the specific implication of this law on this aspect?
Answer:
Some improvements are expected relating among other to simplifying the working permit process and to
bring the law in line with existing commitment under GATS.
Question 13:
The third round of negotiations for service liberalization within ASEAN countries was launched in
September 2001, to end in 2004, covering all specific sectors and modes of supply. What is the current
status of these negotiation ?
Answer:
In ASEAN there is a principle so called “GATS Plus” which means the commitment under ASEAN
should be more liberal than under the WTO. In general, Indonesian commitments under ASEAN
Framework Agreement on Services (AFAS) consisting the widening and deepening of existing
commitments under the WTO.  Efforts to bring harmonization and comparability within ASEAN
members’ countries commitments are also has been an issue for quite sometimes.  Some progresses havebeen made under the current negotiation process.  New approaches are being introduced to speed up the
liberalization process, but the final result is yet to wait the development of the negotiation process.
Question 14:
According to the secretariat’s report, Indonesia requires joint operation/ venture involving a
representative Indonesian office / partner for the provision in Mode 3 – commercial presence of computerand related services, either  business services ( e.g architecture), professional services ( e.g. engineering),
construction and related engineering services.  What are the specifications of this joint operation/venture
? What is the maximum participation allowed for a foreign company ? Are there any other restrictions
besides this one?
Answer:
Joint venture company is in the form of Indonesian legal entity of PT (Limited Liability).The maximum
ownership of foreign company is set differently  fo r each individual sub sector of services. Under the
horizontal measure of Indonesian commitment under GATS, the max ownership is 49 percent.  The
existing regulations in many services sub-sectors are allowed for the majority ownership of foreign
services providers.  Some other restrictions are also applicable for certain sectors such as:
a. the requirement that domestic partners shall be member of certain sector associations;
b. Some geographical limitation;
c. Economic Need Test.WT/TPR/M/117/Add.1
Page 13
Question 15:
Please indicate the legislation that rules the provision of construction and related engineering services.
Answer:
The Construction Law No. 18/1999.Question 16:
In Document W/TPR/S/117, page 24, paragraph 29, related ASEAN intra-regional service liberalization,
it is said “ Members agreed in 2001 to accelerate service liberalisation and to negotiate mutual
recognition arrangements for professional services. It would be interesting to have details on how  many
recognition arrangements for professional services have been already done and what sub-sectors they
encompass and how they operate.
Answer:
There is no recognition arrangement that has been agreed between Indonesia and WTO members.
Preparation is being taken to speed up the process of negotiation on the MRA.   Informal negotiations are
also being taken with certain members of WTO.
Investment
Question 17:
It was cited, in the Trade Policy  Regime (Chapter II para 44; pages 28 and 29), that “ however, the
existing arrangements including the likelihood of changes in the respective powers of the central and
local governments as well as amendments to th e investment rules and procedures, are unclear, and
inconsistent investment process across regions may be the result. Enhanced taxation powers may also
enable local governments to impose taxes on investo rs (especially foreign); this is another source of
investor uncertainty, especially in sectors like mining, which require long investment horizons, and wherepredictable investment and taxation regimes are most needed.  There are also concerns that
decentralization of investment approval may accentua te corrupt practices (World Bank  2003 page 21) –
“ How these uncertainties have been treated by Indonesia ?
Answer:
In this investment undertaking issues, the Government is preparing the regulations concerning the
division of responsibility between central and local government. This regulation shall be expected to
eliminate the uncertainties and inconsistency.
Government Procurement
Question 18:
Which are the offsets allowed in Indonesia bidding process ?WT/TPR/M/117/Add.1
Page 14
Answer:
Indonesia bidding process, based on Presidential Decree number 18/2000, have preferences on domestic
price.  This regulation is part of government policy to push small medium enterprise development and
maintaining a healthy balance of payment. It is inline with the WTO Government Procurement
Agreement.
Question 19:
Are concessions treated in the government procurem ent framework? Are foreign companies allowed to
participate in bids concerned with concessions?
Answer:
There is no regulation on concessions in Presidential Decree number 18/2000.Question 20:
Which classification system is employed to goods, services and public works in Indonesia?
Answer:
Indonesia does not have classification system on goods, services, and public works.Question 21:
Does Indonesia use the Built Operate Transfer (BOT) as a purchasing method? Is the Built Operate
Transfer (BOT)  included in the coverage of commercial agreements?
Answer:
In Indonesian experience, BOT is a kind of financing scheme offered by government body to the private
sector. This partnership is one alternative for government to invest its asset. Based on this terms, BOT
could be included in the coverage of commercial agreements.
Question 22:
In Document W/TPR/S/117  page 32, paragraph 7, it is said : “ Counter trade transactions resulting from
export performance requirements for foreign fo rms tendering for certain types of government
procurement contracts and construction projects have fallen off considerably”.  Could Indonesia
elaborate on this information?
Answer:
Indonesian government rarely used counter trade transaction for government procurement contracts and
construction project. Government prefer to make loan from multilateral agencies and bilateral donors and
export credit for financing the procurement.WT/TPR/M/117/Add.1
Page 15
Electronic Commerce
Question 23:
What is the approach of Indonesia to the Work Programme on Electronic Commerce, in particular, on
issues such as the classification of electronic transmission and the definition of the mode of supply of
services delivered by electronic means?
Answer:
So far Indonesia is still learning dealing with business of electronic commerce. Products or goods can be
traded through electronic mean. The mode of supply for those transactions can be cross-border supply.
Question 24:
Was Indonesia recently implemented any new legislation affecting electronic commerce, such as for
instance, regulations concerning privacy and personal data or consumer protection?”
Answer:
The legislation on electronic commerce will be covered in the draft of Information and Electronic
Transaction Law including privacy and personal data. The legislation for consumer protection is the Law
of No. 8 of 1999.
REPLIES TO QUESTIONS RAISED BY CHINA
Trade Policies and Practices by Measure
P. 34-39 para.19-32
Question 1:
As noted in the Secretariat’s report that the average applied MFN tariff of Indonesia was 7.2% in 2002,
down from 9.5% in 1998 and the dispersion in applied MFN tariff rates has fallen since 1998 with tariff
"spikes" and the standard deviation in tariff rates all declining. However, in 2002, imports of 23 nine-digit HS96 items carried the highest ad valorem tariff of 170% and three items were subject to the second
highest rate of 90%, both of which affect alcoholic drinks/preparations.  And during 2002, the authorities
considered raising applied rates on strategic commodities such as rice, wheat, soy beans, and fruit, as
well as electronics, but it is unclear whether they did so.
a. Could Indonesia confirm whether these tariff rates have been raised?
Answer:
Alcoholic beverage tariff (28 nine digit HS 2002), considered as tariff spikes, will be maintained for the
purpose of preventing the people from moral hazard.  Tariff rates on rice is Rp. 430/kg effective in
January 2000, wheat is 0%, soy bean is 0% and most fruit is 5%.  There is no increase of tariff on these
commodities in the past three years.WT/TPR/M/117/Add.1
Page 16
b. Is Indonesia considering further reduction of the existing tariff “spikes”?   
Answer:
Indonesia continuously reduces its tariff rates following the reduction program including some
commodities that are considered as tariff spikes, except on alcoholic beverages and automotives.
Question 2:
The tariff also embodies a degree of escalation, which has become more pronounced for semi-processed
food, beverages and tobacco products as well as for paper, printing, and publishing. As far as it is known
to China, Indonesia imposes the similar tariff esca lation on motor bicycles: a rate of 5-10% for SKD,
25% for CKD35% for motor bicycle with a cylinder capacity under 250cc and 60% for that with a
cylinder capacity ranging from 250cc to 500cc. China is concerned over the practice.
Answer:
The so called “tariff escalation” for food, beverage, tobacco and paper is not the main strategy of tariff
policy even though to some extend it shows in tariff struct ure.  With regard to motor bicycle, tariff rate of
5-10% for SKD, 25% for CKD and 35% for motor bicycle with a cylinder capacity under 250 cc. The
tariff harmonization is intended to encourage full manufacturing of motor bicycle in Indonesia,  by
providing enough incentives to manufacture in term of higher tariff.  A high tariff rates on motor bicycle
with cylinder capacity ranging from 250 cc to 500 cc is intended to discourage the used of this motorbicycle domestically as it is considered as a luxury goods.
P. 43-44 (para.39-43)
Import Restriction
Question 3:
The Secretariat’s reports states that the product coverage of restrictive licensing requirements has been
gradually reduced since the previous Review, to  141 tariff lines in 2002 from 160 in 1998. Import
restrictions and special licensing requirements seem to have been imposed or maintained, inter alia, on
meat and poultry products, alcoholic beverages, artificial sweeteners, lube oil, engines and tractors.
Since March 2002, special import licenses have affected sensitive items such as rice, corn, soy beans,
sugar, textiles, textile products, footwear, electronics, and toys. China would like to have Indonesia’s ideafor those practices.
Answer:
The imposition of a special import licensing requirements on meat is taken in order to provide protection
for animal, human and plant life or health particularly from mouth and foot disease whilst on poultry, a
special import impose is also to avoid the birds disease that might have adverse impact on domestic
poultry producers. As most Indonesian people are moslem, restriction on alcoholic beverages is
considered as related to moral according to Article XX of the GATT 1994. Food additives could beimported and used by food industry based on the existing regulation. As to the lube oil, Indonesia
considers that this product shall be regulated in order to protect consumers from counterfeit oil.WT/TPR/M/117/Add.1
Page 17
P. 33-34 (i) Registration and Documentation
Question 4:
Indonesia has fully transferred the responsibility  for Customs administra tion from pre-shipment
inspection firms back to the Directorate General of Customs and Excise in 1997. Are there any other
changes in the process and requirements of inspection accompanying the transfer of administrativeresponsibility?
Answer:
Indonesia (Directorate General of Customs) was fully control the customs administration when the
inspection of imported goods was assigned to a pre shipment inspection firm in 1985.  When the pre-
shipment inspection practices was abolished in 1997, custom administration took over the inspection duty
by implementing on-arrival sampling inspection   The process and requirement of inspection has not
changed significantly after the transfer of inspection duty.
P. 42 (para.36-37)
Customs Valuation
Question 5:
In September 2001, the authorities notified the WTO of the Government Regulation on Customs Valuation
for the Calculation of Import Duties. However, we have not seen the full text of the said regulation; Chinawould like to ask Indonesia to exp lain how it implem ents the Customs valuation for imported food and
motor bicycles?
Answer:
Principally, Customs Valuation for the calculation of import duties is based on “transaction price”. The
use of customs database is solely a counter-check  for indicated low price of import declaration.
Trade Policies and Practices by Sectors
P. 85 (para.67)
Question 6:
According to the report by the Secretariat, trade barriers remain in many service sectors. However, it is a
positive sign that IMF-sponsored policy reforms help relax certain trade restrictions. It is noted thatIndonesia's other GATS commitments, including computer and related services, other business services
(e.g. architecture), professional services (e.g. engineering), construction and related engineering
services, do not in general cover cross-border supply, consumption abroad, and presence of natural
persons. Supply of these services by commercial presence  is limited to joint operations/ventures involving
a representative Indonesian office/Indonesian partner.
Is there a plan in Indonesia to liberalize its market of business service and professional service?WT/TPR/M/117/Add.1
Page 18
Answer:
Indonesia is still conducting the assessment process for the business services and professional services.
Indonesia implements the Economic N eeds Test. However, China is concerned that this would constitute
restrictions for employment of foreign labor. Would Indonesia consider abolishing this requirement?
Answer:
The increasing of unemployment rate experience by Indonesia due to unfavorable economic conditions
has alarmed Indonesian government of political and so cial consequences of such high unemployment rate.
Indonesia will keep Economic Need Test as a requirement of foreign workers. Indonesia believe that ENT
is a rational and objectives tools to ensure the availability of job opportunity for domestic worker, without
arbitrary refusing any foreign workers for entering Indonesian job market.
REPLIES TO QUESTIONS RAISED BY CANADA
Secretariat Report (WT/TPR/S/117)
II. Trade Policy Regime: Framework and Objectives; (8) Foreign Investment Regime; (i)
Recent Performance and Developments; paragraph 41:
Question 1:
What is the status of the new investment law, which was to be introduced to Parliament in February
2003?
Answer:
The new investment law draft is currently being reviewed within interdepartmental agencies. The draft
was submitted to the State Secretariat waiting for President’s initiative permit to further be discussed in
the Parliament. The Investment Coordinating Board expects that the draft will be accomplished
immediately
II. Trade Policy Regime: Framework and Objectives; (8) Foreign Investment Regime;  (i)
Recent Performance and Developments; paragraph 45:
Question 2:
Paragraph 45 includes reference to the procedure for the approval of foreign workers.  It states that
positions in foreign-owned companies are declared open to foreign workers by the Government only.How exactly does this process work?  Is there a mechanism to appeal the Government's decision?
Answer:
As Indonesia acknowledges negative list of investme nt (NLI) which is steadily reviewed to be updated
due to recent developments, thus Indonesia also stipulates the use of foreign workers to some job
positions. However, generally, a company can hire foreigners only for positions deemed open to non-
Indonesians by Ministry of Manpower’s policy.WT/TPR/M/117/Add.1
Page 19
II. Trade Policy Regime: Framework and Objectives; (8) Foreign Investment Regime;  (i)
Recent Performance and Developments; paragraph 46:
Question 3:
Paragraph 46 mentions the existence of an Indonesian Investment Arbitration Board to help resolve
disputes. How does this Board operate? What guidelines and rules does it follow? Does it include anappeals mechanism? What is the nature of its relations hip with the judicial system and other government
agencies?
Answer:
It is important to clarify that Indonesia does not ha ve the specific Investment Arbitration Board. The
BANI (Badan Arbitrase Nasional Indonesia) may operate on wider business cases not only investment
cases but also other business-typed cases, to help resolve disputes. However, the investors may choose the
forum to settle their disputes. Meanwhile the number of bilateral investment treaties which are concludedby Indonesia and its counterparts, are increasing to become 56 countries.
III. Trade Policies by Measure; (2) Measures Affecting Imports; (xi) Standards and other
technical requirements; (b) Sanitary and phytosanitary regulations:
Question 4:
Canada understands that Indonesia is considering a draft regulation regarding the "Safety of Living
Organisms and Foods of Biotechnological Products (PBHRG) Produced Through Genetic Engineering".
Canada requests information on the legislative status  of this regulation, including information on when
this regulation is expected to be implemented.
Answer:
Draft Law on matters related with Safety of Living  Organisms and Foods of Biotechnological Products
(PBHRG) Produced Through Genetic Engineering is being worked out within the Government.
III. Trade Policies by Measure; (2) Measures Affecting Imports; (xi) Standards and other
technical requirements; (c) Marking, labelling, and packaging; paragraph 77:
Question 5:
Canada notes that,  “As from January 2001, any food containing genetically engineered or irradiated
products must be labelled in compliance with BPO M requirements.” Canada requests an explanation of
the BPOM requirements and the rationale for the labelling requirement as it relates to food containing
genetically engineered or irradiated products.
Answer:
Labelling on food containing genetically engineered or irradiated products. Under Government
Regulation number 69 of 1999 on Food Labelling and Advertisement stated that food which is treated
through irradiation technique should be labelled by writing irradiated food on irradiated food ingredient
and put logo on the package. This regulation also regulate on food containing genetically engineered.WT/TPR/M/117/Add.1
Page 20
Food product should be labelled GMO by the threshold more than 5 percent. The rationale objective of
this labelling is  education to the consumer.
III. Trade Policies and Practices by Measure; (4) Measures Affecting Production and Trade;
(iv) Intellectual Property Rights; Institutio nal issues and enforcement action; paragraph
117; and Government Report; III. Progress on Economic Policy Reforms; p. Intellectualproperty rights; paras 77-78:
Question 6:
Canada appreciates the legislative measures Indonesia has taken to become TRIPS compliant but we are
concerned about the enforcement of IP rights and note the rise of piracy in recent years. We note from the
Government Report that with respect to its future program in the field of intellectual property rights,
Indonesia refers to the "improvement of the quality and quantity of law enforcement as well as the
improvement of public services." Please elaborat e on how Indonesia intends to  improve the enforcement
of intellectual property rights.
Answer:
Well implementation of IP Law depends on at least 2 (two) points i.e well structured and well organized
law and enforcement of the law.  The IP law of Indonesia is considered good enough since the law has
clear definition and procedural legal.  However, it is acknowledged that the law inforcement of IP doesnot satisfy with the target due to the  lack of human resources as well as technological resources such as
computerized system on IP.  To improve the enforcement of IP,  Indonesia has done some action ; some
of which are :
• Doing some trainings, seminars and workshop for judges, police, civil servants, business
players and prosecutors.
• Doing regular raids on industry and trader who produce and offer infringing, pirating and
counterfaiting goods.
IV. Trade Policies by Sector; (2) Agriculture and Forestry, (ii) Main policy developments;
(a) Border protection; Non-tariff border protection; paragraph 19:
Question 7:
In paragraph 19, we note that imports of soybean are subject to special import licensing. Please clarify
the reasons why soybean are subject to special impor t licensing and the conditions an importer must meet
to access the license. We would also appreciate In donesia providing more information on special import
licences by submitting a notification to the Committee on Import Licensing.
Answer:
Although soybean is one of the sensitive products of Indonesia in terms of food security, rural
development, and poverty alleviation, there is no special import licensing imposed on this product.WT/TPR/M/117/Add.1
Page 21
IV. Trade Policies by Sector; (5) Services; paragraph 67:
Question 8:
According to paragraph 67, Indonesia has undertaken policy reforms in a number of areas, which go
beyond its current GATS commitments. In the same paragraph, Indonesia notes that its GATS
commitments do not cover cross-border supply, c onsumption abroad, and presence of natural persons in
sectors including computer and related services, other business services (e.g., architecture), professional
services (e.g., engineering), and construction and related engineering services. Please provide
clarification regarding the extent to which recent policy reform touches on these areas.
Answer:
The policy reforms covered many areas of services, the reforms went beyond the existing commitments,
especially in commercial presence, which we consid ered as the most important mode supply and has a
wider implications toward international trade in services and Indonesia economy in general.  In othermode of supplies Indonesia is still carefully considered the merits of liberalization toward its economy.
Indonesia is also carefully follow the discussion on the aspect of liberalization in these mode of supplies.
IV. Trade Policies by Sector; (5) Services; (i) Financial Services (a) Banking; Regulatory
framework; paragraphs 74 and 79:
Question 9:
Paragraph 74 describes the statutory criteria, includ ing an economic needs test, which Bank Indonesia
considers when granting a bank license, and also notes that opening a representative office of a foreign
bank, and bank branch and sub-branch closures must be approved by Bank Indonesia. Please elaborate
on the rationale for employing an economic needs test in granting bank licenses. In the case of branch or
sub-branch closures or establishment of a representative office, does Indonesia consider that anotification procedure, rather than an approvals procedure, may be sufficient?
Answer:
Economic Need Test as a criteria for granting a bank license
In order to obtain an operating license as a commercial bank or a rural bank in Indonesia, an applicant is
required to fulfil basic requirements concerning: (i) organization and management structure; (ii) capital;(iii) ownership; (iv) expertise in banking; and (v) feasibility of the business plan. As additional
consideration, Bank Indonesia will also assess whether the applicant meets the criteria of the feasibility of
the business plan.  In order to assess the feasibility of business plan, Bank Indonesia will take into
account several additional aspects such as existing competition in the banking industry so as to ensure
healthy competition among Banks, the degree of Bank density within a certain area, and the distribution
of national economic development. The rationale for requiring a review on the feasibility of the business
plan is to protect both bank customers and the banking system from unsound competition.WT/TPR/M/117/Add.1
Page 22
Notification or approval for the establishment or closing of a branch or sub-branch or
representative office.
Based on the Banking Act of 1998, either the opening or closing of a foreign bank office needs a prior
approval by the central bank. In practice there are two different kinds of approvals required depending on
the kinds of operation of the office to be opened or closed. Basically the process of obtaining an approvalfor the opening or closing of a non-deposit taking office, such as a representative office, is more relaxed
than a deposit taking branch or sub-branch office. This policy is aimed to protect the customers as well as
integrity of the financial system.
Question 10:
Paragraph 79 notes that "An independent Financial Supervisory Authority (FSA) is to be established,
initially by end 2002…" Please explain the delay in this legislation, and please provide Members with a
revised timeline for the presentation and implementation of this important legislation.
Answer:
An FSA is a new concept for Indonesia and represented a dramatic change in the way supervision will be
conducted by the authority in the field of financial services. Therefore, its establishment needs a careful
consideration so as to ensure the smooth implementations. Since the FSA will alter the current financial
authorities structure in Indonesia, its establishment also require amendments of several existing lawsnamely Bank Indonesia (central bank) Law, Banking Law, Insurance Law, Pension Fund Law, and
Capital Market Law. The improvement of the draft is also required because according to the IMF the FSA
system need also  to be complement by the safety net system for Indonesia financial sector, including
deposit insurance scheme and lender of last resort.   In May 2003, the draft has been submitted to
Parliament by the President.
It should be noted that the process of issuing a new law in Indonesia is somewhat complicated inter alia
because of the requirement to meet the transparency standard as one of the best practices. When issuing a
new law, the government should at minimum meet the following requirements:
a. Prepare an academic paper and draft of law
b. Conduct a seminar and submit the draft to the public and any other related authority to
have a comment.
c. Revise the draft based on the comment
d. Submit the draft to minister of justice to have a legal opinion
e. Revise the draft based on the legal opinion
f. Submit the draft to cabinet meeting
g. Revise the draft based on the comment in the cabinet meeting
h. Submit the draft to the president and the president will submit the draft to the parliament.
The parliament will also conduct hearings with various relevant parties in order to have final public
comment and discuss the draft with the government.WT/TPR/M/117/Add.1
Page 23
IV. Trade Policies by Sector; (5) Services; (i) Financial Services ; (b) Insurance;  paragraphs 81
and 82:
Question 11:
Paragraph 81 highlights the legal harassment that Manulife Indonesia (AJMI) has faced since 2000.
Please provide an update regarding the status of reforms to its bankruptcy laws. In particular, canIndonesia confirm that it plans to require Ministry  of Finance approval prior to bringing a bankruptcy
petition against an insurance firm before the court? What is the expected date for the new bankruptcy
legislation to come into force?
Paragraph 82 describes certain prudential requiremen ts with respect to insurance companies. Please
clarify the evaluation criteria for its requirement that insurance companies must support the industry's
growth?
Answer:
The Government of Indonesia has already proposed the drafts of amendment of the Bankruptcy Law and
Insurance Law. Both reformed laws plan to regulate  that a bankruptcy petition against an insurance firm
should be requested by the Minister of Finance. Both draft are currently in the Parliament.
The phrase “support the industry’s growth” is intended to ensure that any insurance company establish in
Indonesia shall have a strong capital, expertise, and products that improve the growth of the insuranceindustry and provide additional security toward industry as a whole so as to support other industries
growth indirectly.
