Note: Advance written questions by WTO Members and replies provided by the Government of
Indonesia are reproduced in document WT/TPR/M/117/Add.1 and will be available online
at:  http://www.wto.org/english/tratop_e/tpr_e/tp_rep_e.htm.WORLD TRADE
ORGANIZATIONWT/TPR/M/117
11 September 2003
(03-4719)
Trade Policy Review Body
27 and 30 June 2003
TRADE POLICY REVIEW
INDONESIA
Minutes of Meeting
Chairperson:  H.E. Mrs. Mary Whelan (Ireland)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3II. OPENING STATEMENT BY THE REPRESENTATIVE OF INDONESIA 4III. STATEMENT BY THE DISCUSSANT 6
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY 8
V. REPLIES BY THE REPRESENTATIVE OF INDONESIA AND ADDITIONAL
COMMENTS 15
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 21WT/TPR/M/117
Page 3
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The fourth Trade Policy Review of Indonesia was held on 27 and 30 June 2003.  The
Chairperson (H.E. Mrs. Mary Whelan) welcomed the delegation of Indonesia, headed by
Mr. Pos Hutabarat, Director General for International Trade and Industry Cooperation, and the
discussant H.E. Mr. K.J. Weerasinghe (Sri Lanka) .  As usual, the discussant would speak in his
personal capacity and, in accordance with established procedures, he had made available in advance a
broad outline of the themes he intended to raise (document WT/TPR/D/96).
2. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of
the procedures of the meeting.  The Report by the Government of Indonesia was contained in
document WT/TPR/G/117 and that of the Secret ariat in document WT/TPR/S/117.  Copies of
advance written questions, submitted by Canada;  New Zealand;  China;  Australia;  the European
Union;  the United States;  Norway;  Chinese Taipei;  Hong Kong, China;  India;  Colombia;  Japan;Switzerland;  Argentina;  Korea;  Venezuela;  and Brazil, had been transmitted to the delegation of
Indonesia.  These questions and the replies provided by the delegation of Indonesia are reproduced in
WT/TPR/M/117/Add.1.
3. She had read with great interest the reports prepared for this Review by the Government of
Indonesia and the Secretariat.  Both reports highlighted the fact that since the 1997 financial andeconomic crisis, Indonesia had undergone considerable economic, political, and social change, as well
as particularly rapid moves to decentralize government and enhance regional autonomy, all of which
had affected the economy.  Unilateral trade policy reforms had exceeded WTO obligations in certain
areas, although policy changes concerning a few sensitive items could reflect a more cautious stance.
It would appear that Indonesia was also taking a more "proactive" approach to the development ofpreferential trade ties.  She was sure that members would be interested in learning from the
Indonesian delegation how these and other policies might be expected to help alleviate poverty,
increase economic efficiency, attract investment, and ensure recovery from past and more recent
shocks.WT/TPR/M/117
Page 4
II. OPENING STATEMENT BY THE REPRESENTATIVE OF INDONESIA
4. The representative of Indonesia highlighted the macroeconomic, trade and investment
developments and trends since Indonesia's last TPR by referring to numerous indicators.  To contain
the hike in inflation, the central bank had raised interest rates and had then begun to ease monetary
policy so as to help accelerating the economic recovery.  He highlighted the two major strategies forrestructuring the banking system:  the recap programmes and the temporary blanket guarantee
scheme;  and the strengthening of the banking system.  He referred to the 1999 legislation
decentralizing some authority to Indonesia's 30 provinces and 410 districts.
5. The objective of fiscal consolidation was to establish a sound and sustainable fiscal position,
through streamlining expenditure and raising domestic revenues while maintaining economic
stimulus.  To increase domestic revenue, the Government had sought to strengthen tax collection,
broaden the tax base, and improve services to taxpayers.  To streamline expenditure, the Governmenthad cut development expenditures and subsidies on particular commodities and services such as oil
and utilities.