IV. Trade Policies by Sector; (5) Services; (i) Financial Services ; (c) Capital markets;
paragraph 85:
Question 12:
Paragraph 85 notes that "Minimum capital requirements for local securities companies are lower than
for joint ventures."  In addition, Indonesia's GATS Schedule of Specific Commitments, Supplement
(GATS/SC/43/Suppl.3) states for the banking sub-se ctor, "limitation on national treatment in terms of
difference in paid up capital requirement will be elim inated in the year 1998." Please clarify the extent of
the different treatment, and explain why national treatment is not provided in this sub-sector and others.
Answer:
The different in minimum capital requirement has been abolished by the Minister of Finance Decree
Number 179/KMK.010/2003 dated May 5,  2003.
Shares of joint venture securities companies can be  owned by foreign financial legal entity up to a
maximum of 85% of the paid-in capital (Minister of Finance Decree Number 179/KMK.010/2003, article
2 item 1). In case of foreign legal entity that operates in securities activity that have license from or under
supervision of capital market regulator in their ow n country, the foreign share ownership can reach a
maximum of 99% of the paid-in capital.  In the event that a national or join-venture Securities Company
makes a Public Offering of its shares, the share of that Securities Company can be owned by foreign
investor or domestic investor up to 100% of paid-in capital (article 3 item 1).WT/TPR/M/117/Add.1
Page 24
IV. Trade Policies by Sector, (5) Services; (ii) Communications; (a) Telecommunications;
Regulatory framework; paragraphs 93 and 95:
Question 13:
In paragraph 93, Indonesia notes that telecommunications is regulated by the Directorate General of
Posts and Telecommunications (Postel), and that there are plans to convert Postel into an independent
regulator. Please provide a timetable for this conversion.
Answer:
Indonesia is seriously considered to establish independent regulatory agency.  In principle Indonesia agree
with the idea of separating market player and market  regulator.  It is expected that the independent
regulatory body will be established at the end of this year.
Question 14:
In paragraph 95, Indonesia notes that A exclusivity for local services is to terminate by August 2002, and
by August 2003 for national long-distance and international calls.  Indosat was awarded a local
telephony licence in August 2002 and is to be granted a long-distance licence in 2003. Telecom is to be
given an international licence in 2003". Please  provide an update on these plans.
Answer:
Indonesia’s program of an early termination of exclusivity rights has been implemented according to
above mentioned plan. There is no additional plan.
Government Report (WT/TPR/G/117)
IV. Trade Policy and Trade Related Policy Developments; k. Non-bank financing sector;
paragraphs 63 and 64:
Question 15:
Paragraph 63 of the Government Report states that  "In the financing service, market access and national
treatment for leasing company, credit card, and cons umer financing have been too open.” However, the
report of the Secretariat (Trade Policies by Sector, Financial Services, paragraph 85) states that
"Minimum capital requirem ents for local finance companies are lower than for joint ventures, which must
deposit 100% more paid-in capital." Please clarify whether or not national treatment is provided in thissub-sector regarding paid-in capital requirements.
Answer:
There is no discriminatory treatment in the requir ement on paid up capital for local finance companies
and joint venture companies (Minister of Finance Decree Number 172/KMK.06/2003 dated April 23,
2003.WT/TPR/M/117/Add.1
Page 25
Question 16:
Paragraph 64 of the Government Report highlights the absence of commitments in certain sub-sectors.
Does Indonesia intend to make commitments in the pension fund sub-sector in the current round of
negotiations
Answer:
In the current round of negotiations, Indonesia have no intention to make commitments in the pension
fund sub-sector due to the fact that pension fund industry is in the early stage of development.
REPLIES TO QUESTIONS RAISED BY CHINESE TAIPEI
Secretariat Report (WT/TPR/S/117)
I. Economic Environment: introduction and recent economic developments  (p. 1, para. 1 & 2;
p. 8, para. 17)
Question 1:
At present, the mainstream of pubic opinion in Indonesia seems to be against the government’s
dependence on the IMF rescue programs and is in favor of terminating the Letter of Intent (LoI) with the
IMF at the end of 2003. Although macroeconomic conditions appear to have stabilized for the time being,
the growth rate of the Indonesian economy is still low compared with other Southeast Asian countries,
which have recovered from the Asian financial cris is.  We would like to know how the Indonesian
Government plans to maintain its domestic growth and international credibility if IMF support is
withdrawn at the end of 2003.
Answer:
The government agrees that sustained economic growth calls for conducive investment climate and
progress in economic reforms.  Therefore, the authorities have embarked on the stabilization program andstructural reforms since the economic crisis in 1997.
• Macroeconomic policy has been directed toward maintaining stability. Once stability
maintained, monetary policy has been eased as reflected in the decline of interest rate on
monetary instrument.
• On the fiscal front, the government sought fiscal consolidation by increasing domestic
revenue so as to keep deficit within manageable level while providing economic stimulus
for domestic economy.  The government has also introduced tax reform, restructuredpublic debt, and continued privatization and sales of assets of IBRA.
• On the structural issues efforts have been made to adhere remaining problems which have
hampered economic growth such as restoring security, especially in conflict area,
strenghthen good governance, continued structural reform including financial sector.
To improve investment climate, the government has sought to strengthen good corporate governance,
restore security, introduce judicial reform, strengthen law enforcement, and improve labor relation.  InWT/TPR/M/117/Add.1
Page 26
order for the economy to grow faster, it also calls for favorable international environment as reflected in
world economic growth and international trade.
In 2002 Indonesia’s economy grew by 3.8% despite the unfavorable world economic growth of 2.8% and
this year the growth is expected to be slightly higher i.e. around 4.0%.  The successful outcome of a more
ambitious round will also help expand world and Indonesia will also derive its benefit provided thatIndonesia’s trading partners will also open its market for Indonesia’s products.
Regarding the plan to maintain credibility after te rmination of the IMF program, the government has
commisioned a Team to prepare the necessary steps to succesfully exit from the IMF program. Those
steps are mainly directed toward formulating Economic Recovery Program of 2004-2006. The program
rests mainly on three pillars namely : (i) macroeconomic stabilization program ; (ii) restructuring and
reforming the financial sector ; and (iii) promoting investment and exports and creating jobs.
To maintain international credibility, Indonesia will likely opt to adopt a post program monitoring (PPM).
Under this PPM program, Indonesia will continued its restructuring program which will be reviewed by
the IMF twice a year.
II. Trade Policy Regime: framework and objectives; regional decentralization  (p. 8, para. 19;
p. 16, para. 2; p. 17, para. 8 & 9; p. 18; p. 28, para. 44)
Question 2:
As indicated in the Secretariat Report, new taxes and levies can only be applied in the public interest and,
under the decentralization policy, can not cover areas already taxed by the central government of
Indonesia, but the private sector has finally become a target for taxation. Decentralization has created
business uncertainty and this has adversely affected willingness to invest in Indonesia. It is recognized
that foreign direct investment is one of the driving forces of Indonesia’s economic development, and thata stable and predictable investment climate is essen tial for further economic development. We would like
to know whether there are laws to regulate such taxation by provinces and districts, and to have
information on the kind of taxes that may be collect ed, and their ceilings. Furthermore, as there are
different economic conditions in different regions, does the central government apply a different taxation
approach to each region?
Answer:
Indonesian law no 34/2000 provides guidance to provinces and districts to impose regional taxation and
levies. Those areas that has been taxed by the central government (such as income tax, value added tax,
luxury sales tax, import duties, export taxes) can not be taxed by regional government.
In the transaction period of decentralization era, some provinces and districts collect extra taxes to meet
their expenditure budget. These unlawful taxes and levies are being reviewed by the central government
law compliance.WT/TPR/M/117/Add.1
Page 27
(p.19, para.13)
Question 3:
Two aims of industrial and trade policy are to impl ement the structural reforms agreed with the IMF and
to meet WTO commitments. As part of the IMF prog rams, Indonesia has adopted unilateral reforms, for
example, in the financial and other services sector, that in some cases have substantially exceeded itsWTO commitments. Could Indonesia please provide us with details of these reforms in financial and
other services, and of the likely effects of exceeding its WTO commitments. Furthermore, if Indonesia
terminates its agreements with the IMF at the end of 2003, will these reforms be changed?
Answer:
Unilateral/autonomous liberalization has been introduced to strengthen economic efficiency. Autonomous
liberalization in Indonesia is conducted under the auspicious of IMF program. Since it is undertaken
unilaterally, there is no obligation that it is binding under the WTO rules.
(p. 27 & 28, para. 40-43)
Question 4:
In recent years, Indonesia has adopted a more liberal strategy in attracting foreign investments, with the
purpose of enhancing economic development. A new draf t investment law, which was released in October
2000 and submitted to Parliament in February 2003, seems to have further relaxed the investmentregime. Our investors are enthusiastic about investing in the agriculture, forestry and fisheries sectors in
Indonesia, and we firmly believe that potential exis ts in financial services, land and sea transport, and
other services. We would appreciate knowing, therefore, whether the Indonesian government has plans to
open up more areas for foreign investment, and to lowe r the investment threshold and simplify investment
approval procedures in the future.
Answer:
Since the Government of Indonesia has been seriousl y creating the more conducive investment climate,
and to cope with current situation the Government has been preparing to open more business fields
(updated negative list for investment) to the foreig n investors, and simplify the investment approval
procedures.
III. Trade Policy and Practices by Measure: Measures directly affecting imports; tariffs (p. 38,
para. 28)
Question 5:
As indicated in the report, many of Indonesia’s bound rates are considerably higher than the applied
rates, thus imparting a degree of   uncertainty to its tariff regime. The gap between these two rates
widened when Indonesia reduced applied rates in 1998, but we note that the Indonesian government
plans to lower its bound rates through negotiations . We would like to know whether Indonesia will
commit itself to bind all its tariffs at the current appli ed rates, or lower, in this round of negotiations.WT/TPR/M/117/Add.1
Page 28
Answer:
As shown in the applied tariff in the past few years, Indonesia is consistently implement the tariff
reduction schedule as stipulated in the Ministry of Finance Decree No. 378/KMK.01/1996 and maintain
the low level of tariff. The tariff reduction schedule is mainly intended to provide certainties for investor
(local and foreign) to plan their investment. Based on this basic principle, there is no intention to fill upthe gap between Indonesian bound tariff and the applied tariff, except of course the food staples such as
rice, sugar, wheat flour. Therefore, the level of Indonesia current bound tariff will not be a dominant
factor from uncertainties to its tariff regime.
Measures directly affecting imports; import pr ohibitions, restrictions, and licensing (p. 45,
para. 43)
Question 6:
As indicated in the Secretariat report, Indonesia has notified the WTO only once about its laws,
regulations, and administrative procedures, as well as replies to the Questionnaire on Import Licensing
Procedures (annual) in October, 1998. Could Indonesia please provide the updated information
according to its WTO obligations.
Answer:
Indonesia highly appreciate the the questions pose by Taiwan, Penghu, Kinmen and Matsu with regards to
the updated data and information of Indonesian notification on Import Regulation. As the notification
concerned has just been submitted to the WTO Secretariat, Indonesia is of the view that the updated
notification should be submitted later in 2004.
Question 7:
Measures directly affecting imports; state trading (p. 45, para. 44)
Table III.2 identifies the activities of Indonesian state enterprises in various fields of goods. Among these,
BULOG was the only state trading enterprise that  was included in Indonesia’s notification in 2002.
Exclusive import rights have been maintained for certain firms or certain categories of goods (alcoholic
beverages, sugar, cloves, textile cloth, hot- and cold-rolled coil iron and steel products). Therefore,
would Indonesia please include in its WTO notification those enterprises that have exclusive importrights, together with their activities, in accordance with the requirements of Article XVII of GATT 1994?
Answer:
Indonesia recognizes that BULOG is the only state trad ing enterprises that has been notified to the WTO
based on Article XVII. With respect to other state trading enterprises as stated in Table III.2, Indonesia is
of the view that although those state trading enterprises have a special rights, nevertheless, the special
rights given to them are not within the meaning of Article XVII.  Since the regulation establishing Bulog
has a higher level of statutory  regulation than other state trading enterprises, Indonesia consider that only
Bulog could be defined as state trading enterprise as meant in Article 17 of the GATT 1994.WT/TPR/M/117/Add.1
Page 29
Measures directly affecting imports; government procurement  (p. 47, para. 46; P. 48; P. 49,
paras. 52 & 53)
Question 8:
Indonesia is not a signatory to the WTO Agreemen t on Government Procurement (GPA), but it is an
active participant in the Working Group on Transparency in Government Procurement. Moreover,government procurement is used as a significant instrument of its industrial policy. We are vigorously
pursuing membership of the GPA ourselves. If Indonesia were also to become a signatory to the GPA
Agreement, there could be further useful cooperation between us in this area.
Indonesia stipulates that procurement contracts not exceeding Rp 10 billion shall be handled by the
respective government agencies and state-owned ente rprises. Above this amount, contracts shall be
submitted for final approval to the inter-ministerial Central Procurement Team (TEP). Some complaints
about irregularities in the administration of tenders relating to procurement contracts have beenreported. We would like to know if there is  a mechanism to handle such complaints.
Answer:
There is mechanism on delivering complaints about irregularities in the administration of tenders.
Complaints should be delivered firstly to the pr ocurement evaluation committee  within the government
institution. If the person who complaint did not get satisfaction answer, he can report to Commission for
Supervision of Business Competition. This Commission is an independent body consists of representative
from business community and society. The  commission will have investigation procedure before the case
is decided irregular or comply with the administration procedure. If the Commission found irregularities
which is violent the law than the case will be submitted to the court.
Measures directly affecting imports; counter trade (p. 49, para. 54 & 55)
Question 9:
It has been noted that in May 2003, President Megawati led a delegation to Russia. During the visit,
Indonesia purchased 4 Russian Sukhoi jetfighters amounting to $200 million (exclusive of weaponry
system). The purchase was secured with counter-trade to be paid by Indonesian palm-oil and spices.
Since Indonesia’s counter-trade operations are expected to pick up as the awarding of tenders graduallyincreases, we think there might be opportunities for us to develop counter-trade with Indonesia,
especially in view of its abundant natural resource s. Any ideas or information from Indonesia in this
respect would therefore be greatly appreciated.
Answer:
Indonesia is of the view that the counter trade is one of our efforts to increase export revenue and counter
economic slowdown which is non discriminatory, since counter trade could be offered to any other
trading nations in need of Indonesian export products. Besides Russia, Indonesia has counter tradeagreement with a number of countries such as India, Thailand, Myanmar, Vietnam, Poland, etc. offering
Crude Palm Oil (CPO), coal, crumb rubbe r, aeroplane, passenger train wagon.WT/TPR/M/117/Add.1
Page 30
IV. Trade Policies by Sector:  Mining and energy; energy (p. 81 & 82, para. 41-51)
Question 10:
At present, a large number of foreign companies are allowed to participate in the exploration and
exploitation of oil- and gas-fields under production-s haring contracts with the state-owned Pertamina.
Are there any standard rules or guidelines by which foreign companies are judged to qualify to take partin oil and gas exploration or exploitation activities in Indonesia? As indicated in the report, BALAK, a
new oil and gas authority, was established and took over many functions from Pertamina in 2002. Could
Indonesia please describe for us the role of BALAK and its status in the government hierarchy? Also, how
do foreign companies benefit from the replacement of Pertamina with BALAK?
Answer:
• Standards rules or guidelines for participating in the exploration or exploitation of oil and
gas field under production sharing contract are issued by the Directorate General of Oil
and Gas. The tender procedures include among others the announcement of new offeredworking acreage, invitation disseminated to all companies, bid information containing
tender process and instructions and bid evaluation. The signing of the contract will done
by BALAK and the successful bidder.
• The status of BALAK is State Owned Legal Entity. It holds the function of control over
the oil and gas upstream business operations. In order to implement such functions the
BALAK provides recommendations to the Minister of Energy and Mineral Resourcesregarding its policy in preparing and offering work areas and cooperation contracts,
monitoring of the implementation of the cooperation contracts, appointing sellers of the
state’s share of oil and gas and so forth.
• The replacement of Pertamina’s role to BALAK in upstream business operation
particularly concerning separation of its function as a player and supervisory will create
fair market competition between foreign companies competition with Pertamina.
Manufacturing; textiles, clothing, and leather (p. 83,para. 56, 57)
Question 11:
Indonesia’s main export markets for textiles and cl othing are the European Union, the United States,
Canada and Turkey. Export quotas are allocated by the Ministry of Industry and Trade to exporters, on
the basis of past performance, and to economically weak  firms. Quota utilization varies depending on the
product category and market, and can be traded between holders and big new exporters. As we have
many investors in the Indonesian textile and clothing sector, we would like to know the principles
underlying this quota allocation and to be informed of any relevant regulations.
Answer:
The principles underlying the quota allocation in the Ministry of Industry and Trade are:
• Transparency. All quota allocations are distributed to all companies in a transparent
manner fully based on past performance.WT/TPR/M/117/Add.1
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• Non discrimination. Quota allocation is distributed equally to domestic and foreign
companies as long as they have already met the requirements.
Services; financial services (p. 88, para. 75)
Question 12:
As indicated in the report, commercial banks may be established only by Indonesian interests or as joint
ventures, and foreign banks operate in Indonesia as licensed branches, provided they are among the 200largest world banks, having at least an “A” credit-rating and an operating fund of over Rp 3 trillion. We
are of the opinion that these capital requirements are higher than international standards and would
consequently discourage foreign financial service providers from offering their expertise and know-how
to the Indonesian market. We would like to know if Indonesia plans to relax these requirements and/or
lower the threshold.
Answer:
The rationale for requiring a high paid-up capital for bank operating in Indonesia is first Indonesia, as
most other developing countries, has been experiencing a saving investment gap. Therefore, the presence
of a bank in Indonesia is expected to make contribution to the economy by bringing adequate capital to
Indonesia. Second, the idea of requiring a sufficient amount of capital is to show the seriousness of
conducting business in Indonesia.
Since the banking crisis, the priority in the development of the banking sector is to improve the soundness
and strengthen the resilience of the banking system through re-capitalization and restructuring program.
Following the economic crisis in 1997, the number of commercial banks in Indonesia dropped to 141 in
2002 from more than 200 before the crisis due to closing and merger.  While the number of banks
dropped significantly, the number of offices has increased from 6,765 to 7,000 at end of 2002. These
developments reflect an improvement in the consolidation of the banking sector in Indonesia.
It is worth noting that under the re-capitalization pr ogram, in order to comply with the Basle Capital
Accord, the government has issued a substantial am ount of government bonds that increased government
ownership in the re-capitalized banks significan tly.  However, such ownership is intended only
temporarily and plans have been made for divestiture.  This provides an opportunity for foreign investors
to invest in the re-capitalized banks in Indonesia.
Services; financial services (p. 91, para. 83)
Question 13:
Foreign insurers are not allowed to open branches in Indonesia and can only operate as a joint venture
with a local firm or as a shareholder of a list ed company. The maximum level of foreign ownership
allowed in a joint venture is 80%. Does Indonesia have any plans to further relax its regulations appliedto foreign insurers operating in Indonesia?WT/TPR/M/117/Add.1
Page 32
Answer:
Commercial presence could be done in the form of jo int venture company. Foreign ownership in a joint
venture at the time of incorporation shall not exceed 80% of the total capital of the company and might be
raised up to more than 80% by keeping the amount of share owned by Indonesia.
Services;  communications (p. 93, para. 92 & 93; P. 94, para. 95)
Question 14:
Concerning the current negotiations on trade in services, we have submitted Initial Requests to
Indonesia, including one to further open up its te lecommunications market. However, Indonesia has yet to
respond to our requests. We welcome Indones ia’s strong commitment to liberalizing its
telecommunications market through competition in order to end monopolies, increase regulatory
transparency and form enhanced strategic alliances with foreign investors. We sincerely hope that
Indonesia can provide us with its Initial Offers in the near future so that we can start our discussions withthem on services negotiations (including telecommunications) under the current round, thereby paving
the way for our future closer cooperation with Indonesia in the telecommunications services sector.
Answer:
Indonesia fully appreciate for the sincere invitation to discuss Indonesia’s program on the liberalization of
telecommunications.
Question 15:
The Indonesian government imposes many restrictions on broadcast, film and videotape-related activities
by foreigners, such as the prohibition of foreign ownership of private broadcasting, and foreign
investment in film production, distribution and scre ening. As we know, a new law regulating radio and
television broadcasting was enacted in 2002. It allows foreigners to hold 20 percent of the shares ofIndonesian wireless, cable, satellite and other pr ivate telecommunication institutions. We would
appreciate knowing if the law has been promulgated and put into practice. Furthermore, with regard to
film and videotape production, and distribution, does Indonesia plan to open up this area to foreign
investment? And, as for the distribution of non-American films in Indonesia, do these have to be handled
through the European and American Film Importers’ Association (AIFEA)? If not, what is the marketingchannel for these films?
Answer:
Regarding the film production, technical filming services, export of import movies, film distribution, and
screening could be explained as follows:
• Film distribution can only be conducted by film distribution company.
• Every film production company is permitted to distribute its own film production.
• Before film are distributed, all films must pass the censorship procedures assigned by
film censorship institution. This rule appl ies to both film and film advertising, both
import and export.WT/TPR/M/117/Add.1
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• Every film production company must optimize the available domestic national resources.
• Film export can only be conducted by film production company, film engineering
services company and film distribution company, film export must pass the censorshipprocedures.
Services; tourism (P. 97, para. 110, 111)
Question 16:
In recent years, Indonesia’s tourism industry ha s suffered severely from unfortunate developments,
including the political upheavals of 1998, the East Timor crisis in 1999, 11 September 2001 events in the
US, the Bali bombing in October 2002 and the SARS outbreaks in March 2003. We are delighted to see
the Indonesian Government taking active measures to revive its tourism industry. However, in its
Presidential Decree No. 18/2003, the visa-free facility that had previously been extended to 48 countries
since 1983, has been reduced to only 11 countries and territories that provide reciprocal treatment to its
citizens. This measure will surely be counter-productive to its goal of boosting tourism. Our citizens
represent, for example, the third largest source of tourists to the island of Bali but they will now have to
apply for visas under this measure. This new policy is scheduled to be put into practice in October 2003.
In order to avoid discouraging significant numbers of  Taiwanese tourists from sightseeing in Indonesia
and thus adversely affecting the efforts to revive the tourism industry, we strongly urge the Indonesian
Government to reassess this matter carefully and to po stpone or cancel the implementation of its policy in
this respect.
Answer:
The new policy on Free Short Visit Visa (Bebas Visa Kunjungan Singkat/BVKS) has been launched since
March 31, 2003 by a Presidential Decree No.18/2003. After 20 years of its implementation, The
Government of Indonesia has concluded that the policy of granting Free Short Visit Visa needed revision.
The data of immigration compliance in Directorate of Immigration Surveillance and Measure revealedthat the policy of visa free entries are often being misused/abused by foreigners. FSVV are misused in
violation of immigration law , criminal offenses, and any other illegal activities.  The new policy is
intended also to protect domestic security interest.
However, under the Presidential Decree No. 18/2003 (Article 2), Indonesia is open for bilateral discussion
to arrange new visa free arrangements based on reciprocal basis and mutual benefits.
REPLIES TO QUESTIONS RAISED BY COLOMBIA
Trade Policies and Practices by Measure
Question 1:
Since the last trade policy review, Indonesia has made considerable efforts to rationalize tariff protection,
both industrial and agricultural.  In the manufacturing sector, we note the reduction of the average tarifffrom 9.5 per cent to 7.2 per cent.  However, we would li ke to know how this fact can be reconciled with
the maintenance of tariffs ranging from 60 per cent to 170 per cent in certain sectors such as chemicals,
fabricated metal products and transport equipment.WT/TPR/M/117/Add.1
Page 34
What are the sectors that benefit from temporar y tax exemptions and other incentives. What types of
measures are applied and what results have been achieved?
Has Indonesia considered the possibility of updating the notification of its import licensing system in
order to contribute to transparency in the WTO?  Would it be possible to have a list of the tariff headings
subject to import restrictions and prohibitions as well as the criteria for allocation on the basis of anassessment of domestic need?
According to the Report of the Secretariat, since the previous review, the system regulating exports
through licensing and quotas has remained unchanged.  There is reference to a lack of transparency and
adverse economic effects of the system at that time .  This was aggravated by administrative discretion and
uncertainty regarding the level of export taxes and the minimum "check" prices on which they were
levied.  Has Indonesia considered revising its export regulation system in the short term?
Answer:
We fully agree the view of Colombia that average tariff for manufacturing sector has been reduced from
9.5% to 7.2%. Based on Indonesian Custom tariff book, the average tariff for chemical is 5% to 10% , the
average tariff level for fabricated metal products is 25% and for transport equipment is 80%.
Sector that has benefited from temporary tax exemption is steel pipe product and no other incentives
provided for this sector by the government. Actually, no  results have been achieved, rather than just tomaintain thousand employments (labor) which are absorbed in this sector.
Yes, Indonesia is fully aware of updating the im port licensing notification according to rules and
disciplines as contained in the agreement on Import Li censing. And it would be very possible for every
member of WTO to have all documents related to import regulations through the Committee of Import
Licensing.
No plan has been made  to revise Indonesian export regulation in the short term.
Trademarks
Question 2:
The Report of the Secretariat (paragraph 121) states that Indonesia had not yet fully developed its
registration procedures for trademarks, inter alia owing to institutional constraints that had impededeffective implementation of its commitments under the TRIPS Agreement.  In view of these circumstances,
we would like to know how products imported into Indonesia with "well known" marks have been and will
be protected.
Paragraph 122 (mark registration process) states that after registration is granted, the Trademark Office
may take up to 12 months to issue the certificate of registration of the mark which is needed to commence
enforcement procedures.  Why is a certificate of registration required once the registration had been
granted by the competent authorities?
Paragraph 125 states that the new law on trade secrets does not set any time limitation, and protection
remains in force as long as the trade secret is maintained and not disclosed to the public.  What are the
criteria applied to the protection of trade secrets?WT/TPR/M/117/Add.1
Page 35
Answer:
Indonesia protects “well-known” trade mark by placing regulation saying that an application for
registration of a mark shall be refused if the mark has a similarity in its essential part or in its entirety with
a well-known mark owned  by  another party for the same kind of goods and or services. The refusal can
be applied for goods and or services  which are different with the well-known goods or services.
Certificate of registration is required to be used as a proof that the person whose name and identity are
printed on the certificate is the owner of registered mark.
Based on the Indonesia Trade Secret Act, trade secret is information in the field of technology and or
business. To be protected, trade secrets shall be categorized as confidential information which should be
maintained with necessary efforts and shall have economic values.
REPLIES TO THE QUESTIONS RAISED BY EUROPEAN UNION
Progress on Economic Policies Reforms
Integrated Economic Development Zone (KAPET)
Question 1:
(Para 26 and 27) The report mentions the creation of an Integrated Economic Development Zone,
KAPET, and describes the fiscal and other advantages for companies. What are the conditions for
companies to be able to locate in these zones? Ar e there any export requirements for companies locating
in these zones?
Answer:
In general there are no conditions for any company to be able to locate in these zones. The export
requirement is that the product of the company can be sold domestically for not more than 50% of export
realisation. This export requirement is a condition for manufacturer to be eligible for VAT facilities, andderived from export requirement for Bonded Zones. There is no export requirement for income tax
facilities purpose.
Trade Policy and Trade Related Policy Developments
Trade Policy
Question 2:
The Ministry of Industry and Trade recently announced its plans to seek more counter-trade deals, in a
bid to increase export revenue and counter the economic slowdown in developed nations. How is this
policy consistent with the WTO obligations of non-discriminatory treatment for all the members?
Answer:
Indonesia is of the view that the counter-trade is one of our efforts to increase export revenue and counter
economic slowdown which is non discriminatory, since counter-trade could be offered to any otherWT/TPR/M/117/Add.1
Page 36
trading nations in need of Indonesian export products. Besides Russia, Indonesia has counter-trade
agreement with a number of countries such as India, Thailand, Myanmar, Vietnam, Poland, etc. offering
Crude Palm Oil (CPO), coal, crumb rubbe r, aeroplane, passenger train wagon.
Question 3:
To what extent are Sustainability Impact Assessmen ts (SIA), which assess the economic, environmental
and social impacts of regulatory changes, used by Indonesian policy makers when formulating trade
policy?
Answer:
As far as Indonesia is concerned  the formulation of trade policy involve various ministries, private
sectors and other stake holders in order to analyse, to maximise economic outcome, as well as to
minimise the social and environmental impacts.
Government Procurement
Question 4:
(Para 49) In the new regulation on government procurem ent, what are the references made to the GPA,
UNCITRAL Model Law and the APEC Principles of Go vernment Procurement? In particular, does the
regulation refer to any transparency principles?
Answer:
Indonesia’s government procurement laws are very much in line with international standards such as
UNCITRAL, WTO Government Procurement Agreement, and APEC Principles of Government
Procurement.  This is reflected on the basic principles of Presidential Decree number 18/2000, i.e.
efficiency, effectiveness, competitiveness, transparency, non-discriminative, responsibility.
Investment
Question 5:
(Para 74) A new Foreign Investment Law has been announced for some time but it is awaiting approval
in the Parliament. What plans does the Government have to expedite its approval?  Are there any other
specific measures in the pipeline to support the investment climate?
Answer:
The interdepartmental agencies have been discussing the substantial differences since the differences
require to be carefully negotiated. This is to aimed at similar perception among the agencies concerned.
Meanwhile, simultaneously, the government has been preparing several substantial measures to support
the more conducive investment climate, namely, among others, the accomplishment of investment legal
framework such as investment deregulation including investment incentives, decentralisation of
investment licensing, the arrangement of “one roof service” policy for investment, the simplification of
investment procedures, updating negative list for investment, while the other policies measures are theWT/TPR/M/117/Add.1
Page 37
establishment of BKPM team task force” to resolve investors’ problems, the preparation of establishment
of the National Team for Investment, institutional-capacity building on the regional (BKPMD) and
BKPM, and improving promotional activities.
Regional Trade Arrangement
Question 6:
There are indications in Indonesia’s trade policy according to which the Government intends to pursue a
proactive policy in its regional approach to trade and towards bilateral agreements. In this respect we
would like to learn more about Indonesia's prioriti es in terms of the next steps of intra-ASEAN
integration, in particular the perceived main challenges in that integration process. What are the
expected consequences for the Indonesian economy?
Answer:
The expected consequences for the Indonesian economy are to increase intra trade and investment among
ASEAN, to promote regional growth, and to increase economic stability in the region. However,
regarding the idea of establishing the ASEAN Econom ic Community (AEC), Indone sia is of the view that
the above idea should be considered carefully, particularly on the issue of supranational body which is
contrary to the main ASEAN Principle i.e. to respect the national sovereignty of its members.
Future Economic and Trade Policy Directions
Question 7:
As far as the overall direction of Indonesia’s trade policy is concerned, we are surprised that no
reference is made to the Government’s approach to and its objectives in multilateral trade, in particular
the ongoing DDA negotiations. The report clearly show, however, that the progress in the macro-
economic climate and the reforms undertaken are no t enough to guarantee sustained economic growth.
The economy is still too much dependent from domes tic consumption while the investment climate is
deteriorating. Attracting foreign investment is vital for increasing the growth rate that is so well needed
to tackle problems of unemployment and poverty. Would not the Government agree that a successful
outcome of this multilateral trade round with ambitious results on the market access and the rules side of
the agenda will help Indonesia on its way to macro-economic recovery, in particular to meet thechallenges set out in the National Development Pr ogram, and with consolidating internal reforms in
order to improve micro-economic policies to restore investors’ confidence?
More generally, there is the impression that decisions related to trade are taken rather on a ad-hoc basis.
Are there any particular reasons, for instance structural problems within the Government as regards the
management of international trade? Could the Gover nment please elaborate on a possible long-term
strategy for trade issues?
Answer:
Sustained economic growth calls for conducive climate and progress in economic reforms and successful
outcome of multilateral trade round with ambitious resultWT/TPR/M/117/Add.1
Page 38
The government agrees that sustained economic growth calls for conducive investment climate and
progress in economic reforms.  Therefore, the authorities have embarked on the stabilization program and
structural reforms since the economic crisis in 1997.
• Macroeconomic policy has been directed toward maintaining stability. Once stability
maintained, monetary policy has been eased as reflected in the decline of interest rate on
monetary instrument.
• On the fiscal front, the government sought fiscal consolidation by increasing domestic
revenue so as to keep deficit within manageable level while providing economic stimulusfor domestic economy.  The government has also introduced tax reform, restructured
public debt, and continued privatization and sales of assets of IBRA.
• On the structural issues efforts have been made to adhere remaining problems which have
hampered economic growth such as restoring security, especially in conflict area,
strengthen good governance, continued structural reform including financial sector.
To improve investment climate, the government has sought to strengthen good corporate governance,
restore security, introduce judicial reform, strengthen law enforcement, and improve labor relation.  In
order for the economy to grow faster, it also calls for favorable international environment as reflected in
world economic growth and international trade.
In 2002 Indonesia’s economy grew by 3.8% despite the unfavorable world economic growth of 2.8% and
this year the growth is expected to be slightly higher i.e. around 4.0%.  The successful outcome of a more
ambitious round will also help expand world and Indonesia will also derive its benefit provided thatIndonesia’s trading partners will also open its market for Indonesia’s products.
Regarding the plan to maintain credibility after te rmination of the IMF program, the government has
commisioned a Team to prepare the necessary steps to succesfully exit from the IMF program. Those
steps are mainly directed toward formulating Economic Recovery Program of 2004-2006. The program
rests mainly on three pillars namely : (i) macroeconomic stabilization program ; (ii) restructuring andreforming the financial sector ; and (iii) promoting investment and exports and creating jobs.
To maintain international credibility, Indonesia will likely opt to adopt a post program monitoring (PPM).
Under this PPM program, Indonesia will continue its restructuring program which will be reviewed by the
IMF twice a year.
Question 8:
In this respect, we would appreciate if Indonesia could give some indication on the word of the existing
MOIT for DDA issues,  which was set up in early 2002?
Answer:
The advisory committee set up under the National Team for Multilateral Trade Negotiation contribute
analyses and recommendation to negotiation process of trade in goods, services, rules making as well asSingapore’s issues.WT/TPR/M/117/Add.1
Page 39
Question 9:
We consider the dialogue between the Governmen t and the country’s business community and civil
society as an important element to base and cons olidate multilateral trade policy decision. Could
Indonesia please explain:
- If and how such kind of dialogue takes place in Indonesia;- Who the main interlocutors are and what kind of key message they provide on multilateral trade
issues.
- How business advice and civil society concerns on market access and on multilateral rule-making
are taken into consideration in the government’s policy formulation.
Answer:
The national team of multilateral trade negotiation consists of high rangking  government officials as well
as Indonesian Chambers of Commerce which represent private sectors.  The team meets regularly in orderto discuss and make recommendation on issues relating Indonesian position in multilateral trade
negotiation.
The main interlocutors are officials from Ministry of Industry and Trade, Ministry of Finance, Ministry of
Agriculture, Ministry of Foreign Affairs, Ministry of Justice and Human Rights, Ministry of Health, Bank
Indonesia, and Coordinating Investment Board. The key messages they convey are supporting multilateraltrade liberalisation and at the same time balancing out the national commitments taking into account
specific sectors’ development.
The National Team organised on continuous basis dialog forum with business and civil society in order to
discuss issues and concerns relating to market access and multilateral rule making.
REPORT BY THE SECRETARIAT (WT/TPR/S/117)
TRADE POLICIES AND PRACTICES BY MEASURE
Measures Directly Affecting Imports
Tariffs
General features
Question 10:
We recently observed an increased use of tariff and non-tariff measures as an instrument to protect
specific sectors. In particular, recent announcements of measures with regard to of rice and sugar have
created confusion in the markets and triggered sharp price increases. To what extent are these measures
coherent with the overall trade policy of Indonesia that has been to date quite liberal and open to foreign
trade?WT/TPR/M/117/Add.1
Page 40
Answer:
Since 1998 up to lately, Indonesia has been aggressive in liberalising their domestic market especially for
sensitive products (rice tariff Rp 430,-/kg; sugar Rp 550,-/kg (raw); Rp 700,-/kg (refine sugar); corn 0%;
and soybean 0%). The consequence of the policy becomes disincentive to the farmers, and even worse
due to the distorted world market, which in turn will threaten our food security.
Government Procurement
Question 11:
(Para 46) What are the ethics guidelines for procur ement officials in the new procurement legislation?
Are these guidelines enforced, and if so, how?
Answer:
The ethics guidelines for procurement officials, including consumer (planner, executor, and supervisor),
supplier and others, has been formulated in article number 5 of Presidential Decree number 18/2000, i.e.
a. Do the task in a good and responsible manner
b. Professionally, honest, and keep the restricted the procurement document for preventive
reasons.
c. Do not influence each other direct or indirectly to avoiding unfair competition
d. Have responsibility on any agreed decisione. Prevent any conflict of interest group direct and indirectly
f. Prevent any leakage on government budget
g. Prevent any power abused or joint activities for personal, group, and others benefit which
is directly or indirectly make government loss
h. Do not receive or offering or promising to give or to get any gift to anybody which has
related to the procurement process.
Question 12:
(Para 48) Is there any data on the extent of foreign procurement in Indonesia?Answer:
There is no comprehensive data on foreign procurement in Indonesia.
Question 13:
(Para 50) Are any of the tendering procedures open and competitive, under which all interested suppliers
may submit a tender?
Answer:
Based on Presidential Decree number 18/2000, any procurement process should do transparent and
competitive. Transparent means any regulation and information on procurement should be opened for
suppliers  to participate whether on general selection, direct selection, or direct appointment. CompetitiveWT/TPR/M/117/Add.1
Page 41
means any procurement have to do with selection and healthy competition within equal suppliers and
comply to any transparent regulation.
Question 14:
(Para 50) What transparency rules apply to the four procurement methods? Are calls for tenders and
contract awards published, and if so, where?
Answer:
There is check and balance mechanism in each procurement method during and after the process. Based
on Presidential Decree 18/2000, article number 25, it is possible for tender participants to deliver protest
or complaint to the government officials which responsible to the procurement process if  they find
mismanagement and corruption, collusion,  nepotism practice.
Question 15:
(Para 52) On what basis does the Central Procur ement Team approve or reject a contract award?
Answer:
The Central Procurement Team is liquidated after Presidential Decree number 6/1999 published.Question 16:
(Para 53) How can complaints about irregularities in the administration of tenders be lodged? What has
been the outcome of the complaints made about the procurement practices of the Bank of Indonesia and
of the telecommunications com panies PT Telkom and Indosat?
Answer:
There is mechanism on delivering complaints about irregularities in the administration of tenders.
Complaints should be delivered firstly to the pr ocurement evaluation committee  within the government
institution. If the person who complaint did not get satisfaction answer, he can report to Commission for
Supervision of Business Competition. The  commission will have investigation procedure before the case
is decided irregular or comply with the administration procedure. If the Commission found irregularities
which is violent the law than the case will be submitted to the court.
In case of the Telekom and Indosat, the complaints were already solved within government institution and
the Commission for Supervision of Business Competition.
Procurement process of security thread for Indonesian banknote paper (EU)
• The complaints made by two paper makers (A and B) about the procurement practice of
Bank Indonesia (BI) is for the procurement of security thread that will be used in the new
series of Indonesian Rupiah banknote paper, not for the procurement of banknote paper.WT/TPR/M/117/Add.1
Page 42
• In the past, BI also used such a thread (in two denominations) the patent of which is held
by one company (A).   This company, however , is not licensing its patent to all paper
makers willing to participate in BI banknote paper procurement process.
• At first, for the new Rupiah series, BI is also willing to use the security thread the patents
of which are known to be held partially by three paper mills (A, B, and C), on conditionthat they are willing to give license to all paper makers (with the same license fee) so as
to qualify them to participate in BI tender process.
• This requirement is meant to broaden the supplier base to increase the competition among
paper suppliers in order to get the best price for BI. But since they are not willing to givea license to all suppliers, BI then cancel to use this product and received an offer from
one company (D) which proposed different product/spesification for each denomination
and willing to grant a license to all supliers for the same price.
• Therefore, the accusation that the thread procurement process is lack of transparency and
openness and the technical description of the thread is only revealed to one company is
unfounded. The fact is that BI is not allowed to disclose the thread specification which
belongs to this company, not belongs to BI, otherwise BI will infringe the patent of this
company. Most importantly, two other paper mills (A and B) fail to meet BI’s basic
requirements to supply the product.
• The above mentioned reason has also prevented BI to conduct a tender. Therefore, BI has
appointed one company directly to supply the product.This policy is allowed by both BIinternal procurement procedure and by GATS article XVI bis (security exception) due to
the reason that such product is very specific and is a security product.
Contingency Measures
Anti-dumping and countervailing measures
Question 17:
Although still limited, the use of Anti-Dumping measures  has recently been under increase. In particular,
an investigation has been opened against European exporters of wheat flour in 2000 (officially not yetterminated) and recently, writing paper. The mere fact of opening these investigations is damaging EU
exporters as they cannot provide their clients with a guarantee on the price they will have to pay for their
imports. Therefore, we would appreciate it if Indonesi an authorities perform the investigations in a timely
manner according to the WTO regulations on Anti-dumping procedures.
Answer:
The Indonesian  Government appreciates the concern of EU exporters regarding the trade uncertainty that
prevails resulting from anti-dumping proceeding. Indonesian exporters face similar problems, most
recently the protected expi ry review initiated by the EU on PSF that was, after several months and years
of investigation , finally terminated.
In the case of Wheat Flour, an affirmative determin ation was reached by the investigating authority, the
Komite Anti Dumping Indonesia (KADI), and the investigation was concluded within the time limitWT/TPR/M/117/Add.1
Page 43
prescribed under article 5.10 of the WTO anti dumping agreement. However, the decision whether to
impose anti-dumping measures is still pending though due account is taken of the concern of the EU.
In the case of uncoated and coated writing and printing paper, the proceeding has been going on for 4
months and the KADI is aware of the time limits laid down in the Agreement. The investigation is on
going.
Since its establishment in 1996, KADI has rejected 3 applications and proceed 44 cases and the
government has only imposed 15 cases of anti dumping duties
Measures Affecting Production and Trade
Competition and consumer policy
Question 18:
(para 108) Please note that the correct name of the Bundeskartellamt would be "Federal Cartel Office".
Answer:
Thank you for the correction, we will note that in the report.
Intellectual Property
Enforcement action
Question 19:
Indonesia's domestic market is dominated by pirate d optical media products, the increase of production
over the last years is such that it now for far exceeds Indonesia domestic consumption capacity and,
hence, the pirated goods are clearly meant for export. This escalation is of a main concern for the EU
and its industry. What policy will Indonesia undertake to curb down this tendency? May Indonesia, for
instance, introduce custom enforcement on exports (as foreseen by Article 51 last paragraph of the TRIPs
Agreement)?
Answer:
Concerning the possibility  of expanding pirated g oods to the EU, Indonesia is of the view that this
activity will not be tolerated by issuing the Government regulation regarding the optical disk.
Question 20:
(para 114) Indonesia is currently contemplating to set-up a more integrated administrative organisation
for the coordination of activities between the different enforcement bodies (Ministry of Justice, police,
customs). The EU looks forward to the launching of such project which will expectantly lead to a more
effective IPR regime in Indonesia. Can Indonesia give more details on the progress of this initiative?WT/TPR/M/117/Add.1
Page 44
Answer:
To provide strong law enforcement, Indonesia is preparing the establishment of the national committee
for intellectual counter fitting that has a responsibil ity in formulating technical and strategy  for the IPR
enforcement.
Question 21:
The EU considers that the coordination among law en forcement agencies will have to be supplemented by
additional efforts to strengthen the IP legislati on especially on enforcement. Would Indonesia, for
instance, agree to lower the criminal prosecution standards for IP infringements and to enhance the civil
remedies and the criminal penalties against IP offences?
Answer:
It could be taken into account and the decision depends on the decision of judges.Legislative reform
Question 22:
Geographical Indications are supposed to be protected in Indonesia through Articles 79A and 79B of the
Marks Law. These provisions appear not to provide a protection to geographical indications as it is
mandated by the TRIPs Agreement. Indonesia should specify how the provisions of Article 22 and 23 of
the TRIPs Agreement have been implemented in its national legislation. What level of protection is
provided to geographical indications, i.e. what are the legal means for interested parties to prevent the
use of geographical indications on non-genuinely originating products?
Answer:
The trade mark act no. 19/1992 as amended by the Mark Act No. 14/1997 was replaced by the Mark Act
No. 15/2001. The issuance of new trade mark act no. 15/2001 is to meet the international norms. Thetrade mark act no. 15/2001 protect geographical indications after its registration based on an application
filed by:
• An institution representing the society,
• An institution that is given the authority to do so,
• Group of consumers of the goods concerned.
An application for the registration of geographical indications should be refused if the sign concerned is
against morality, public order, mislead people etc., and it does not qualify to be registered as geographical
indication. However, a sign having been used in good faith by another party who has no right to registergeographical indication, the party who has been acting in good faith may continue to use the sign
concerned for a period of two years as from the date of the registration as a geographical indication.WT/TPR/M/117/Add.1
Page 45
Question 23:
Furthermore, it appears that the higher level of protection applicable to geographical indications for
wines and spirits by virtue of Article 23 of the TRIPs Agreement is not provided for under the Indonesian
legislation. Article 23 of the TRIPs Agreement requires that geographical indications for wines and
spirits are protected regardless of whether the consumer might be misled or not. Does Indonesia intend totake the respective measures to comply with its obligations to protect geographical indications?
Answer:
It has been regulated in the Law Number 30 of the year 2000Question 24
Undisclosed test data that are required as a conditi on of approving the marketing of pharmaceutical or of
agricultural chemical products should be protected,  according to Article 39.3 of the TRIPs Agreement
against disclosure and against "unfair commercial use". Could Indonesia please specify how it complieswith this provision of the TRIPs Agreement. Does  the new law No. 30/2000 on Trade Secrets provide in
an adequate and sufficient protection for clinical test data that are submitted to marketing authorisation
authorities? Is there a specific provision which would prevent the reliance by the marketing authorisation
authority, on clinical test data priory submitted to  grant authorisation for a subsequent applicant?
Answer:
Trade Secret Act No. 30 of 2000 is silent on test data submitted by first applicant in order to approve a
product of another applicant.
Question 25:
(para 121) The report mentions that the registration for trademarks as "well-known" have not been fully
developed yet, which is to the detriment of several foreign marks mainly. Apparently, a new regulation onthis matter is being prepared. The EU is keen to k now what the precise provisions of such a regulation
will be and when it will come into force.
Answer:
The protection of well known marks is provided in paragraph (1) letter b and paragraph (2) of articles 6
and paragraph (2) of article 37 of the Mark Law. Article 6 paragraph (1) letter b of the Mark Lawprovides that the Marks Office may refused an applic ation for registration of trade mark, which is similar
in its essential part or in its entirety to a trademark that has already been well-known and belong to
another person for the same kind of goods or services. Furthermore, paragraph (2) of article 6 provides
that the provision as referred to in paragraph (1) letter b is also applicable to goods and/or services which
are not of the same kind, provided that it fulfils certain condition that will be regulated further by
Government Regulation. The Government Regulation as mentioned in the Article 6 paragraph (2) is still
being prepared.WT/TPR/M/117/Add.1
Page 46
TRADE POLICIES BY SELECTED SECTOR
Agriculture and Forestry
Question 26:
The EC has been developing several TRTA projects with Indonesia. Some of them relate to Trade and
Environment, in particular to forest management and trade. Are there other needs for TRTA in the
specific field of Trade and Environment?
Answer:
The Ministry of Forestry of Indonesia (MoF) has signed Memorandum of Understanding on Forest Law
Enforcement and Governance and Trade (FLEGT) with the European Community. It is expected that the
MoU could be an umbrella to work together with EC to combat illegal logging and trade. This is because
MoF and other Institutions both national and international have concerned on illegal logging and trade.
This activity has been covered in the MoU. Therefore,  it is in need an assistance under TRTA in the field
of illegal logging and trade since this illegal activity has been recorded at an alarming rate affecting forest
destruction in conservation area in Indonesia.
Selected items
Question 27:
Please explain whether, and if so, how Fair Trade (which takes account of sustainability) is being
promoted by the national trade policy, in particular with regard to the export of coffee.
Answer:
In order to promote the Fair Trade (which takes account the sustainability)  in particular with regard to the
export coffee, the GOI had taken a measure in the farm regulations concerning the exportation of coffee,
i.e. The Decree of Minister of Industry and Trade of Indonesia No. 558/MPP/Kp/I/1998 jo. No.
118/MPP/Kep/2/2003 concerning the General Rule  of Export, No. 29/MPP/Kep/1/1999 and No.
164/MPP/Kep/16/1996 concerning the Supervision of quality that has to be taken for exporting certain
products.
These regulations stipulated that exports of coffee have been allowed only through registered and
approved exporters, and that the coffee that want to be exported had meet the standard requirements.
Forestry
Question 28:
Please explain whether, and if so, the national forestry policy plans to introduce international
benchmarks for sustainable forestry, with particu lar focus on the combat against illegal logging and
reforestation.WT/TPR/M/117/Add.1
Page 47
Answer:
At present, combating illegal logging and promoting reforestation have been decided as two priorities
among five priority policies in Indonesian forestry sector.  In particular to illegal logging, international
community has also put a concern on this issue.  There are several international co-operation that have
been developed, among others are Forest Law Enforcement and Governance in East Asia and Pacificregion producing Bali Ministerial Declaration, Asian Forest Partnership and  a number of bilateral
agreements, such as  with United Kingdom on Illega l Timber Trade, with European Union on Forest Law
Enforcement and Governance and Trade, and co-operation between Indonesia and Norway on the
improvement of Forest Law Making and Law Enforcement to Combat Illegal Logging.
In regard to reforestation, Indonesia has developed a program on this peculiar important policy to improve
forest cover that has lost dramatically since the last decade.  The reforestation policy has resulted in
50,000 to 70,000 hectares annually and afforestation (reforestation outside of forest area) showsreforestation covers the area of 400,000 to 500,000 hectares per year.  In cooperation with JICA,
Indonesia has developed a plan for reforestation program in particular on mangrove areas.
Question 29:
Please explain which measures are envisaged in order to assure the simplification and enforcement of
current forestry laws in Indonesia.
Answer:
There is a specific measure under Forestry Law 41 of 1999 (Chapter XIV) regulating criminal sanction
including penalty and fine that someone or a company breaks this Law.  This chapter clarifies article 50
of the Law, identifying activities that are considered against the Law.  These include:
− Any body is prohibited to destroy infrastructure and means of forest protection.
− Any body is granted a concession permit to manage a forest area, to manage environmental
services, to manage wood and non-wood forest pr oducts and to collect wood and non-wood forest
products, is prohibited to conduct activity affecting forest degradation.
− Any body is prohibited to:
• act and/or use and/or occupy forest area illegally
• encroach forest area
• cut trees in forest area within a radius or distance not more than:
- 100 meters from the right and left sides of river
- 50 meters from the right and left sides of creek
- 2 times of the depth of ravine
- 130 times the difference of the maximum and minimum water levels of beachWT/TPR/M/117/Add.1
Page 48
• burn forest
• cut trees or harvest or collect forest products in forest area without having concession or
permission from the authorised officers.
• receive, buy or sell, accept exchange, accept entrusted goods, store or possess forest
products identified or assumed coming from forest area which are harvested illegally.
• conduct activities of general investigation or exploration or exploitation of mineral in
forest area without permission from the Minister of Forestry.
• transport, occupy or possess forest products that are not supported with a letter of legal
forest products.
• bring livestock to forest area which is not decided specifically for that purpose
• bring heavy equipment and/or other equipment which is common or assumed to be used
for transporting forest products in forest area without permission from authorised
officers.
• bring equipment which is commonly used for cutting trees in forest area without
permission from authorised officers.
• throw away things causing forest fire and forest destruction and jeopardise the continuity
of existing forest function in forest area.
• to bring out, carry out and transport wild flora and fauna which are not regulated from
forest area without permission from authorised officers.
This particular article shows the simplification of Indonesian forestry legislation allowing people to
understand which activities are prohibited under the existing Forestry Law.
Manufacturing
Textiles, clothing and leather
Question 30:
(para 56) The reports repeatedly refer to the import restrictions on textiles, system which basically
provides that imports of certain textiles are allowed only for local transformation and on basis of non-
automatic licensing. These restrictions have been addressed bilaterally with Indonesia, unfortunately
without obtaining formal insurance that the respective Decree will not affect our exports to Indonesia. We
would be grateful for a clarification from the side of Indonesia.
(para 56) Furthermore, we would consider it useful if Indonesia could explain the reasons for this
Decree, its implementation and its life span, as well as ensure that it will not affect de facto the EU
exports to Indonesia.WT/TPR/M/117/Add.1
Page 49
Answer:
Firstly, Indonesia confirms that the decree is not inconsistent with Article III of the GATT 1994, article
XI of the GATT 1994 and article 7 of the ATC, based on the following reason:
• No discriminative treatment between local and foreign producers as long as they fulfilled all
requirements as provided in the decree.
• The decree can not be constituted as non tariff barriers since the issuance of the decree (2002
up to now), the import volume from EU of the those products listed in the Annex has not
decreased, instead  increased substantially. Therefore, we believe that EU will not be
damaged by the issuance of the decree. (see table). As to the question of the life span of the
decree,  the license will be in force for one ye ar and be automatically renewed if the company
concerned so requested by completing all conditions as required by the decree.
• With respect to the elimination of quota restriction starting 31 December 2004, Indonesia,
like other developing countries will take appropriate policy to boost export especially for
small and medium enterprises (SMEs). On the other hand, structural adjustment perhaps
would be one of the policy options to prepare them to compete in global market.
Question 31:
Moreover, we would be interested to learn more about Indonesia’s approach to the post 2004 elimination
of textile quotas between WTO Members. What are the Government’s main concerns and how does it
intend to cope with the impact of the opening of the world textile trade which will no doubt modify
production in this sector?
 Answer:
 Firstly, Indonesia confirms that the decree is not inconsistent with Article III of the GATT 1994, articleXI of the GATT 1994 and article 7 of the ATC, based on the following reason:
• No discriminative treatment between local and foreign producers as long as they fulfilled
all requirements as provided in the decree.
• The decree can not be constituted as non tariff barriers since the issuance of the decree
(2002 up to now), the import volume from EU of the those products listed in the Annex
has not decreased, instead  increased substantially. Therefore, we believe that EU will not
be damaged by the issuance of the decree. (see table). As to the question of the life span
of the decree,  the license will be in force for one year and be automatically renewed if
the company concerned so requested by completing all conditions as required by the
decree.
• With respect to the elimination of quota restriction starting 31 December 2004, Indonesia,
like other developing countries will take appropriate policy to boost export especially forsmall and medium enterprises (SMEs). On the other hand, structural adjustment perhaps
would be one of the policy options to prepare them to compete in global market.WT/TPR/M/117/Add.1
Page 50
Services
Financial services
Question 32:
(para 74) The report states that granting of banking licenses is subject to an economic needs test.
However, Indonesia's GATS commitments do not seem to allow such a test. Could Indonesia pleaseclarify the situation?
Answer:
In order to obtain an operating license as a commercial bank or a rural bank in Indonesia, an applicant is
required to fulfil requirements concerning: (i) organization and management structure; (ii) capital; (iii)
ownership; (iv) expertise in banking; and (v) feasibility of the business plan.
In order to assess as to whether the applicant meets the criteria of the feasibility of the business plan,
Bank Indonesia will take into account several aspects such as existing competition in the banking industryso as to ensure healthy competition among Banks, th e degree of Bank density within a certain area, and
the distribution of national economic development. The rationale for requiring a review on the feasibility
of the business plan is to protect both bank customers and the banking system from unsound competition.
Question 33:
(para 75) The report says that foreign banks need to be among the 200 largest world banks to obtain a
license in Indonesia. However, Indonesia's GATS co mmitments do not seem to include such a condition.
Could Indonesia please clarify the situation?
Answer:
Banking industry is basically a business of trust. The trust shall be a main consideration in banking
business. Once the trust is lost, there will be a bank run which may result in a crisis as Indonesiaexperienced. Therefore, the requirement of 200 largest banks to operate in Indonesia is to ensure that the
bank is well capitalised and internationally recognized. This requirements will help to strengthen
confidence in those banks and therefore prevent from crisis. Furthermore, the presence of an international
bank is expected to contribute to the transfer of inte rnational best practices, such as knowledge, skills and
higher prudential standard to the country.
From the outset, the Indonesian commitment, is inte nded to include any criteria that the Government
think appropriate, including 200 largest banks requirement for the granting of new license as it is stated in
General Conditions on Banking Sub-sector under the heading of “unbound for new license”.
Question 34:
(para 83) This paragraph refers to wholly foreign-owned companies and then says that foreign insurers
must operate through joint-ventures. Please explain in detail current limits on foreign ownership (if any).WT/TPR/M/117/Add.1
Page 51
Answer:
Commercial presence could be done in the form of jo int venture company. Foreign ownership in a joint
venture at the time of incorporation shall not exceed 80% of the total capital of the company and might be
raised up to more than 80% through addition of foreign capital without effecting the total amount of
shares owned by Indonesian partners.
Question 35:
(para 85) The report indicates that minimum capital requirements for local co mpanies are lower than for
joint-ventures in securities services and various other financial services (factoring, credit cards, and
consumer finance). However, Indonesia's GATS commitments do not seem to include such a
discrimination. Could Indonesia please clarify the situation?
Answer:
Based on the Minister of Finance Decree Numb er 179/KMK.010/2003 and Number 172/KMK.06/2003,
there were no the discriminatory treatment in the requirement on paid up capital for local finance
companies and joint venture companies (foreign participation) in securities company and various other
financial  services.
• The minimum capital requirement for Securities Company operating as a joint-venture
can be owned by foreign legal entity that operates in financial sector other than securities
activity up to a maximum of 85% of the paid-in capital (Minister of Finance Decree No179/KMK.010/2003, article 2 item 1).
• Meanwhile, foreign legal entity that operates in securities activity that had have license or
under supervising of capital market regulator in their own country could have
participation up to a maximum of 99% of the paid-in capital (article 2 item 2).
• Then, in the event that a national or join-venture Securities Company makes a Public
Offering of its shares, the share of that Securities Company can be owned by foreign
investor or domestic investor up to 100% of paid-in capital (article 3 item 1). There is noa different of minimum requirement of paid-in capital between national and joint venture
securities company.
• There is no the discriminatory treatment in the requirement on paid up capital for local
finance companies and joint venture companies (Decree of Minister of Finance Number172/KMK.06/2003 dated April 23, 2003).
Communications
Telecommunications
Question 36:
(para 94) Could Indonesia please explain if Telekom was required to own part of any operator (including
data services for instance)? How is the transition managed to allow operators to become independent
from Telekom and create effective competition?WT/TPR/M/117/Add.1
Page 52
Answer:
According to current telecommunication law, there is no more obligation for operators to cooperate with
Telkom in term of having part of the shares. However if Telkom intends to hold stake in those operators,
it is purely based on business and market considerations. There is no specific transition determined for
operators to become independent from Telkom.
Question 37:
(para 94) Does the government regulate interconnection of all network operators? If yes, why is it
necessary to do so (and not only for dominant operators for example)?
Answer:
Government regulates only a  general principles to be followed by the operators to ensure fair competition
in telecommunications sector, such as obligation not to refuse any interconnection request from any
others operators, and all interconnections must be treated equally.
Question 38:
(para 95) Please explain why the number of  operators is limited in each segment?
Answer:
Value added services such as ISP, multimedia and other non basic services, such as calling card, premium
call, stored and forward messages are fully privatized.
Mobile cellular is principally open, however, since its dependency to the spectrum, the new entrance shall
be selected.
Basic telecommunications is opened in stages  from monopoly and now duopoly, while now preparing
interconnection cost based and the USO.
Question 39:
(para 96) What are the concrete obligations imposed on the networks of operators?  Which
administration can address anti-competitive practices prohibited by the law? How is the universal service
defined?
Answer:
Telecommunication networks operators must follow the basic rules of interconnections.
Broadcasting and audio-visual
Question 40:
(para 99) Apparently, only domestic news agency or agencies have the right to deal directly with
domestic media. Can Indonesian confirm this, and are there any legislative reforms planned in this field?WT/TPR/M/117/Add.1
Page 53
Answer:
Based on the Law Number 32 year 2002 Concerning Br oadcasting, foreign broadcasting institutions or
foreign news agencies are prohibited to be established in Indonesia. Due to the fact that Law Number 32
year 2002 has just recently enacted, some of the implem enting regulations are still yet to issue, therefore
Indonesia for the time being does not have any plan to make legislative reforms in this fields.
Question 41:
(para 99) How does Indonesia guarantee the access of foreign press to government press conferences?'Answer:
Foreign broadcasting institutions or foreign news agencies who will conduct journalistic activities in
Indonesia, whether a live broadcast or recorded, shall follow the procedures stipulated in the prevailing
regulations. A guidelines for foreign journalistic activities in Indonesia is currently being discussed by the
Indonesian Broadcasting Commission and  the Government.  For the meantime, the access of foreignpress to government press conferences and other foreign journalistic activities can be obtain through and
under coordination of the Department of Foreign Affairs. This policy has also guarantee foreign media to
cover the news in Indonesia.
Transportation
Air Transportation
Question 42:
(para 106) The report mentions that the main Indonesian airport is prepared for privatization. What
degree of foreign ownership is considered? Can Indonesia please clarify the extent and conditions under
which international providers of ground-handling services can offer their services in airports opened to
international traffic and inform if such internationa l providers are currently established in Indonesia's
airports?
Answer:
The privatisation of Indonesian main airports, which are operated and managed by PT. Angkasa Pura I
and II (stated owned Enterprises) are still being discussed by Parliament and The Ministry of state-owned
Enterprise, and there is no specific time frame. Th e discussion has not yet come up with any specific
recommendation relating to a degree of foreign ownership that should be considered.
We are still in the position not to open ground handling services for foreign investment until the issuance
of national regulations on services directly related to air transport, including ground handling. The draft of
the regulations on the subjects are currently under the discussion.WT/TPR/M/117/Add.1
Page 54
Maritime transport
Question 43:
(para 109) Foreign shipping companies operating international services to and from Indonesian ports
must appoint an Indonesian shipping company as an agent (Government Regulation No. 82/1999). Can
the Indonesian government confirm that all governmen t owned cargo has to be shipped by domestic flag
vessels, or chartered foreign flag vessels if provided by an Indonesian shipping company? And that in the
latter cases pay a compensation of 2% administration import duties and a deposit/bank guarantee
approx. 10% of vessel value?
Answer:
In principle all government owned cargo shall  be shipped by domestic flag vessels, or chartered foreign
flag vessel  provided by Indonesian shipping company.
There is a provision under custom import duties 2% for administration and  as a deposit or guarantee
approx. 10% of vessel value for deferred value added tax (VAT).
Question 44:
Can it be confirmed that foreign operators pay a discriminatory cargo tax on foreign flags (2,64%) more
than double of Indonesian operators?
Answer:
Principally there is no discriminatory treatment on cargo tax for the foreign operators. Cargo tax of 2,4 %
is required for foreign operators, meanwhile Indonesian operators have the obligation to pay a corporate
tax  of approx. 1,2% of freight. In addition, many foreign operators which are come from the countries
that have tax treaty with the government of Indonesia do not pay a cargo tax.
Tourism
Question 45:
(para 110 and 111) We are happy to know that tourism in Bali is beginning to pick up again. We would
like Indonesia to give its view on the economic growth and employment driven by the tourism sector. How
many people work in the tourism sector, and what has been the evolution in the last years? The share of
GDP that arrives from tourism? We would also be inte rested in an assessment of the impact of tourism in
growth and employment in other economic sectors, like construction, computer services, education and
professional training, and possibly other sectors? What plans exist for improving professional education
and training related to the tourism sector?
Answer:
• Tourism creates around 7.7 million jobs comprising of total 8.11% of the national
employment.WT/TPR/M/117/Add.1
Page 55
• Tourism contributed 9.27% of its income to the national production of goods and
services, and 17.44% of the GDP.
• The study regarding the assessment is currently under taken on Tourism Satellite Account
Study.
• Indonesia, collaborating with Australia under the “Indonesia-Australia Partnership for
Skill Development”, carries out Hotel & Restaurant Project, and Tour & Travel Project.The output of these two projects is adopted to the Indonesia National Competency
Standard.  This standard has been applie d in the industry and educational curriculum.
Indonesia initiated the APEC TOSS – Tourism Occupation al Skill Standards Project with the objective to
find the common competency standards within APEC which will encourage the mobility of people
(human resources) in the region.
There are many higher education in Indonesia which are specialising in tourism services that have high
reputation and have a close cooperation with other countries higher education in tourism such as fromSwitzerland. The Government will encourage further su ch cooperation and expecting the similar attitude
from foreign  governments.
Question 46:
What measures has the Indonesian government taken to ensure non-discrimination of foreign service
suppliers on rescue, rehabilitation and normalisation programmes?  Are there any plans for consulting
with the industry operating in Indonesia?
Answer:
The rescue, rehabilitation and normalisation programs is aimed to regain the international image of the
Indonesian tourism, especially Bali tourism.  The program itself has involved domestic and foreign
service related suppliers, such as Public Relation company in Australia and  USA Broadcasting company.
This program does not in anyway effects any existin g treatments toward foreign service suppliers in
tourism services sector.
On November 2000 the Ministry of Culture and Tourism launched the “Masyarakat Pariwisata Indonesia”
or Indonesia Tourism Society whose members are representative of the tourism industry, press,
academicians , tourism associations and legislative members. The MPI acts more in advisory capacity or
as a think tank with regard to government pol icies and development strategies. It would absorb
community aspirations and consolidate the stakeholders of tourism and culture, bringing togetherrepresentatives of the government and the industry.
Question 47:
How is Indonesia approaching the regulation of tourism-related aspects of general interest: environment,
wildlife, urban planning, etc.? Have any lessons b een drawn in terms of links between tourism and
promotion of local cultures, development of water supply and sanitation services, public security etc?WT/TPR/M/117/Add.1
Page 56
Answer:
Tourism in Indonesia is developed based on the “balance of life”  concept and the desire to uphold the
local wisdom insights, one of which is through eco-tourism that emphasises on the development of
community-based tourism.
Where product development is concerned, it has to be related to community based tourism  using a
business approach. The community-based tourism in volves the participation of the local community
which will eventually motivate them to be also res ponsible for the preservation of the natural & cultural
environment. This concept  is one of the priorities of the government to bring social welfare to the people,
empowering them with the means to benefit from deve lopment in their own environment. In other words,
community based tourism keeps greater share of th e income generated by visitors in the community
which is not based on gender but it is based on competency of the people.
Water supply and sanitation services:
Indonesia is conducting a preliminary study on food waste management in hotels and restaurants under
the Green Productivity Program.
Public security:
For the last 4 years of political and economic difficulties in Indonesia, tourism has suffered much.
Security disturbances and social unrests that actually happened in some isolated areas in Indonesia havetarnished Indonesian image as a whole causing such a negative image toward Indonesian tourism.
Tourism is multidimensional, it is related to politics, social, culture, economics and security. The
Government, the industry, and the  community are hand in hand to do their up most efforts to improve
political, cultural, economic and security environments in Indonesia. The main priority for the Indonesian
Government is to speed up economic recovery, tourism is expected to play an important role in thatprocess.
Question 48:
Finally, we would be interested in knowing what meas ures are taken or planned to further liberalise the
tourism sector. What is Indonesia’s assessment of the benefits resulting from limitations on foreign
capital in hotel and tourism-related facilities? And which benefit is expected from de-centralisingregulation and administration of tourism activities to district level? What is the timing of this
administrative change?
Answer:
According to the National Policy Guidelines in bala ncing the development level, Indonesia promotes the
development of eastern part of Indonesia.  Foreign investment in tourism is allowed up to 100% capital
share. Eastern Part of Indonesia has a huge potential in tourism that required capital and skill to develop.
Foreign investors are expected to play an increasin g role in the efforts to develop that potential.
Further measures to be taken including the removing of regulatory impediment to tourism business &
investment in line with principle of progressive liberalisation in services sectors.WT/TPR/M/117/Add.1
Page 57
The limitation of the foreign participation in certain areas is  aimed to balance the level of the
development in the whole country, by boosting the development in the eastern part.
The foreign capital participation is limited only in 3, 4, 5 stared hotels in the form of joint venture
company.  The hotel classification of  1 and 2 stared hotels are mainly owned and managed by local
community in small scale which generally does not require huge investment. This policy is believed tohave benefited the small scale businesses in hotels, so as to keep Indonesian local businesses in tourism
sector.
REPLIES TO QUESTIONS RAISED BY HONG KONG, CHINA
Import Licensing
(WT/TPR/S/117, P. ix, Para. 15; and P. 44-45, Para. 42-43)
Question 1:
It is noted that since March 2002, special licensing  requirements have been imposed on sensitive items
such as agricultural products, textiles, footwear, electronics and toys, and the special import licences
granted are based on a domestic-needs assessment.  One of the claimed objectives for these special
licensing requirements is to balance supply and de mand in a transparent manner.  Could Indonesia
elaborate on how these requirements work to attain this objective, with particular reference to how they
operate to minimize the deprivation of market  access opportunities of overseas suppliers.
Answer:
The idea to regulate sensitive items by imposing special licensing requirements such as agricultural
products, textiles, foot wear, electronics and toys is not intending to totally restrict market opportunities
of overseas suppliers. And we cannot consider that licensing requirement to constitute as special. For
agricultural products such as rice, sugar, soy bean, corn, registration of import measures are only made asadministrative procedure in the form of Special Impor ter  Identification Number (NPIK) that generally
available for all companies. No negative impact cause d by this administrative procedures especially in
relation to deprivation of market opportunity. This has been evidenced by import data of which import of
those commodities are remained high. With respect to the policy on sugar, Indonesia considers that while
Indonesia is one of the big importer of sugar for domestic consumption, domestic producers which haveabsorbed million labors and farmer have to be fully taken into account. Accordingly, Indonesia will
provide such as assistance so that the local producer and sugar farmer could compete with the imported
sugar.
Financial Services
(WT/TPR/S/117, P. xii, Para. 37; and P. 91-92, Para. 85)
Question 2:
The Secretariat Report states that minimum capital requirements for local securities companies and local
finance companies are lower than those for joint vent ures.  It is however noted from Indonesia’s GATS
schedule of commitments that limitation on national tr eatment in terms of difference in paid-up capitalWT/TPR/M/117/Add.1
Page 58
requirement will be eliminated in the year 1998.  It would be helpful if Indonesia could explain whether
the difference still exists or has been eliminated as scheduled.
Answer:
Based on the Minister of Finance Decree Numb er 179/KMK.010/2003 and Number 172/KMK.06/2003,
there were no the discriminatory treatment in the requirement on paid up capital for local financecompanies and joint venture companies (foreign partic ipation) in securities companies and various other
financial services.
Telecommunications
(WT/TPR/S/117, P. xiii, Para. 41; and P. 94, Para. 95)
Question 3:
It is noted that Telekom’s exclusive rights for local services is supposed to terminate by August 2002,
while those for national long-distance and international calls will end by August 2003.  It is also notedthat the divestment of a 42% stake in Indosat has exce eded the foreign equity cap of 35% as inscribed in
Indonesia’s schedule.  We are glad to see these impr ovements and would like to know if Indonesia would
reflect them in its initial offers.  Could Indonesia also inform us if there is any plan to relax the
prohibition on bypass and call back services and to eliminate the scheduled discriminatory minimum
paid-up capital requirement for various value-added services?
Answer:
So far there is no final decision for foreign equity cap and there is no plan or decision to relax the
prohibition on bypass and call back services.
REPLIES TO QUESTIONS RAISED BY INDIA
Question 1:
The Indonesian government has stipulated a policy of import tariff restructuring which, inter alia,
envisages reduction of import tariffs above 20% to a maximum level of 10% in the year 2003. We would
request the government of Indonesia to indicate the current percentage  contribution of revenue earned
through the levy of  import tariffs in the national  revenue and also the steps contemplated  to replenish
the decreased  government revenue once import  tariffs are brought down  to the target level.
Answer:
Contribution of revenue earned through the levy of import tariff is around 3% in the national revenue.
There is no special effort to be done to replenish the decreased revenue on import tariffs, because with the
low level of tariff rates will increase the import volume which bring about the increase of value added tax
and income tax on imports.WT/TPR/M/117/Add.1
Page 59
Question 2:
Indonesia does not permit the import of meat and meat products from India on the ground that India is
not free from the foot and mouth disease (FMD). Indi a has been exporting to   other countries including
in South East Asia frozen, deboned and deglanded meat in accordance with guidelines by the OIE. We
would request the government to indicate whether th ere is any regular review mechanism in Indonesia to
review and re-consider such decisions?  If so , when the above decision with regard to the ban on Indian
meat and meat products is likely to be considered?
Answer:
As Indonesia is free from FMD and in other diseases in List A of OIE, and according to OIE regulation
we can only trade meat and meat products with countri es free from those diseases (100% free). Moreover,
as Indonesia has the experiences in overcoming the FMD problems, Indonesia welcomes the country,
which is going to learn from Indonesia
REPLIES TO QUESTIONS RAISED BY JAPAN
General Issues (Rule of Law)
Question 1:
It is reported that the number of business problems t hat foreign companies are facing is on the increase
due to the inappropriate implementation of laws (especially regarding taxation, customs and judiciary
matters). It is also pointed out that corruption and patronage (the so-called ‘KKN’) have been rather
aggravated because public order is still unstable after the collapse of the previous Suharto regime. The
increasing smuggling of consumer goods, such as elec tronics and clothes, deprives foreign companies of
their share in sales, which in turn could create a negative effect on foreign investment. It is reported that
the laws and regulations are so frequently changed or amended that foreign investors suffer from a lackof predictability in the investment sector. Under these circumstances, it is hoped that the Indonesian
Government will take further measures to maintain public order, improve the morale of officials in
charge of the implementation of laws, and di sclose information relating to the Judiciary.
Concerning the above, exactly which measures will the Indonesian government take?
Answer:
Since the old regime was over, the Government of Indonesia looks forward by changing its paradigm.
And this effort takes time, not only be completed by just “one single night”. Thus the changing or
amendments of the laws and regulations are arranged so, to aim more benefits to the economic
stakeholders, in which, this could be differently interpreted. Nevertheless, concerning the good will of the
government to create better investment performance, the policy taken is to create positive measures to
avoid negative implications.WT/TPR/M/117/Add.1
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Regional Decentralization
(From pp.17 to 18, paragraph 9 of the Secretariat Report)
Question 2:
It is reported that the Regional Autonomy La w (No.22/99) and the Law on Fiscal Balance (No.25/99)
entered into force in January 2001 enabling regional decentralization to be implemented step-by-step.
However regional decentralization has given rise to a new form of confusion, for example, each local
government can establish its own regulations and im pose its own tax, thereby obstructing investment,
whether it be by foreigners or not.
Concerning this point, what measures for promot ing investment will the Indonesian government take?
Answer:
This crucial issue is being comprehensively reviewed by preparing the policy concerning investment
approval procedure and one roof system. These two policies will distinct the division of responsibilitiesamongst the central, provincial, regency and cities government levels on undertaking the investment
administrations.
Problems Linked to Labour
Question 3:
It is reported that after the collapse of the ‘Suharto regime’, through the enhancement of a movement of
democratization, the problem of labour often caused anxiety to factories for their stable operation. Due to
this worry a new labour law entered into force in March 2003. While the new law has already been
enacted, for the purpose of implementation, it is, however, necessary to enact more for detailed
regulations in the form of a presidential decree, government ordinance or ministerial notification, which
have yet to be finalized.
In this regard, please indicate the present status of clarifying the implementation regulations for the new
labour law.
Answer:
For the purpose of implementation of the new Labour Law issued in March 2003, the Government of
Indonesia had already drafted 4 Decrees of Minister  of Labour and Transmigration, and 1 Presidential
Decree currently the four draft of Ministry of Labour & Transmigration are under discussion at the LKS
Tripartit, to further be decided by the Minister of Labour of Transmigration, while the draft of
Presidential Decree will be submitted to the State Secretariat for further be discussed in the Parliament.
The GoI expects that all drafts will be accomplished immediately.WT/TPR/M/117/Add.1
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Construction of Infrastructure
Question 4:
It is pointed out that the uncompleted access routes between airports or ports and production bases, such
as industrial complexes obstructs the distribution of products in industrial activities. Regarding
electricity, there is scarce capacity for new supply, even though demand is increasing by about 10% ayear. This is a serious problem for the manufacturing industries and investors alike, especially that the
forecast for a stable supply of electricity is quite unclear for the future. Under these circumstances, Japan
is providing assistance for the construction of adequate infrastructure, for example, through  yen loan
scheme.
Concerning construction of infrastructure, what will the Indonesian government take measures ?
Answer:
Will be submitted later.
Promotion of Supporting Industries
Question 5:
Supporting industries, which provide electronic and machinery parts, and require human resources, have
not been well-developed, which creates a negative effect on Indonesia’s  industrial competitiveness and
environment for recruiting local staff of top qual ity. In 2000, Japan submitted the “Urada Report” in
which it is proposed to promote small and medium-sized enterprises, to the Indonesian Government, and
Japan dispatched technical experts to implement proj ects, such as technical assistance. The Indonesian
Government also published a ‘Mid-Term Action Plan  for SME Development (MTAP) ’ in April, 2002.
Please indicate for which policies the Indonesian Government is making and what is the present status of
the specific implementation of th e MTAP under these circumstances?
Answer:
With respect to the policies of the Government of Indonesia to promote supporting industries for small
and medium enterprises the GOI will strengthen the coordination of the agencies concerned (vertical and
horizontal); applying the same criteria of SME’s nationally and internationally; optimalizing the
utilization of the credit scheme for SME’s ; providing government budget particularly for revolving fund;increasing the role of company appointed to provide capital for the SME’s; setting up a proposed training
centre; optimalizing the role of  Metal Industry Development Centre in developing small scale industry
and trade in cooperation with PT Krakatau Steel, PT Sucofindo, PT Rekayasa Industry, and Bandung
Institute of Technology; optimalizing the existing  pr omotion and information agencies;  establishing  a
Special Agency that are dealing with the coordination and development of the SME’s; revising the Law
No 5 / 1984 regarding Industry and Law No 9 of 1997 regarding small industry that will be coordinated
with Ministry of Industry and Trade; reviewing Pres idential Decree no 51/  2000 regarding  Agency for
Business Resource Development and PKM.WT/TPR/M/117/Add.1
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Financial Services
(p.24, paragraph 29 of the Secretariat Report)
Question 6:
6-1. The Secretariat Report states that intra-regional services liberalization in the area of financial
services has been agreed after two rounds of negotiations by ASEAN countries. In this regard,Japan would like to ask if the level of the liberalization commitments by Indonesia in financial
services under this negotiation is higher than that committed under the 1997 WTO Financial
Services Agreement. If so, please provide deta ils of the additional liberalization commitments.
Answer:
In ASEAN there is a principle so called “GATS Plus” which means the commitment under ASEAN
should be more liberal than under the WTO. In general, Indonesian commitments under ASEAN
Framework Agreement on Services (AFAS) consisting the widening and deepening of existingcommitments under the WTO.  Efforts to bring harmonization and comparability within ASEAN
members’ countries commitments are also has been an issue for quite sometimes.
With respect to the WTO commitment, Indonesia ha s remained committed to liberalization under the
Doha Development Agenda.  Further liberalization will  be pursued base on the principle of progressive
liberalization and national policy objectives. In order to liberalize further and to meet some tradingpartners’ requests, the Government has been caring out domestic consultation and conducting an
assessment of the impact of liberalization in financial services sector.
Question 7:
(From pp.27 to 30, from paragraphs 40 to 45 of the Secretariat Report)
6-2. With regard to paragraphs 40-45 of the Secretariat Report, Japan would like to clarify whether
the new draft investment law, currently being submitted to Parliament, covers financial services
(i.e. banking, insurance, securities companies). If not, please provide the legal source of
regulations on foreign direct investment in financial services, as well as the status of
liberalization in these sectors.
Answer:
The new draft law of investment does not cover regulation pertaining foreign direct investment in
financial services. The financial services investment regimes can be found in the individual act of each
industry  such as Banking Act, Insurance Act, Pensiun Fund Act, and Capital Market Act and their
implementing regulations.
Question 8:
(From pp.86 to 87, paragraph 71 of the Secretariat Report)
6-3. Japan would like to clarify whether foreign financial institutions can qualify as potential partners
in the divestiture of state-owned banks under the current government program.WT/TPR/M/117/Add.1
Page 63
Answer:
Indonesia is still in the progress of divesting some of government-owned bank, which are not only state-
owned bank but also other commercial bank as the result of recapitalization program. Recently
divestment have taken places for PT. Bank BCA, PT.Bank Danamon and PT.Bank Mandiri.  The three
banks are represented the largest segment of banks in the Country.
Question 9:
(p.88, paragraph 74 of the Secretariat Report)
6-4. Japan would like to clarify whether the "economic needs test" described in paragraph 74 is
reserved in Indonesia's current Schedule of Commitments or is justified under the GATS
provisions. Please also indicate where such description can be found in Indonesia’s Schedule.
Answer:
Economic Need Test as a criteria for granting a bank license
In order to obtain an operating license as a commercial bank or a rural bank in Indonesia, an applicant is
required to fulfill basic requirements concerning: (i) organization and management structure; (ii) capital;
(iii) ownership; (iv) expertise in banking; and (v) feasibility of the business plan. As additional
consideration, Bank Indonesia will also assess whether the applicant meets the criteria of the feasibility of
the business plan.  In order to assess the feasibility of business plan, Bank Indonesia will take intoaccount several additional aspects such as existing competition in the banking industry so as to ensure
healthy competition among Banks, the degree of Bank density within a certain area, and the distribution
of national economic development. The rationale for requiring a review on the feasibility of the business
plan is to protect both bank customers and the banking system from unsound competition.
From the outset, the Indonesian commitment, is intend ed to include economic need test elements for the
granting of new license as it is stated in General Conditions on Banking Sub-sector under the heading of
“unbound for new license”.
Question 10:
(p.88, paragraph 75 of the Secretariat Report)
6-5. Japan would like to clarify whether: (i) foreign banks may newly enter the Indonesian market in
the form of a branch; (ii) foreign banks are allowed to establish 100% foreign-owned bank
subsidiaries; and (iii) foreign banks are allowed to acquire 100% shares of existing domestic
banks.
Answer:
Market access of foreign services providers can be done through: (i) Opening of representative office; (ii).
Opening the branch office; (iii). Acquired the existing domestic bank; (iv).Establishment of new bank
subsidiary;WT/TPR/M/117/Add.1
Page 64
New Draft Investment Law
(From pp.27 to 28, paragraph 41 of the Secretariat Report)
Question 11:
The BKPM has drafted the new investment law, to in clude providing equal opportunities between foreign
enterprises and domestic enterprises, and tax incentive in February 2003. We recognize that the newdraft investment law is under consideration af ter having been submitted to the parliament.
Please indicate the present status of the Parliament’s consideration concerning the draft law.
Answer:
The new investment law draft is currently being re viewed within the interdepartmental agencies. The
draft has been submitted to the State Secretariat waiting for President’s initiative permit to further be
discussed in the Parliament. The government of Indonesia expects that the draft will be accomplished
immediately.
Maritime Transport Service
(From pp.96 to 97, paragraph 109 of the Secretariat Report)
Question 12:
We welcome that foreigners can hold up to 95% equity in ocean freight services in a joint venture with
Indonesian partners, as pointed out in the Secretariat Report.
8-1 Please indicate whether the Indonesian Government can admit that foreigners could hold up to
100% equity, abolishing the existing 5% limitation.
8-2 Does the Indonesian ship implicated in the join t venture have to be above 5000G/T?  If so, please
indicate the reason.
Answer:
According to Government Regulation Number 82/1999, fore ign establishment shall be in the form of joint
venture. Therefore, foreign ownership of up to 100%  will not possible. The joint venture have to be
above 5000G/T. This policy is intended to stimulate the active participations from national fleet and in
order to increase competition capacity.
Intellectual Property Rights
(From pp.65 to 66, paragraph 111 of the Secretariat Report)
Question 13:
We appreciate that Indonesia has become a party to the WIPO Copyrights Treaty especially since
intellectual property rights have become increasingly important especially in the sectors related to theWT/TPR/M/117/Add.1
Page 65
Internet. We also note that Indonesia is consid ering ratifying the WIPO Performance and Phonograms
Treaty.
9-1. Please indicate the probability of the schedu le to ratify WIPO Performance and Phonograms
Treaty.
Answer:
Indonesia is improving the IP Law by amending the existing IP regime and ratifying the international
treaties so that the Indonesian IP law will meet the international standards.  However, before ratifying an
international treaty such as WIPO Performance a nd Phonograms Treaty, Indonesia has to analyse the
substance involving various related institutions. Ac tivities to study the substance of WIPO performance
and Phonograms Treaty is still on the process.
Question 14:
(From pp. 69 to 70, from paragraphs 128 to 129 of the Secretariat Report)
According to the report by the Secretariat, Indonesia’s piracy rate was the 3rd highest in the world, and
police forces conduct regular raids on shops offering pirated material.
9-2. Please indicate what measur es Indonesia has taken and will take regarding the pirated material
is addition to the above.
Answer:
The pirated materials which were found during the raids have been destroyed.
Question 15:
(p. 22, paragraph 78 of the Report by the Government)
9-3. Please provide in detail information of regarding “Improvement quality and quantity of law
enforcement as well as the Improvement of Public Services”, as stated in  the Report by theGovernment.
Answer:
Besides the effort to improve quality and quantity of law enforcement of IP,  Indonesia places the
improvement of public services as another important element.  Public services in the field of IP such as
the examination of  request, application and registration can not be done manually.  The above servicesneed to be supported with appropriate equipments.WT/TPR/M/117/Add.1
Page 66
REPLIES TO QUESTIONS RAISED BY SOUTH KOREA
II. Trade and Investment Policy Framework
p.31 (para 48)
Question 1:
The Government of Indonesia provides duty and VAT concessions in the form of reimbursement on
imported inputs if they are exported after manufactur ing. However, the reimbursement procedures takes a
considerable amount of time (from 4 - 5 months to  1 year for VAT and from 3 to 6 months for duties
reimbursement), resulting in the undermin ing of incentives for foreign investors.
What is the views of the Government of Indonesia on the opinion that such a problem can undermine the
incentives for foreign investors and needs to be repaired?
Answer:
The administration process of tax and duty reimburshment is acknowledged to take some time, of which
might hamper the investment activities. However, the Government of Indonesia is trying to speed up the
process.
III. Trade Policies and Practices By Measures
p.34 (para 16-17)
Question 2:
The Government of Indonesia is reportedly striving to  simplify the customs procedures by introducing new
systems like a post-entry audit system and Electronic Data Interchange System.
Please explain the procedure of the post-entry audit system in detail including the standard for selecting
the items (or importers) to be audited)
Answer:
The post-entry audit system in customs procedure is as the consequences of the implementation of “self-
assessment” principles in customs clearance. Some importers make use of this facility negatively by un-
appropriate declaring of imports, either in value or volume. To overcome this problem, custom
administration conducts a post-audit using some criteria in the selection of  items (or importers), such as
information from customs intelligent, periodical audi t for industries, indicated fictitious importers, and
dispute of import values.
p.34 (para 18)
Question 3:
The Government of Indonesia is reportedly implem enting pre-shipment inspection on some steel and
textile products. The inspection is conducted at the expense of the importers concerned.WT/TPR/M/117/Add.1
Page 67
• Please explain the legal grounds for this sy stem, the effect that the system has, and the
plan to extend the system to other items
• Please also explain whether or not the system is a pre-shipment inspection in line with
the WTO Agreement on Pre-shipment Inspection
• The expense of the inspection is borne by the concerned importers, but, in reality, the cost
can rise the price of the items inspected, thereby weakening their price competitiveness.What is the opinion of the government of Indonesia on the view that pre-shipment
inspection should be conducted on limited occasions and in a careful, cost-effectivemanner?
Answer:
Indonesia considers the importance of pre-shipment inspection in order to avoid under invoice done by
importers which ultimately resulting in the lost of  government revenue. As under invoicing is mostly
done in textile and steel products, Indonesia has now been conducting pre-shipment inspection in order toavoid importers manipulate price in the form of under invoicing and manipulation of HS Code number for
the maximum benefit of the importers.
Indonesia confirms that the policy of pre-shipment inspection is consistent with the Agreement on Pre-
shipment Inspection-WTO especially Article 2 para 12 where Surveillance Indonesia as pre-shipment
inspection entity does not request exporters to provide information as contained in Article 2.12
particularly in relation to internal pricing, including manufacturing costs; profit levels etc. Up to now, no
plan has been set as to the extension this policy to other products. We are fully aware that theimplementation of this policy is done in a very careful and cost effective manner.
p.38 (para. 27-30)
Question 4:
In November 2002, the Government of Indonesia reportedly decided to raise the tariff rates app-lied to
some steel products for one year for the purpose of protecting the domestic industry. We are concernedthat a series of actions taken by major countries to raise the tariff rates applied to steel products will
eventually undermine the spirit of free trade across the world.
We think that the raised tariff rate should be applied for only one year as originally planned. Please
explain the position of Indonesia in this matter.
Answer:
Indonesia acknowledges that Indonesia has raised applied tariffs on steel products. However, as the
Korean is aware that policy is taken on the temporarily manner as it will be in force one year in order to
provide those industries to make adjustment.WT/TPR/M/117/Add.1
Page 68
p.50 (para 58)
Question 5:
The Secretariat reports that Indonesia is the eleventh most frequent country to use anti-dumping
measures, with 43 AD measures taken during the period between 1996 and 2002
What is the position of Indonesia on the view that it needs to be more cautious about initiating AD
investigation considering the fact that the initiati on alone of an AD investigation can do severe damage to
the concerned industry of the exporting countries.
Answer:
Indonesia Antidumping Committee (KADI) has conducted its investigation in accordance with Article
VI-GATT 1994. Even though since 1996, KADI has initiated 44 cases but KADI has rejected 3 cases
because of the application had not met the application requirements. Further only, 15 cases are imposed
definite measure and 11 cases terminated.
REPLIES TO QUESTIONS RAISED BY NEW ZEALAND
Tariff Policy
Question 1:
The Secretariat comments that tariffs have increasingly become Indonesia’ s main trade policy instrument
(p32, para 2) but despite the structure of the tariff system has remained complex, involving 18 ad valoremrates and three specific rates.  Further, the Secretariat note that due to tariff escalation, ad valorem and
specific rates of duty, and some applied rates exceeding bound rates, tariffs continue to be a potential
obstacle to a more efficient allocation of domestic resources (p32, para 3).
In light of this, as well as Indonesia’ s committed to further trade liberalisation to promote economic
development (p19, para 14), what policy changes is Indonesia considering with respect to its tariff regimein an effort to streamline the efficient allocation of Indonesia’ s resources for future economic growth?
Answer:
Indonesia is committed to further trade liberalization to promote economic development as well as to
increase the allocation of economic resources. Some measures have been taken in this area, such as
reducing and converting non tariff barriers into tariff. The tariff reduction program that has beenimplemented consistently has reduced the average import tariff as well as the so called “tariff escalation”.
Commodities that exceed several bound rates are mainly on alcoholic beverages (26 tariff lines of HS-
2002). The reason for this is to prevent the people from potential moral hazard. The use of specific rates is
mainly intended to ease the customs administration especially to cope with the potential under-invoicing
imports. Indonesia will continue to reduce its tariff level in accordance with the tariff reduction schedule.
By implementing this program, the tariff escalation will be reduced due to the low level tariff on most
commodities.WT/TPR/M/117/Add.1
Page 69
Question 2:
The Secretariat reports notes that almost all applied rates are ad valorem but the Indonesian government
has on occasion, as in the cases of rice and sugar, replaced ad valorem with specific duties (p37,
para 25).
What measures has Indonesia put in place to ensure that the level of protection provided by specific duties
does not exceed the bound ad valorem rate in Indonesia’ s WTO Schedule of Commitments?
Answer:
The specific duties of rice and sugar do not exceed the bound A V rate in Indonesia’s WTO Schedule of
commitment. Based on the calculation made for sugar, the average specific duties from July to December
2002 ranging from 32 to 38% (bound rate 95%), while for rice from January to December 2002, it was
equal to 25% (bound rate 160%).
Question 3:
New Zealand notes that although the level of tariff dispersion has fallen, for which New Zealand
commends Indonesia, tariff escalation remains a feature of Indonesia’ s tariff policy.  According to the
Secretariat report, p32, para 3, tariff escalation has become more pronounced for semi-processed food,
beverages, and tobacco and wood and furniture (px, para 12).  New Zealand also notes that there is also
a high level of separation between bound and applied rates for agricultural products (as well asindustrial products) (p34, para 20).
What consideration has Indonesia given to the impact of tariff escalation on end-users, both processors
and consumers, especially their ability to purchase quality processed agricultural and forestry products
at internationally competitive prices?
Answer:
In fact, Indonesia does not apply tariff escalation as it is implemented by developed countries, although
for some products, it happens in our tariff structure. The consideration is to give incentive to the
development of value added agriculture industries.
In view of Indonesia’s commitment to further trade liberalisation what moves is Indonesia taking to
reduce tariff escalation and the degree of separation between bound and applied tariff rates foragricultural and forestry products?
Answer:
In general to reduce the so called “tariff escalation” is done through the implementation of import tariff
reduction program. The low level of the most import products will reduce the potential tariff escalation.
The impact of this is that the larger degree of separation between bound and applied tariffs on agricultural
and forestry products including manufacturing prod ucts. Indonesia views that the bigger gap between
bound and applied tariff is not an obstacles to further trade liberalization as it shows the seriousness ofIndonesia to fulfill its commitment to WTO agreement on tariff.WT/TPR/M/117/Add.1
Page 70
Question 4:
The Secretariat report (p74, para 13) notes that Indonesia's long-standing policy objective has been to
foster food production in order to meet the dema nd of a growing population, and achieve self -sufficiency
in the main staple foods but that labour productivity levels in agriculture are less than half the national
average (p73, para 11).  New Zealand does not demur that food security isn’t important, but we believethat true food security can only be obtained through an open international market, rather than striving for
self-sufficiency and that isolating markets leads to greater climatic and input risks, and an inefficient
global market.
How does Indonesia view the international market as contributing to its food security needs and how does
this influence Indonesia’ s overall trade policy?
Answer:
We believe that in term of food security, Indonesia is now moving from self sufficiency at all cost to self
reliance by maintaining the balances between domestic production capacity and the ability to import food,
meaning that international trade contributes to the achievement of food security of the country.
Import Iicensing
Question 5:
The Secretariat reports (WT/TPR/S/117, page ix) that the scope of import restrictions and licensing has
increased, with the scope of import restrictions unclear and the licensing regime opaque.  What steps is
Indonesia intending to take to improve transparency in this area?
What steps is Indonesia taken to reduce the incidence of corruption in import practices, including that by
government employees?
Answer:
Indonesia  highly appreciates the concerns of New Zealand with respect to the scope of import restrictions
and licensing which are deemed to be increased and with the scope are also unclear and the licensing
regime opaque. Indonesia is fully aware of  the scope of import restrictions and licensing and Indonesia
has taken steps in order to improve the import licensing system through, interalia:
• Improving the importer registration system in cooperation with Custom and Excise
Office.
• Improving the verification system  for certain import products, such as steel and iron,
textiles etc.
• Issuing publication of all trade regulations and procedures  (not only import regulations)
in the Gazette and Website
• improving transparency system by cross-checking all import documents provided by
importers both in Custom Office a nd Ministry of Industry and Trade.WT/TPR/M/117/Add.1
Page 71
As steps taken in order to reduce the incidence of corruption in import practices, Indonesia has taken
many efforts to increase transparency so that companies and/or government employ could be easily
controlled. Further, Indonesia has now had  an administrative court (PTUN) where all companies have the
opportunity to lodge  administrative cases including corruption.
Intellectual Property
Question 6:
Indonesia is making steady progress in expanding its range of commitments on intellectual property
through participation in the World Intellectual Property Organization and in implementing its WTO
TRIPS obligations.  However, as the Secretariat’ s re port notes (WT/TPR/S/117, page 65-66) enforcement
of Indonesian law in this area is ineffective. What steps is Indonesia intending to take to provide an
environment that allows for more effective enforcement of intellectual property law?
Answer:
Well implementation of IP Law depends on at least 2 (two) points which are well structured and well
organized and enforcement of the law. The IP Law of Indonesia is considered good enough since the law
has clear definition and procedural legal. However, it is acknowledge that the law inforcement of IP does
not satisfy with the target due to the lack of human resource and lack of national coordination in law
enforcement.  To improve the enforcement of IP,  Indonesia has done some action ; some of which are :
• Doing some training, seminar and workshop for judges, policies, civil servants, business
players and prosecutors.
• Establishing national committee for enforcement
• Doing regular raids on industry and trader who produce and offer infringing, pirating and
counterfaiting goods.
We have enforced our IP Law through reguler raid.  However, the more important element to enforce the
IP Law is increasing the awareness of IP to every Indonesia citizen, and develope IP culture in Indonesia
society.
Trade Remedies
Question 7:
When are the institutional frameworks required to allow implementation of Presidential Decree Number
84 of 2002, concerning the Safeguard of the Domestic Industry Against a Surge in the Import of Goods
expected to be established?
Answer:
Presidential Decree number 84 dated 6 December 2003 regarding the Safeguard of the Domestic Industry
Against the impact of Increased Imports is supported by the Decree of Minister of Industry and Trade of
the Republic of Indonesia No. 84/MPP/Kep/2/2003 dated 17 February 2003 establishing  the Committee
of Trade Remedy of Indonesia or Komite Pengam anan Perdagangan Indonesia (KPPI), and Decree ofWT/TPR/M/117/Add.1
Page 72
Minister of Industry and Trade of Indonesia N o. 85/MPP/Kep/2/2003 dated 17 February 2003 laying
down Procedures and Requirements of Application for Investigation with respect to Safeguarding
Domestic Industry from an Increase Import. This supporting legislation lays down the institutional
frameworks required.
Export Restrictions
Question 8:
As identified in page 58 of the Secretariat’ s re port (WT/TPR/S/117), Indone sia maintains a system of
export restrictions for “supervised” exports and export licensing and quotas for “regulated” exports.
What economic benefits does Indonesia derive from these measures?
Answer:
Certain live bovine animal, live fish are categorized as supervised exports are due to the protection of
germ plasm. While for palm nuts/kernel, the supervised export has been imposed in order to meeting thesufficient supply as raw material for domestic industries. At the same token, no supervised export are
imposed on lead and bauxite ores/concentrate and petroleum oil/products. In order to have a sufficient
supply for farmer especially in the rural area, Indonesia has strictly supervised the distribution of urea
fertilizer. As to crocodile leather products, supervised export imposed as Indonesia is fully committed to
CITES.  Indonesia is of the view that supervised export imposed to those products has not consideredonly in the context of the economic benefit but also to  fully committed to the international obligations and
to protect the germ plasm.
Government Procurement
Question 9:
What steps, if any, is the Indonesian Government intending to take to reduce the discrimination faced by
foreign suppliers in tendering for Indonesian Government contracts?
Answer:
Government of Indonesia currently running policy reform in various sectors including government
procurement. We begin with the adoption of action pl an to reform the legal framework and organization
structure for procurement. Indonesia’s procurement system is to be brought up to international standardsto meet AFTA and WTO requirement.
In-line with that purpose, Government of Indonesia concerned on reducing the discrimination faced by
foreign suppliers. On the other hand, Indonesian economy is still on the early phase of recovery. As part
of our effort to have sustainable economy growth, we committed to push the SME as the main economy
actor in the future. We don’t want to make same mistakes as before the crisis in 1997 when the economy
relies on performance of a few conglomerates company. Based on that strategy, Indonesia will give more
room for foreign suppliers gradually in-line with the SME development.WT/TPR/M/117/Add.1
Page 73
REPLIES TO QUESTIONS RAISED BY NORWAY
Question 1:
As stated in the reports, Indonesia has experienced a decline in FDI since the financial crisis in 1997. We
would be pleased to know what steps Indonesia inte nds to make in order to improve the climate for
foreign investment.
Answer:
The government has been preparing several substantial measures to support the more conducive
investment climate, namely, among others, the accomp lishment of investment legal framework such as
investment deregulation including investment incent ives, decentralization of investment licensing, the
arrangement of “one roof service” policy for investment, the simplification of investment procedures,
updating negative list for investment, while the other policies measures are the establishment of BKPM
team task force” to resolve investors’ problems, the preparation of the National Team for Investment,institutional-capacity building on the regional and central government, and improving promotional
activities.
REPLIES TO QUESTIONS RAISED BY SWITZERLAND
Report Secretariat (WT/TPR/S/117 ):
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
(6) TRADE AGREEMENTS AND ARRANGEMENTS, (ii) Bilateral agreements
Question 1:
Indonesia intends to establish comprehensive bilateral trading arrangements (§35, page 26). Could
Indonesia elaborate on the strategy followed with regard to the selection of potential bilateral trade
cooperation partners aiming at improving mutual opportunities for trade in goods, services andinvestment?
Answer:
Indonesia is willing to established bilateral trading arrangements with any country based on mutual
benefit through each comparative advantage.
(8) FOREIGN INVESTMENT REGIME, (i) Recent performance
Question 2:
According to the secretariat’s report greater responsi bility seems to have been devolved to regions for
investment approval, largely through the more aut onomous provincial BKPM boards. This devolution of
responsibility, and including the likelihood of changes in the respective powers of the central and local
governments as well as the amendments to th e investment rules and procedures may have created
negative effects accentuating corrupt practices, resulting in uncertainty and unpredictability for both
domestic and foreign investors. Switzerland would appreciate if Indonesia could provide additionalWT/TPR/M/117/Add.1
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information on its experiences made under the various BKPM authorities with regard to competition
among the different BKPMs in attracting foreign investment .
Switzerland would find it helpful if the Indonesian authorities could provide some complementary
information on experiences made under its investment incentives scheme before and after it was changed
through the IMF package in January 2000 (cf. §48, page 31).
Answer:
Considering experiences by various regional BKPM authorities, the Government of Indonesia believes
that competition among the regional agencies in attracting foreign investment could be created as long as
the interest of the investor’s satisfaction is to be put and or positive results (the investment stake holders)
come into effect. They are given flexibility for promoting investment based on its resource endowments.
This is due to the different or specific characteristics of their economic resources.
Regarding the investment incentive scheme, the incen tives apply to all foreign investors. They include
duty and VAT concessions on imported inputs and capital goods, and additional incentives for export-
oriented investment as well as investment in certain regions (e.g. eastern Indonesia). Special incentives
such as income tax, value-added tax and luxury tax exemptions may also be approved on the case-by case
basis. The criteria for granting tax holidays, of up to eight years, for new investors in designated
“pioneer” industries, such as capital goods, sea and air transport and agribusiness were stipulated in 1999.Nonetheless, this policy was eliminated under the IMF package in January 2000.
In addition, the latest progress of providing tax incentives could be seen in “the Government Report”
Chapter III Progress on Economic Policies Reforms c. Taxation and e. Integrated Economic Development
Zone (KAPET) page No. 8-11.
III. TRADE POLICIES AND PRACTICES BY MEASURE
(2) MEASURES DIRECTLY AFFECTING IMPORTS, (vii) Government procurement
Question 3:
The secretariat report cites a few cases of irregularities in the administration of tenders (§53, page 48).
What are the administrative or judicial review po ssibilities’ for potential bidders –domestic and foreign-
to challenge procurement decisions? How does the new legislation passed in 2000 ensure theindependence of the review bodies?
Answer:
There is mechanism on delivering complaints about irregularities in the administration of tenders.
Complaints should be delivered firstly to the pr ocurement evaluation committee  within the government
institution. If the person who complaint did not get satisfaction answer, he can report to Commission for
Supervision of Business Competition. This Commission is an independent body consists of representative
from business community and society. The  commission will have investigation procedure before the case
is decided irregular or comply with the administration procedure. If the Commission found irregularities
which is violent the law than the case will be submitted to the court.WT/TPR/M/117/Add.1
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(xi) Standards and other technical requirements
Question 4:
According to § 66 on page 54 Indonesia participates, through its National Accreditation Body KAN, in
the work of the International Accreditation Forum IAF and of the International Laboratory Accreditation
Cooperation ILAC. KAN is signatory of both, th e ILAC MRA and the IAF MRA. Does Indonesia,
therefore, accept results of conformity assessment conducted by conformity assessment bodies that are
accredited by other ILAC and/or IAF members?
Answer:
Since Indonesia has MRA with several countries as a member of ILAC and /or IAF, we will conform the
assessment conducted by conformity assessment body as long as they have already had MRA with
Indonesia. i.e NATA (Australia), SCC (Canad a), NABL (India), NULAP (USA), JAB-JCSS-JNLA
(Japan), IANZ (New Zealand), SAC-SINGLAB (S ingapore, TLAS (Thailand), VILAS (Vietnam).
(4) MEASURES AFFECTING PRODUCTION AND TRADE, (iii) Competition and consumer
policy
Question 5:
Switzerland would be interested in receiving more in formation regarding the tasks and the mandate of the
Commission for the Supervision of Business Competition (KPPU) mentioned in § 108 on page 64/65. Isthis commission an independent body with regulatory and/or supervisory functions in the area of
competition policy?
Answer:
The Commission for the Supervision of Business Co mpetition (KPPU) was established based on Law on
Business Competition. Members of this Commission  are proposed by society and appointed by the
Parliament.
(iv) Intellectual property rights
Question 6:
According to Article 18 and 21 of the revised Patent Law No. 13 of 1997, products deriving from a
patented process which are produced outside Indonesia but imported into Indonesia are protected inIndonesia only if:
a) there is evidence that the manufacturing of such  products locally is not possible due to economic
reasons, so that it is only appropriate to be carried out on a regional scale, and,
b) there is evidence that it is manufactured  in an acknowledged region such as ASEAN.
Please explain how these provisions comply with Ar ticle 27 of the TRIPS Agreement which states that
patents shall be protected, and patent rights enjoyable, without discrimination as to whether the products
are imported or locally produced.WT/TPR/M/117/Add.1
Page 76
Concerning enforcement action it is mentioned on page 66 of the secretariat’s report that although efforts
have been made by the Indonesian Government to lower the rate of counterfeiting and piracy, the
phenomenon in Indonesia is still increasing. Are there new measures planned to combat counterfeiting
and piracy more efficiently?
Answer:
The patent law no. 13/1997 is no longer valid so that it was changed by the New  Law No. 14/2001.
Based on the Article 16, a patent holder shall have the exclusive right to exploit his patent and prohibit
any other party who without his consent uses the patent to make product and commits other activities
(makes, uses, sels, imports, rent out, delivers – in the case of  process patents). Such prohibition shall only
apply to imported products solely produces from the use of the pertinent process patent.
The exemption from the above provisions only if the use of said patent is for the sake of education,
research, experiment or analyses, as long as it does not harm the normal interest of patent holder.
One reason to revise Patent  Law no. 17/1997 to the New  Patent Law 14/2001 is to meet with the TRIPS
Agreement.
We have enforced our IP Law through reguler raid.  However, the more important element to enforce the
IP law is increasing the awareness of IP to every Indonesia citizen, and develop IP culture in Indonesia
society.
Report by the Government (WT/TPR/G/117 ):
IV. Trade Policy and Trade Related Policy Developments, a) Trade Policy
Question 7:
Switzerland would be interested in receiving mo re information on the role and functioning of the
Indonesia Recovery Fund mentioned in §33. How is it go ing to be included within the official economic
policy?
Answer:
The idea of Indonesia Recovery Fund was launched by Minister of Industry and Trade by the end of
2001. The idea was agreed at Cabinet Minster Meeting and would be launched 2002. However, since
2002 the idea is still pending.
i) Standardization
Question 8:
Government Regulation No.102/2000 concerning National Standard: It is mentioned that Indonesia is
working on improving the role of standardization on the national level. How far has Indonesia introduced
and implemented the national standard in cooperation with other stakeholders?WT/TPR/M/117/Add.1
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Answer:
Will be submitted later.
k) Non-Bank Financing Sector
Question 9:
According to § 64 there is no government commitm ent in three sub-sectors (sub-sector accounting,
auditing and bookkeeping, sub-sector appraisal service and sub-sector pension fund). How does
Indonesia ensure “good corporate”- governance in the sub-sectors?
Answer:
Indonesia ensure of the GCG in the subsector accounting, bookkeeping and auditing will be implemented
by reviewing or supervising the professions in compliance with professional standards, code of ethical
conduct issued by Associations of Indonesian Accountans (AIA) and regulations issued by the
government. The professional standards of accounting subsector issued by the AIA has already adopted
the International Accounting Standards and International Auditing Standards. Recently,   proposal to
regulate the accounting professions and other related parties through drafting a draft law of public
accountant is being discussed. In the appraisal services the associations of Indonesian appraisals and the
government also performs the same activities with the accounting profession. Meanwhile, in the pension
fund subsector the principles of good corporate governance, such as, transparency and independency hasbeen adopted and implemented.
p) Intellectual Property Right
Question 10:
In § 77 Indonesia mentions that the Trade Secret Act No. 30 of 2000 has been amended in order to
comply with the TRIPS obligations. In relation to th e issue of undisclosed information and Article 39.3 of
the TRIPS Agreement in the context of market appr oval procedure for pharmaceutical and agrochemical
products, does the Trade Secret Act address the question whether the state authority in charge of the
market authorization procedure is allowed to rely on test data submitted by a first applicant in order to
approve a product of another applicant? If so, what mechanism does the Act provide to prevent these test
data from being used in unfair commercial manner?
Answer:
Trade Secret Act No. 30 of 2000 is silent on test data submitted by first applicant in order to approve a
product of another applicant.
Additional questions from Switzerland
Report Secretariat (WTR/TPR/S/117)
IV. TRADE POLICIES BY SECTOR
(5) SERVICES, (i) Financial Services, (a) BankingWT/TPR/M/117/Add.1
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70. ….The new arrangements will be needed to complete outstanding matters following IBRA’s
envisaged closure in February 2004, such as disposal of its remaining stock of assets and transferring
responsibility for troubled banks, have yet to be announced. This has created uncertainty, especially
following delays in establishing the Financial Supervisory Authority.
Question 11:
The experience of the costly bank recapitalization exercise has shown that the banking sector will remain
a heavy burden for economic recovery. Is the Indonesi an government set to maintain the large number of
banks by further recapitalization? How could reducing the number be achieved, by means of liquidation,
divestment or merger exercises?
Answer:
There is no intention of the government of Indonesia to conduct another recapitalization program. Since
the banking crisis, the priority in the development of  the banking sector is to improve the soundness and
strengthen the resilience of the banking system through recapitalization and restructuring program.
Following the economic crisis in 1997, the number of commercial banks in Indonesia dropped to 141 in
2002 from more than 200 before the crisis due to closing and merger.  While the number of banks
dropped significantly, the number of offices has increased from 6,765 to 7,000 at end of 2002. These
developments reflect an improvement in the consolidation of the banking sector in Indonesia.
The government also has no intention to reduce the number of banks. However, an exit strategy has
already been in place since 1999. Under the exit strategy a bank is subject to closing if it fails to meet the
solvency and liquidity criteria.
Regarding the future direction of the banking sector development, Bank Indonesia is currently envisaging
the blueprint of the Indonesian Architecture of the Banking System which is expected to be completed byend of 2003.
Question 12:
IBRA’s execution of the blanket guarantee scheme function will cease by February 2004. Which
institution will replace IBRA in this particular role ? How can continuation of letter of credits acceptance
be granted?
Answer:
According to the Banking Law and the new concept regarding Indonesian Financial Safety Net (which
include deposit insurance scheme and the lender of the last resort), the government of Indonesia plans to
set-up the Deposit Insurance Institution in order to replace the current blanket guarantee scheme.
The deposit insurance scheme initially will cover the current blanket guarantee, and would gradually
reduce of its coverage.
For the purpose of transparency, reducing coverage in the deposit insurance scheme would be announced
six month before implementation.WT/TPR/M/117/Add.1
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Question 13:
Establishing independent Financial Supervisory Authority. Which efforts are being taken to accelerate
FSA’s schedule of establishment and its coming into effective operation?
Answer:
An FSA is a new concept for Indonesia and represented a dramatic change in the way supervision will be
conducted by the authority in the field of financial services. Therefore, its establishment needs a careful
consideration so as to ensure the smooth implementations. Since the FSA will alter the current financial
authorities structure in Indonesia, its establishment also require amendments of several existing laws
namely Bank Indonesia (central bank) Law, Banking Law, Insurance Law, Pension Fund Law, and
Capital Market Law. The improvement of the draft is also required because according to the IMF the FSA
system need also  to be complement by the safety net system for Indonesia financial sector, including
deposit insurance scheme and lender of last resort.   In May 2003, the draft has been submitted toParliament by the President.
It should be noted that the process of issuing a new law in Indonesia is somewhat complicated inter alia
because of the requirement to meet the transparency standard as one of the best practices. When issuing a
new law, the government should at minimum meet the following requirements:
a. Prepare an academic paper and draft of law
b. Conduct a seminar and submit the draft to the public and any other related authority to
have a comment.
c. Revise the draft based on the comment
d. Submit the draft to minister of justice to have a legal opinion
e. Revise the draft based on the legal opinionf. Submit the draft to cabinet meeting
g. Revise the draft based on the comment in the cabinet meeting
h. Submit the draft to the president and the president will submit the draft to the parliament.
The parliament will also conduct hearings with various relevant parties in order to have final public
comment and discuss the draft with the government.
REPLIES TO QUESTIONS RAISED BY THE UNITED STATES
II. FRAMEWORK AND OBJECTIVES
(6) Trade Agreements and Arrangements
(ii) Regional Agreements
Question 1:
The United States understands that Indonesia has expressed an interest in using emergency exit clauses
for aspects of its AFTA commitments.
We respectfully request that the Government of Indonesia indicate whether it now intends to use these
clauses, and, if so, in which areas.WT/TPR/M/117/Add.1
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Answer:
Indonesia maintains its commitment on AFTA.
III TRADE POLICIES AND PRACTICES BY MEASURE
(1) Introduction
(page 32, para. 2)Question 2:
In the past few years, Indonesia has reduced applied tariffs on a number of items.Does Indonesia intend to continue to reduce the high tariffs on such items as agricultural products,
alcoholic beverages and automobiles?
Answer:
The tariff rate of most of agriculture products have already been very low ( ranging between 0-5%).
Therefore, further reductions of these tariffs has not been considered. Indonesia plans not to reduce tariffrates on alcoholic beverages as they have impacts on public moral. To increase the industry efficiency, the
tariff rates on automobiles will be reviewed to balance the interest of consumers and producers.
(page 33, para. 11)
Question 3:
The report prepared by the Secretariat makes reference to “institutional constraints” that continue to
impede effective implementation of TRIPs.
We would appreciate if Indonesia would comment on th e nature of the “institutional constraints” that
impede effective implementation of TRIPs.
Answer:
With respect to “institutional constraints” Indonesia does not have any national constraint.
(2) Measures Directly Affecting Imports
(ii) Tariffs
(f) Applied MFN Tariffs
(page 38, para. 28)
Question 4:
The Secretariat report notes a widening gap between bound rates and applied rates created by unilateral
reductions in applied rates.WT/TPR/M/117/Add.1
Page 81
We ask that Indonesia provide us information on their plans to enhance the predictability of market
access through lowering bindings as well.  
Answer:
Indonesia has no plan to reduce bound tariff rates as a strategy to enhance the predictability of market
access. The Schedule of tariff reductions that is made public and implemented consistently is consideredas a stronger strategy in giving more certainties to economic players in planning their activities.
Question 5:
The United States appreciates that Indonesia applies a very low import tariff for most agricultural
products.  We are concerned, however, that the proposed tariff increases for rice (30 to 36 percent), corn
(from 0 to 30 percent), soybeans (from 0 to 27 percent), and sugar (from 20 to 85 percent) indicate a shift
away from policies that support an open trading system.
Could Indonesia further elaborate on whether they will  be implementing these tariff increases and when?  
Answer:
Import tariffs for most of agricultural products have already been very low. Therefore, the proposal for
increasing of tariff rates made by groups of society on rice, soybeans, corn, sugar will be analyzed
carefully.
(iii) Customs Valuation
Question 6:
Para 36 of part III of the Secretariat's report indi cates that "Indonesia did not request a reservation to
maintain a system of minimum values for a limited time under paragraph 2 of Annex III of the Agreement
on Customs Valuation."  The United States has learned, however, that Indonesia appears to maintain a
list of "check prices," which it uses in lieu of transaction values for food imports.
We would appreciate Indonesia confirming the lack of re servation and use of a list of “check prices,” and
if that is the case, we also request that Indonesia provide information on how it intends to change its
practices in order to comply with the Agreement on Customs Valuation.
Answer:
Indonesia has not been using “check prices” in calculating the value of duty. The basis for  custom value
in the “transaction price” that is provided by importers. The use of custom database on price is only used
for counter price checking on the indicated low price of imports in their custom declaration.WT/TPR/M/117/Add.1
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(v) Import Prohibitions, Restrictions and Licensing
Textiles
Question 7:
On October 29, 2002, Indonesia implemented an import licensing regulation, Decree No. 732/2000 of the
Ministry of Industry and Trade on Procedures for Impor ting Textiles. We are seriously concerned that the
import licensing requirement established by the Decree is restricting and distorting trade contrary to the
Agreement on Import Licensing Procedures, and possibly in conflict with the provisions of Articles III
and XI of the GATT as well as Article 7 of the Agreement on Textiles and Clothing, which requires all
Members to abide by GATT 1994.
The United States raised concerns and questions about these requirements at the Committee on Import
Licensing on May 8, 2003. Indonesia has responded to the questionnaire on import licensing procedures
on May 20, 2003.  We do not believe, however, that Indonesia has adequately responded to the questionsposed by the United States.
The United States would like to reiterate our concerns. Our review of the Decree presented in the import
licensing committee indicated various provisions go far beyond a registration requirement or licensing
procedure, in the following matter:
• Textile fabrics can only be imported by local textile producers.
• Imports can only be used as raw material or supplements for the production process of
the importers-producers and may not be sold or transferred to others.
• All authorized importers must seek approval from the Ministry of Industry and Trade for
the amount and the time schedule of their imports.
• Importers must also submit a monthly report on  their imports to the Ministry of Industry
and Trade.  Failure to submit monthly reports will result in the revocation of import
licenses, according to the Decree.
• These limits on the use of imported textiles  restrict the amount and type of imports of
these products. The ban on sale of imported textiles in Indonesia and the requirement
that imports only can be used as raw materials or auxiliary materials for productionprocesses appears to us to provide imported textile products less favorable treatment
than textiles produced in Indonesia.  Such restrictions would appear to conflict with the
provisions of Articles III and XI of the GATT as well as Article 7 of the Agreement on
Textiles and Clothing, which requires all Members to abide by GATT 1994.
We have serious additional concerns regarding whether the provisions of the Agreement on Import
Licensing Procedures were followed in issuing the Decree.
• There was neither advance notice to the Committee, nor notification in a timely manner
after implementation, which occurred on October 22, 2002.WT/TPR/M/117/Add.1
Page 83
• The notification itself, which was circulated on April 14, 2003, does not appear accurate
and we believe is missing attachments.
• It is not clear whether the required licenses are automatically granted or not, assuming a
firm meets the conditions of the Decree.
• Nor is it clear whether the licenses are valid indefinitely if a firm files the required
monthly reports, or whether firms need to renew the licenses.
• Furthermore, the required monthly reports appear to require firms to provide excessive
amounts of information, and possibly to requir e firms to provide business confidential
information.
The United States requests additional information and explanation from Indonesia on the operation of its
licensing system:
• If firms need to renew licenses, what is the procedure for doing so?
• Please provide more detail concerning how the Government of Indonesia administers
these import licenses
• Please indicate how many licenses have been granted under the regulation, and how
many were provided for each supplying country.
• Please provide import statistics for the previous year, where practicable (in terms of
value and volume) for products subject to import licensing.
 Answer:
Concerning the issue of textiles, Indonesia is of the view that the decree is not restricting and distorting
and even Indonesia firmly believes that the decree  is not in contrary to the Agreement on Import
Licensing Procedures. The decree aims only at provid ing administrative import procedures. As indicated
in the decree, no prohibition or limitation on the import for those products as listed in the Annex to thedecree as long as the company concerned are fully in compliance with all requirements. As the US is of
the view that the decree is in conflict to Article III of the GATT 1994, Article XI of the GATT 1994 and
article 7 of the ATC, Indonesia strongly emphasizes that:
• No discriminative treatment between local and foreign producers as long as they fulfilled
all requirements as provided in the decree.
• The decree can not be constituted as non tariff barriers since the issuance of the decree,
the import volume of the those products listed in the annex has not decreased  but instead
increased substantially. (see table).
• It is therefore, Indonesia believes that the decree is fully consistent with Article 7 of the
ATC as the decree has no negative impact on market access for textiles and clothing as
inherently stated in the ATC.WT/TPR/M/117/Add.1
Page 84
As stated in the decree, Imports can only be used as raw material or supplements for the production
process of the importers-producers and may not be sold or transferred to others. The idea behind the
decree is that since the late of 2001, the bulk of  textiles entering Indonesian market are from smuggling
activities which ultimately distort market.  In fact that it creates an unfair trade practices (sell the products
under value/price). In this context, we cannot ignore that smuggling activities will very adversely affectfair trade as well as significantly reduce the government revenue. According to the research and survey
done by Indonesia University Research Institution, th e smuggled textiles entering Indonesian market has
resulted in loss of Rp. 50 trillions in terms of Government revenue. In fact,  the smuggling activities has
not only adversely affected the performance of many producers, but directly has great impacts on
employment in 7000 factories which absorb  more than 3,5 millions labors with the investment value of
Rp. 132 trillion.  Among the instruments taken, we believe that licensing procedure is one of the keen
policies to combat smuggling. Since Indonesia is an archipelago with almost 17.000 islands, smugglingactivities could be very easy be done by smugglers if the government are not fully aware.
According to Article 3 of the Decree all authorized importers must seek approval from the Ministry of
Industry and Trade for the amount and the time schedule of their imports within one year. In order to
effectively enforce the decree, (Article 7 of the Decree) Importers must also submit a monthly report on
their imports to the Ministry of Industry and Trade.  Failure to submit monthly reports will result in therevocation of import licenses, according to the Decree. This requirements are not intended to restrict or
control trade in textiles, but rather to monitor imported textiles sold under value (monitoring system).
With respect to the question on whether the provisions of the Agreement on Import Licensing Procedures
were followed in issuing the Decree, the US is of the view that notification has not been made in a timely
manner; the notification does not appear accurate and missing attachments,  whether the required licensesare automatically granted or not, assuming a firm meets the conditions of the Decree, nor is it clear
whether the licenses are valid indefinitely if a firm files the required monthly reports, or whether firms
need to renew the licenses, the procedures to have a new license etc.  As to the late notification, Indonesia
has request apology in the cover letter submitting the notification and we feel that notification is accurate
and no missing attachment. License is  automatically granted as long as the company concerned has metall the  conditions as contained in the Decree.
If firms or companies need to renew license, they have to fulfill all the previous conditions as contained in
the decree. In fact, there is no firm or company that has experienced any difficulty to do so. The
administrative procedures to get license are very simple. Firstly,  the firm files application and send it to
Directorate General for Foreign Trade, MOIT. The application should be attached with required
documents, namely industrial license, Special Importer Identification Number for Textiles and Clothing
(NPIK), Producer/Limited Identification Number, Corporate Registry Certificate, Taxpayer Code Number(NPWP), the Statement on the Plan for the Need of the Raw Material or Auxiliary Material and the
Marketing of the Products in one year which is Legalized by the responsible person of the Company, in
the form as mentioned in Attachment II of the Decree. Up to now there have been 386 licenses granted.
No data provided as to how many were provided for each supplying country since this decree is
implemented in a non discriminatory manner.
Used goods
Question 8:
The United States notes that Decree No. 278 (on the import of used machines, machine tools, and capital
goods) was not among the import licensing measures notified to the Committee on Import Licensing by
Indonesia on 12 May 2003 (G/LIC/N/3/IDN/2, circulated 20 May 2003).WT/TPR/M/117/Add.1
Page 85
• Is Decree No. 278 (on the import of used machines, machine tools and capital goods)
currently in force?
• Does Indonesia maintain, in any form, other restrictions on importation of used
machines?  If so, please provide information on the nature and scope of the measures.
Answer:
The decree No.278 is not in force anymore and has been renewed with the decree No.
756/MPP/Kep/11/2002. This regulation has not yet been notified and will be done so later. Indonesia doesnot maintain - in any form - other restrictions on import on used machines.
(vi) State Trading
(page 44, para. 44)
Question 9:
The Secretariat report notes that Indonesia maintains a State Trading Enterprise in virtually all
important sectors.
• What plans does Indonesia have for either privatization or for removing exclusive import
or export rights on State Trading Enterprises?
• What is the rationale for the restrictions on importation of wine and distilled spirits
(which are limited for importation to three registered importers)?
• Because there is domestic production, it would be helpful for Indonesia to provide
information to show how these re strictions are WTO-consistent.
 Answer :
 With respect to the question as to what plans does Indonesia have plans for either privatization or for
removing exclusive import or export rights on state trading enterprises, we would confirm that in order tohave efficient state enterprises, steps have been taken to release their exclusive rights and  there are some
have been merged such as PT Panca Niaga, PT Cipta Niaga and Dharma Niaga becoming one enterprise
named PT. Perusahaan Perdagangan Indonesia.
 The rationale for the restrictions importation of wine and distilled spirits is in accordance with Article XXof the GATT 1994, as those products  are tightly re lated to moral and religion consideration (most
Indonesian people are Moslem). However, in orde r to accommodate the need for certain communities
such as hotels, international restaurants, diplomatic members and international organizations, the
government of Indonesia still allow certain state trading companies to import such products and to
distribute to consumers.  Indonesia acknowledge that there is domestic production, however to achieve
the objective of the regulation, domestic production are also tightly monitoredWT/TPR/M/117/Add.1
Page 86
(xi) Standards and other technical requirements
(a) Standards General framework
(page 51, para. 60)
Question 10:
Are foreign interests/entities allowed to participate in the standards development process coordinated
within the National Standardization System?
Answer:
Foreign interest/entities are allowed to participate in preparing the standards of certain products as long as
the entities concerns are located in Indonesia.
(page 51, para. 61)
Question 11:
Are American National Standards, such as those developed by ASTM International or ASME
International Standards, ever considered when adopting Indonesian National Standards?
Answer:
In preparing the Indonesian National Standards (SNI) or international standards are fully considered.(4) Measures Directly Affecting Production
(i) Taxation(a) Indirect Taxation
(page 62, para. 95)
Question 12:
Please discuss whether Indonesia plans to reduce the luxury sales tax on motor vehicles, and on
motorcycles with an engine capacity of less than 250 cc?
Answer:
After announcing a fiscal stimulus package through reducing luxury sale tax on a number of goods, until
now there is no plan to reduce rate of the luxury sale tax on motor vehicles and motorcycles with an
engine capacity less than 250 cc. It is because motor vehicles and motorcycles in Indonesia still be
categorized as luxury goods. Only few people have motor vehicles and motorcycles, especially in ruralarea.WT/TPR/M/117/Add.1
Page 87
(ii) Production assistance
(page 33)
Question 13:
Would Indonesia please explain how it provides “financial support” to research and development
activities in high technology industries? Which indust ries within the high-tech field have benefited from
this support?  Is such support provided to other industries?
Answer:
We realize that promoting research and development activities, including in high technology industries
have an important role in accelerating economic growth and sustainable development. Therefore, before
financial and economic crises in 1997, there were some financial support to promote research and
development in high technology industry. To accelerate high-technology industry, the government of
Indonesia, not only established Agency for Strategic Industry Management, (BPIS) but also providedfinancial support for research and development including high technology and technologically
sophisticated industries. The sources of financial support could come from state budget and credit from
banking system, either domestic loans or foreign loans such as export credit facility.
Due to the lack of financial sources, financial support for promoting research and development activities,
especially in high technology industry has become very limited in the past several years. However, thegovernment of Indonesia still provides fund to support research and development program through
development budget for science and technology sector. In 2003, priority of the budget allocation for these
activities would be more focused on increasing of research and development, improving institusional and
infrastructures of science and technology, and increasing quality of human resources in science and
technology.
Question 14:
We are also interested in obtaining information about Indonesia’s Petroleum Fuels Subsidy (BBM).  In
particular, which industries are provided with the fuel price subsidies mentioned in this section?  Would
Indonesia also please explain the eligibility requirements for companies to receive these benefits?
Answer:
The fuel subsidy was put in place to provide affordable access to energy sources for all income groups.
Since this subsidy is a price subsidy and not targeted subsidy, therefore no requirement for companies to
get the subsidy. On the other hand, its burden in the government budget raised sharply due to increase in
international crude oil prices. Because it is not well-suited to helping the poor, since 2001 the government
took the decision to gradually reduce and shift to more targeted schemes, through increasing domestic
fuel prices. In 2003, all kinds of domestic fuel price, except kerosene for household, have been raised to
be 100 % of market price (Mid Oil Platt’s Singapore, MOPS plus 5%) from 75 % in the previous year. Toreduce the negative impact of fuel price adjustment, the government has supplemented the fuel price
adjustment by several compensation programs, including providing rice subsidy for poor household and
continuing the scholarship program.WT/TPR/M/117/Add.1
Page 88
(v) Export assistance
(d) Export finance, guarantees, and insurance
(page 29)
Question 15:
Does Indonesia provide financing on preferential terms through export pre- and post-shipment finance
facilities, or through “guaranteed” facilities operated by BEI, or as part of export insurance programs
provided through ASEI?
Answer:
No, Indonesia doesn’t provide financing on preferential term.
The “guaranteed” facilities operated by BEI is given to all Indonesian  international trade player whilst
they are complied with the regulation. BEI never provide a SUBSIDIZED program in its current
operations nor for its  future transactions. Moreover, BEI never has any preference to certain marketsegment either by commodities or industrial sector or business segment, and the terms & conditions of the
facility are based on commercial calculation and normal banking practice.
The BEI activities in export financing and guarantees can be described as follows :
1. In line with its mission and vision to help Indone sia in achieving its prosperity through promoting
and strengthening competitiveness, growth & developm ent, BEI is providing the financing, guarantee and
consultation services which provides competitiveness for the Indonesian international trade player whilst
it is complied with the regulation.
2. Financing:
a) In extending its financing, BEI provide competitive interest rate to the Indonesian
exporters through and or together with the Indonesian Commercial Bank.
b) The ability of BEI in providing such compet itive financing mainly is resulted from the
relatively low Cost of Fund (CoF) and Cost of Loanable Fund (COLF). due to the
following factors :
1) Strong equity base:
• BEI equity came from the Government of the Republic of Indonesia Capital
Participation amounting to IDR 3 Trillions.
• Using such equity, BEI is able to generate profit during its 3 years business
activity and resulted in the internal growth with positive trend.
• In relation to the cost of capital as part of cost of fund calculation, BEI applied
dividend pay out ration approach. The rationale behind using such approach is
based upon the dividend policy that has been applied since 1999.WT/TPR/M/117/Add.1
Page 89
2) Low Overhead:
BEI is able to maintain its overhead cost at relatively low level (around 0.70%) since its
operation is so efficient due to its slim organization (BEI currently employed 79 staffs).
Moreover, BEI only has 2 Marketing representatives offices since it uses the Indonesian
commercial banks network in channelling the services.
3) Sound Asset Quality :
• BEI always providing its facilities based on common business practice
consideration. This includes no preferential treatment to the certain target
market either by commodities or industrial sectors and business segment.
Further more, it is always complied with the regulation for sound banking from
related authorities i.e. CAMEL (Capital, Asset quality, Management, Earning and
Liquidity), and all the risk involved including credit risk, market risk (liquidity
risk, interest rate risk, and foreign exchange risk); operational risk and legal risk.Such risks are mitigated, amongst others through :
i. Implementation of several manual, policy and procedures through some
committees.
ii. Implementation of “Four Eyes Principle” as part of the implementation of
prudential banking norm in the credit approval process.
iii. Implementation of “matching concept” for foreign exchange risk.
iv. Built in control mechanism consist of make r, checker, authorizer, internal control
(compliance-ex ante) and internal audit (Ex post)
• As a result of such prudential earning asset management, BEI could achieve zero
Non Performing Loan (NPL) ratio, which in turn lead to a low provision for loan
losses need to be allocated by BEI for its earning asset.
c) The cost of Fund (Cof) and Cost of Loanable Fund (CoLF) are calculated based on
commercial calculation and normal banking practice i.e. for IDR based on Jakarta Inter
Bank Offer Rate/JIBOR-6month and for USD based on London Inter Bank Offer
Rate/LIBOR – 6 month). BEI’s prime lending rate is derived from 1) blended cost of
fund using weighted average interest rate (using dividend payout ratio for calculation ofthe cost of equity), 2) overhead cost, 3) risk premium and 4) expected margin. Based on
this calculation, BEI is still able to offer a competitive pricing to its customers.
3. Guarantee:
a) BEI also provides guarantee for L/C of Indonesian importers and performance of the
Indonesian exporters in order to enhance their activities.
b) This guarantee facility is also benefiting the Indonesian commercial bank since it affects
the Commercial Bank’s calculation of Wei ghted Risk Asset from 100% or 50% to 20%,
as stipulated on Bank Indonesia Circular Letter, ref. No.: 2/12/DPNP, dated June 12,WT/TPR/M/117/Add.1
Page 90
2000 regarding Estimation of earning asset in the calculation of weighted risk asset. Thus
it improves the commercial bank’s Capital Adequacy Ratio (CAR).
c) However, such guarantee will not function as a replacement for the collateral required or
change the un-feasible loan proposal to become the feasible one. BEI still has to assess
the Indonesian exporter and importers performance using the normal prudential bankingnorms.
As well as BEI, ASEI does not provide any preferential terms neither receive regulatory support or
financial subsidy from the government to market its products. ASEI products are marketed through
market mechanism to commercial banks and exporters. As a typical export credit agency,  ASEI provides
protection on banks for debtor defaults and on exporters for buyer and political risks.
Question 16:
Could Indonesia please explain whether these pr ograms have been notified to the SCM Committee as
provided for under Article 25 of the SCM Agreement an d, if not, why they would not qualify as notifiable
under this provision?
Answer:
Due to the fact that those programs are  subsidies, there is no need to notify the SCM Committee.(iv) Intellectual Property Rights
(page 65, para. 111)
Question 17:
The report notes that Indonesia is considering ra tifying the WIPO Performance and Phonograms Treaty.
Could Indonesia please share its plans for ratif ication of the WIPO Performance and Phonograms
Treaty?
Answer:
Proposal of ratifying WPPT is still under the processData Exclusivity
Question 18:
The Trade Policy Review does not make reference to provisions for protection of undisclosed information
as required by TRIPs Article 39.3.
We would ask Indonesia to provide us with citations to its law that provide for this protection, with an
explanation of how the law complies with the TRIPs agreement.WT/TPR/M/117/Add.1
Page 91
Answer:
Based on the Law No. 30/2000, trade secret is protected from data disclosure as stated under Article 29(3)
of TRIPs Agreement.
Geographical Indications
Question 19:
Article 56(8) includes a two-year phase out period for a pre-existing unregistered trademark that
conflicts with a later-in-time geographical indication.
Could Indonesia please explain what occurs when a party  attempts to register a geographical indication
that may conflict with a pre-existing registered trademark?
Answer:
According to the  Indonesian Trademark Law No. 15 of  2001, there is no reason to refuse an application
for registration of Geographical Indications, however it may conflict with a pre-existing registeredtrademark. It is important to remind that the Geographical Indications are radically different from
Trademarks.
Question 20:
Related to Article 56(8), what happens if the pre-existing trademark was not registered but was well-
known?
Answer:
The owner of the well-known mark has a right to us e his mark for the period of two years since the
registration of Geographical Indication.
Institutional and enforcement action
Question 21:
Regarding paragraph 78 of the Government’s report, in connection with the section presenting the future
program in the field of IPR.
Could Indonesia please explain what is meant by, and provide any specific plans or measurement criteria
for, Item C, “Improvement [of] quality and quantity of law enforcement as well as the Improvement of
Public Services.”
Answer:
In order to improve the quality and the quantity of law enforcement, the GOI in cooperation with the
professional association have conducted training, seminars, workshop in the fields of IPR, so that they are
able to distinguish original products & pirate products that can be used as an evidence before the Court.WT/TPR/M/117/Add.1
Page 92
Question 22:
Regarding Paragraph 115 of the Secretariat’s report, in connection with the factual observation that
“seizures dropped considerably in 2002,”
Could Indonesia please explain the cause(s) or reason(s) for this, as well as any actions that are being
taken by the government to remedy, improve or reverse this downward trend?
Answer:
Although the GOI is very active in improving additiona l knowledge in handling the seizures, there is still
lack of enforcement officials. To overcome this problem the GOI   improves technical and strategy in
combating piracy.
Question 23:
Paragraph 116 of the Secretariat’s report noted that  “law enforcement was the most crucial problem”
faced in connection with stronger IPR protection. It also observed that “limited resources do not allowfor staff training and proper administration and enforcem ent of IPR legislation,” and that “difficulties in
enforcing IPR protection are the result of, inter alia: lack of knowledge; different views and perceptions
of IPRs (including a hostile social environment and the economic crisis); lack of coordination among law
enforcement agencies; weak civil remedies and cr iminal penalties; and deficiencies in the judicial
mechanism.”
Could Indonesia please explain what actions are be ing taken, planned, or implemented to address this
serious contributing factors to the current law enforcement status of intellectual property rights?
Answer:
At present Government of Indonesia has taken actions among others:
• More actively conducted socialisation on IPR (seminar, workshop, training),
• Establishment National Coordinating for Anti Piracy,
• Minister of Justice and Human Right has signed MoU with Police Department.
Question 24:
Paragraph 117 of the Secretariat’s report notes that as “a result of poor investigative techniques, poor
handling of evidence and lack of expertise, the judicial sy stem is considered to be ineffective in enforcing
IPRs.” The Secretariat’s report also highlights statistics on the number of IPR cases handled by the
commercial courts.
It would be helpful for Indonesia to provide on information on whether it has considered or would
consider the establishment of a special IPR court to handle both civil and criminal IPR matters as a
structural solution to address the problems faced by the commercial courts in handling and managing
IPR cases?WT/TPR/M/117/Add.1
Page 93
Answer:
The idea of establishing a special IPR Court that handle civil and criminal IPR matters had been under the
consideration. However, due to the different system Indonesia has, it is impossible to put the civil and
criminal IPR matter in one court. Based on the IPR Law, the Commercial Court has the jurisdiction to
handle civil cases.
Question 25:
Regarding Document paragraph 122 of the Secretariat’s report and in connection with the observation
that “the Trade Mark Office may take up to 12 months  to issue the certificate of registration, which is
needed to commence enforcement proceedings,”
Has Indonesia considered instituting a procedural  mechanism to expedite issuance of a trademark
certificate of registration for those applicants who may need it to commence enforcement proceedings?
Answer:
The provision concerning of the limit time for issuance of trademark certificate in the Laws on Mark is a
maximum period time for Trademark office. So it is possible to the office to reduce the period time in
issuing of the certificate registration of Trademark.
Question 26:
Regarding paragraph 127 of the Secretariat’s report and in connection with the observation that the
recently amended copyright legislation “does not include provisions for remedies against end-user
piracy,”
Would Indonesia please confirm if there are current efforts or legislative proposals to correct this
deficiency?
Answer:
Yes, there is the current efforts to correct this deficiency by giving the Law no. 19/2002 regarding end
user piracy
Question 27:
Regarding paragraph 129 of the Secretariat’s report, and in connection with the observation that to
address the problem of pirate retail sales, the “police forces conduct regular raids on shops offeringpirated material,”
Is Indonesia considering measures to address this problem, such as making the sale of pirated materials
on a commercial or retail premises licensed by a governmental unit grounds for the suspension or
revocation of a business license?WT/TPR/M/117/Add.1
Page 94
Answer:
Based on the new Copy Right law 19/2002, the pirated material shall be destroyed and the business
licence of those who violate will be revoked as stipul ated by the Minister of Industry and Trade Decree.
Question 28:
Industry and rights holders have concerns that the lack of a statutory deadline for the second level of
appeal to the Supreme Court in trademark cancellation and deletion cases (called the “reconsideration”
appeal) will negate the benefits of the speed achieved in setting statutory deadlines for the Commercial
Court and the Supreme Court (on cassation appeal) to hand down their decisions. However, most cases
routinely are appealed to the highest level of appeal and will continue to be delayed at the Supreme Court
reconsideration level.
Could Indonesia please provide information on whether it is considering placing a statutory deadline at
the reconsideration level?
Answer:
Base on the trademark law, there is no article regulating for reconsideration appeal.Question 29:
We note that new statutory timetables have not been extended to cases existing at the time of
commencement of the new Trademark Law. We also note that previously existing trademark cases beforethe Supreme Court are still pending with little or no movement on these cases, and that the failure by the
Supreme Court to deal with these existing cases conti nues to hinder rights holders in their ability to
conduct their business in Indonesia. This has resulted in commercial uncertainty and a denial of
“effective” IPR protection as required by TRIPs,
What steps does Indonesia plan to take to resolve this issue expeditiously and clear the backlog of those
cases that pre-date the new Trademark Law?
Answer:
To overcome the backlog of those cases, not only does we concentrate on Trademark cases  but also we
concentrate on other IPR cases. The Minister of Justice and Human Right has made MOU with  the Head
of Indonesian Police Forces. One of the Indonesia weakness on enforcing the IPR law is the limitedamount of judges. However, the pending IP R cases will be processed progressively.
Industrial property
Patents and Utility models
The list of exceptions to patent-ability in Arti cle 7(c) of the 2001 patent law of Indonesia includes
methods in mathematics. Please explain how this complies with the requirement to make patents available
for any inventions in all fields of technology of TRIPs article 27(1).WT/TPR/M/117/Add.1
Page 95
Question 30:
Does the patent law of Indonesia allow for the patent-ability of business method patents? If so, besides
the usual patent-ability requirements, is there an additional technical requirement?
Answer:
The general explanatory Indonesian Patent Law stat es that the scope of invention does not include
business method for doing business .
According to Article 7(a) of the 2001 patent law, processes or products whose implementation is in
violation with laws concerning “religious morality” are excluded from patent-ability.
Question 31:
Could Indonesia please provide examples of invent ions that could not be patented based on this
exception?
Answer:
One of the examples of product which violates with religious morality is toys sex.
Question 32:
According to Article 16 (a) and (b) of the 2001 patent law, patent holders will have the exclusive right,
among other things, to “leasing” and “delivering” th e patented product and the product that results from
the patented process.
Could Indonesia please provide example s and explain this exclusive right?
Answer
The regulation is made for just an anticipation for the future.Question 33:
Article 71 states that a license agreement cannot contain provisions that either directly or indirectly
“encumber” the Indonesian economy, or contain provisions that would encumber the ability of the
Indonesia people to master and develop technology in general .
Could Indonesia please provide examples of a license agreement provision that falls under this category?
Answer:
The government is still preparing the government regulation concerning the registration on patent
licensing.WT/TPR/M/117/Add.1
Page 96
Layout Designs (Topographies) of Integrated Circuits(IC)
Question 34:
Does Indonesia protect IC discrete under its integrated circuit topography law?
Answer:
The Indonesian IPR law is silent on IC discrete
Question 35:
Does Indonesia permit applicants to mask certain  trade secret portions of their applications for IC
topography registrations?
Answer:
No, Indonesia does not permit to mask certain trade secret portions of their applications for IC topography
registrations.
Trademarks
Question 36:
Article 68 of the trademark law allows a “concerned party” to make a complaint regarding a trademark
registration and request cancellation of the registration.  A concerned party is defined as the “public
prosecutor, consumer foundation, or religious board.”
We would respectfully request Indonesia to elaborate on who, under domestic law, can petition to cancel
a trademark registration?
Answer:
According to the Article 68 of the Trademark Law, A Lawsuit for the cancellation of registered marks
may be filed by any interested party based on the grounds as referred to in Article 4, 5 or Article 6. The
interested party as mentioned above are the owner of a registered mark, the first user of a mark but notregistered, the owner of a registered well-know n mark, the owner of a well-known mark but not
registered, the public prosecutor, consumer foundation, religious board and any other party that may have
interest to the registered mark.
Question 37:
Why is the trademark cancellation procedure limited to use by only a public prosecutor, consumer
foundation, or religious board rather than by any interested party?  As with Indonesia’s opposition
procedure, its cancellation procedure should be available to any party that would be damaged by the
continued protection of an existing trademark registration.WT/TPR/M/117/Add.1
Page 97
Answer:
Based on the Indonesian system, public prosecutor has an authority  to make a decision whether the action
violates the public order or not,  but there is a  procedure in the trade mark law and the availability for
opposition procedure.
Question 38:
Regarding the requirement to apply for the mark in order to file the petition, under section 2 of Article 68,
the owner of an unregistered trademark can petition for cancellation only if the owner first applied for a
trademark registration.  The TRIPs Agreement requires Members to protect unregistered well-known
marks.  It appears problematic for the national law to require the holder of an unregistered well-known
mark to apply for registration in order to prevent anot her from registering a mark that would be confused
with the well-known mark.
Please explain how Indonesia’s law to require well known mark holders to apply for registration of their
mark, in order to be eligible to petition to cancel an unauthorized registration of the mark by another, is
consistent with the TRIPs Agreement’s provisions for protecting unregistered well-known marks.
Answer:
The protection of well known marks is provided in paragraph (1) letter b of articles 6 of the Mark Law.
With respect to a well known marks is not registered in Indonesia but widely recognized amongconsumers, at the time of its filing, an application for the registration of an identical or similar mark filed
by a person other than the owner of the well-known mark s with respect to goods or services identical with
or similar to those of the well-known marks is due to be refused.
Moreover paragraph (2) of article 6 of the Mark Law provides that the provision as referred to in
paragraph (1) letter b is also applicable to goods and/or services, which are not of the same kind, providedthat it fulfils certain conditions that will be regulated further by Government Regulation. The protection
of well-known marks is also provided in paragraph (2) of article 37 of the mark law, where a request for
the renewal of a registration of mark shall be refused by the office, if the relevant mark has similarities in
its essential part or its entirety with a well known mark of another person, taking in to account the
provision as referred to in article 6 paragraph (1) letter b and paragraph (2
Application for registration is only required in case of the unregistered well-known mark holder want to
file a lawsuit for cancellation of a registered mark.
Question 39:
Mandating that a license agreement remain in force as a contract between a (former) licensee and a new
trademark owner--who never agreed to the license—is a species of compulsory licensing.  Article 48 of
Indonesia’s Trademark law requires a compulsory license of the trademark by the registered trademark
owner.
Please explain how Article 48 is consistent with  Article 21 of the TRIPs Agreement which expressly
forbids compulsory licensing of trademarks.WT/TPR/M/117/Add.1
Page 98
Answer:
Article 48 of the Indonesian Trademark Law is not
Copyright and Related Rights
Question 40:
Does the Copyright Law provide retroactive protection for works, sound recordings, and performances as
required under the TRIPs Agreement?
Answer:
Yes, Indonesia provides retroactive protection for works, sound recordings, and performances as required
under the TRIPs Agreement
Question 41:
Could Indonesia please explain how Article 57 of the Copyright Law comports with the Berne three-part
test in Article 13 of the TRIPs Agreement?
Answer :
Article 57 of the Copyright law complies with the article 13 of TRIPS Agreement.Question 42:
Could Indonesia please explain how the compulsory licensing provisions in Article 16 of the Copyright
Law comport with the TRIPs Agreement?
Answer:
Article 13 of the Copyright law complies with  the TRIPS agreement.IV. TRADE POLICIES BY SECTOR
(2) Agriculture and Forestry
(ii) Main Policy Developments(a) Border Measures
Agriculture tariffs
Question 43:
The United States government is concerned by the negative impact that Indonesia’s proposed high tariffs
would have on market access for rice, sugar, corn, and soybeans.  We encourage Indonesia to maintainthe current tariff rates for these commodities, which benefit Indonesian consumers with lower prices for
staple commodities.WT/TPR/M/117/Add.1
Page 99
Answer:
Firstly, for those commodities, the applied tariff rate has been much lower than the bound rate and very
low by industrial standard. Secondly, those commodities are very sensitive with regard to food security,
rural development, and poverty alleviation. Therefore, we  need the flexibility in determining the tariff rate
of those commodities as long as it does not exceed the bound tariff rate.
Ban on chicken parts
Question 44:
The United States government has consulted with the Government of Indonesia concerning the ban on
imports of chicken parts mentioned in para. 19 of Part IV of the Secretariat's report, which we estimate
costs U.S. exporters $10 to 25 million per year.  We were assured in 2001 that the ban on poultry imports
would be removed.  Although presented as an issue of compliance with Halal standards, the
Government's statement (para 44 of the Government's report), as well as footnote 33 in the Secretariat'sreport, suggest that Indonesia's principal concern is to protect domestic industry from competitively-
priced imports.  The ban also violates Article I of the GATT.
We would appreciate Indonesia providing the reasons for the ban remaining in force and the
government’s plans for the ban’s removal.
Answer:
Principally Indonesia does not impose banning of chickens in the whole forms, however, the importation
of chicken parts will be allowed only if the Halal process is fulfilled.
Question 45:
The U.S. system of Halal certification was thoroughl y reviewed by an Indonesian team in 2000 and found
to be fully compliant because we have established the appropriate mechanisms for export of Halalcertified poultry with the Government of Indonesia and U.S. Islamic Centers.
Could Indonesia please provide us the rationale be hind its indicating the need for another review?
Answer:
Indonesia understands that the US system of Halal certification has been once reviewed in 2000, but since
then, Indonesia frequently experienced that the non-halal chicken parts have entered the local markets.Therefore, further independent re-inspection to all fa cilities and institutions involved in the process of
Halal certification in the USA is needed.
(page 4)
Question 46:
Could Indonesia please comment on the extent that support provided through Indonesia’s Protekan 2003
program contributes to the creation or maintenance of capacity in the fisheries sector?WT/TPR/M/117/Add.1
Page 100
Answer:
Protekan 2003 has been determined as an action plan to navigate the fisheries sector development.  This
advisory document outlines the policy framework to conserve and manage Indonesia’s fisheries
resources.  The protekan 2003 is reviewed annually in accordance through various measures of
responsible fisheries management approach among others stock assessment and statistics sampling.
Question 47:
How are factors such as oversupply and over capacity  taken into account when  determining the amount
of support given to the fishing industry?
Answer:
Indonesia is aware of the fact that existing over-supply and over capacity issues could bring into resources
management problems.  To prevent this occurrence in 9 Indonesia’s fishing management areas, various
steps are made to prevent at the early stage by implementing stock assessment and continuesimprovement of licensing policy
Question 48:
Would the Government of Indonesia please provide the total amount of subsidies going to the fishing
sector during the reporting period?
Answer:
Indonesia recognizes that fishery subsidies offer significant opportunities for fishery  economic
diversification and the generation of wealth of all fishermen, and in particular for artisanal fishermen.  In
this way, it is a need to look significantly at different categories of subsidies, their nature and impact as
well as their situation under existing discipline.
(4) Manufacturing
(page 83, para. 53)
The Secretariat report notes that import restrictions and special licensing requirements remain in force for
certain goods (textiles, textile products, footwear, electronics, toys, engines and pumps, hand tools, and
tractors), and exclusive import rights are accorded to local producers of certain goods (alcoholic
beverages, textile cloth, hot- and cold-rolled coil iron, and steel).
Question 49:
Could Indonesia please clarify why import restrictions  and special licensing requirements remain in force
for these goods? What plans does Indonesia have for their removal?
Answer:
As explained above, the idea to regulate textiles  is to combat smuggling.  However, the imposition of
Special Import Identification Number (NPIK) for textil es products, footwear, electronics, hand tool, toysWT/TPR/M/117/Add.1
Page 101
and hot-and cold rolled coil iron and steel are also to prevent smugglers sell their products under value
which could adversely affect domestic market and also prevent unfair competition among domestic
traders.
(ii) Automotive
(page 83, para. 59)Question 50:
Since 1999, Indonesia has lowered its tariffs on autos.Does Indonesia plan on further lowering the 80% ta riff on autos and the 25-50% tariff on CKD kits?
Answer:
 Since Indonesia has significantly reduced the tariff peak of 200% to 80%, no plan for the time being to
further reduction of the tariffs itself.  With respect to the rationale to rising luxury tax on sedan and SUV
are to increase the government revenue from this sector.
Question 51:
It would be helpful for Indonesia to provide its rationale for raising the luxury tax on sedans and SUVs
from 50% to 75% ?
Answer:
The 75 % luxurious tax only applies to sedans and SUVs with the engine capacity more than 4000 cc.
These type of motor vehicles are quite luxury for Indonesia people and can only be consumed by certain
people with high income.
(5) Services
(page 85, para. 67)
Question 52:
Could Indonesia please explain why it retains foreign in vestment limits in certain sectors, including in
computer and related services, other business services (e.g. architecture), professional services (e.g.
engineering), and construction and related engineering services.
Could Indonesia also please provide its rationale to require foreign firms to partner with a local
company?
Answer:
There are several reasons of why Indonesia still retain foreign investment limits in certain sectors namely:WT/TPR/M/117/Add.1
Page 102
a) The level of development of each sector needs careful considerations, in certain sectors limitation
of foreign ownership is expected  to improve domestic capacity as well as giving an opportunity
for domestic parties to adjust to the changing market conditions;
b) The myriad numbers of domestic construction and professional service providers have caused
some concerns for the Government of their well-being giving the fact that domestic serviceproviders absorbed many Indonesian labours and consisting of SMEs.
(ii) Communications
(a) Telecommunications
(page 92, para. 88)
Question 53:
The Secretariat report notes that Indonesia has agree d to reform its telecommunications market including
privatization. Could Indonesia please share with us  its plans to privatize the state-owned monopolies of
Telkom and Indosat?
Answer:
Indonesia has privatize Telkom and Indosat through their IPO respectively in 1995 and 1996. The recent
policy on those two telecom companies that Indosat would be fully privatized in which GoI will not be
the major share holder. Then, Telkom would be priv atized while GoI will remain the major share holder
in it.
(page 92, para. 89)
Question 54:
The Secretariat report states that Indonesia intends to establish an independent telecommunications
regulatory agency to provide for interconnection and universal service obligations. When does Indonesiaanticipate establishing this independent regulatory agency? Will the new Ministry of Communications
and Information take on these regulatory responsibilities?
Answer:
Indonesia is seriously considered to establish independent regulatory agency.  In principle Indonesia agree
with the idea of separating market player and market  regulator.  It is expected that the independent
regulatory body will be established at the end of this year.  Currently, there is no discussion or any
indication that The Ministry of Communication and Information will become a regulatory body.
(b) Broadcasting and audio-visual
Foreign ownership of private or special broadcast institutions is prohibited.  Foreign investors are also
prohibited from investing in film production, technica l filming services, export and import of movies,
film distribution, and screening.  Indonesia prohibits foreign film and videotape distributors fromWT/TPR/M/117/Add.1
Page 103
establishing branches or subsidies.  The provision of importation and distribution services is reserved for
100% Indonesian-owned companies.
Question 55:
Does Indonesia have plans to lower or eliminate th ese restrictions and when will they be implemented?
Answer:
Based on Law Number 32 the year of 2002 about Broadcasting, foreign ownership of private or special
broadcast institutions is limited, not more than 20% of the total share (capital) and should be a minimum
owned by two shareholders. The mechanism of foreig n participation in private or special broadcast
institutions still under discussion and will be regulated further in form of Government Regulation.
Given the fact that Law Number 32 the year of 2002 has just enacted,  and some of the implementation
regulations are yet still to comes, Indonesia is currently have no plan to lower or eliminate restrictions in
foreign participation.
In regard to the film production, technical filming services, export of import movies, film distribution,
and screening the policy could be explained as follows:
• Film distribution can only be conducted by film distribution company.
• Every film production company is permitted to distribute its own film production.
• Before film are distributed, all films must pass the censorship procedures assigned by
film censorship institution. This rule appl ies to both film and film advertising, both
import and export.
• Every film production company must optimize the available domestic national resources.
REPLIES TO QUESTIONS RAISED BY VENEZUELA
II. Trade Policy Regime:  Framework and Objectives
(8) Foreign Investment Regime
Recent performance and developments (paragraph  41)
Venezuela welcomes the modification and modernization of Indonesia´s Investment Regime. In this
context Venezuela would appreciate if Indonesia coul d provide further clarification on the following
issues:
Question 1:
What is the current status of the new draft Law on Investment that will replace the one of 1967? What are
the new main features which will be introduced?WT/TPR/M/117/Add.1
Page 104
Answer:
We have delivered the reply to other country member regarding this similar question. The new investment
law draft is currently being reviewed within the departmental agencies. The draft was submitted to the
State Secretariat waiting for President’s initiative permit to further be discussed in the Parliament. The
government of Indonesia expects that the draft will be accomplished immediately.
Question 2:
Venezuela´s understands that the Law on Domestic Investment of 1968 contains relevant provisions
relating to treatment of foreign investment. Does the scope of the reform of Indonesia´s Investment
Regimen include the revision this Law?
Answer:
This new law draft will cover the foreign and domestic investment legislation, of which is aimed at
facilitating and easing the investment activities.
Scope of the Reform of the Central Bank of Indonesia (Bank Indonesia)
The Report of Secretariat states (Chapter IV , par. 73) the following:
“(…) The independence and prudential responsibilities of Bank Indonesia were also enhanced; it was
made an "independent state institution free from any interference of the Government and or other parties"
tasked specifically with bank regulation and superv ision, including both "direct and indirect supervision"
(Act Concerning Bank Indonesia, No. 23, 1999)*
* As an independent state institution, Bank Indonesia has full autonomy to fo rmulate and implement its
tasks and authority as stipulated in the Act, and extern al parties are strictly prohibited from interfering.
It must refuse or disregard any such attempts in any form from any party.
The Report of the Government  states ( Par. 20 ) the following:
“To enhance the central bank’s credibility, the new central banking Law No. 23, 1999 was enacted that
gives Bank Indonesia a full autonomy to formulate and implementing monetary policy in order to achieve
the stability of the Rupiah value.  The new law provides considerable scope for independence in
achieving the price stability objective.  Under this new legislation, Bank Indonesia is no longer allowed to
extend credit to the government.  There are three Bank Indonesia’s major functions given by this newlegislation, i.e. to formulate and implement monetary policy; to regulate and safeguard the payment and
financial system, and to regulate and supervise the banking system.”
Question 3:
In this context, Venezuela would appreciate if Indonesia could provide further clarification on the scope
of the participation of Bank Indonesia on policies relating to price stability and currency stabilityWT/TPR/M/117/Add.1
Page 105
Answer:
Under the new central bank law No.23 of 1999, Bank I ndonesia (BI) sets the inflation target that should
be announced at the beginning of the year, and BI is to be accountable for the target. To achieve the target
BI sets the monetary policy consistent with the target. BI also has the discreation to use monetary
instrument, including conducting open market operation, fixing the discount rate, and setting reserverequirement. With respect to operating target, BI has used based money or reserve money. Currently, BI
has set disinflation program intended to lower the inflation rate gradually so as not to impede economic
growth. Under this program, over the medium term  inflation is set between 5%-6% by 2006. For the year
2003, the target was set at 9% with a 1% band. Over the past few years inflation has been on the declining
trend. After rising to 12,5% in 2001 which was higher the target of 10% due mainly to upward adjustment
administered prices and the depreciation of the Rupiah. In 2002, inflation started to decline to 10% and
for 2003 the inflation rate is expected to be  lower than the target initially set at 9%.
__________