6. He, inter alia,  confirmed the considerable drop in approved FDI.  The key economic reform
programmes were aimed at reviving the confidence of investors and donors and improving the local
competition environment.  Indonesia had simplified some of the investment licensing procedures,including granting FDI approval authority to Indonesia's embassies.  New fiscal incentives for at least
three years were provided to new investors in a number of pioneer industries located in the regions
outside of Java and Bali.  An additional year of these incentives was extended to firms employing at
least 2,000 workers at the commencement of commercial production and to joint venture firms with at
least 20% of their equity owned by cooperatives.  A comprehensive draft investment law was beingreviewed for submission to the parliament.
7. Recent trade policy and trade-related objectives involved industrial revitalization (on textile
and textile product, electronics, footwear, wood processing, and pulp and paper industries) and
development (leather and leather product, fish processing, crude palm oil, fertilizer and agricultural
machinery and equipment, food products, software , jewellery and handicraft industries);  export
development, empowering SMEs as support industries;  and increasing bilateral countertrade
arrangements.
8. Tariff levels had been reduced from 9.34% in 1998 to 7.23% in 2003.  Products excluded
from tariff reduction were certain agricultural products, automotive products, chemical products,
plastic goods, and metal products, and alcohol and alcoholic beverages;  specific tariff rates on rice
(Rp 430/kg. equal to 30% ad valorem ) were in force since January 2000.  To fulfil Indonesia's
commitments in ASEAN FTA, all products had been covered by the CEPT Scheme.
9. Since the last Trade Policy Review of I ndonesia, the Government had replaced import
licensing on dairy products (7 tariff lines) from approved importer to general importer;  eliminated the
BPPC monopoly on cloves (2 tariff lines) by giving import licences to general importers;  abolished
the BULOG monopoly on rice (4 tariff lines) by giving import licences to general importers;
eliminated import restriction on automotives (47 tariff lines) by giving import licences to generalimporter (IU) and registered importer/sole agent (AT);  liberalized sugar (7 tariff lines) and rice
(4 tariff lines) imports, by giving import licences to producer importer.  Presidential Decree No. 84/02
concerning safeguard measures was issued on 16 December 2002.  On standardization, Indonesia had
improved its regulatory framework, developed guidance for standards formulation "Indonesian
National Standard – SNI", and adopted a standards mechanism in line with ISO Guide-21.
10. Export taxes for palm oil products (CPO and it s derivative) would be maintained.  However,
the scope and tax rates (level, dispersion) would  be reduced considerably.WT/TPR/M/117
Page 5
11. He indicated recent legislative and institutional developments in areas such as intellectual
property rights (IPRs) (on plant variety protecti on, industrial design, layout-designs of integrated
circuits, patents, trade marks, copyright), compe tition policy, consumer protection, and labour (law
accomplished in 2003, Industrial Relations Dispute Settlement Bill under discussion at the
parliament).
12. Under the Power Sector Restructuring Programme, a new Electricity Law was promulgated
on 23 September 2002 to allow the industry in certain areas to operate on the basis of market
competition rather than state monopoly.  Unde r the National Development Programme (PROPENAS),
Indonesia would phase out subsidies for oil and gas by 2004.
13. The capital market subsector was open to foreign agencies willing to offer their stocks in
Indonesia.  The insurance subsector was relatively liberal.  Market access and national treatment for
foreign leasing companies, credit cards, and consumer financing had been opened.  Taxi-cab, city buspassenger, inter city or province, ferry, train and passenger, cruise passengers, and rental service, were
closed to foreign investors.  Foreigners could participate in the form of a joint venture in international
shipping (up to 95% equity), and certain port activ ities.  With regard to telecommunications, the
National Information Technology Framework had been established;  and Law No. 36/1999 was
formulated to encourage private sector participation in telecommunications activities.  A recoveryaction plan following the Bali tragedy comprised four main aspects of tourism development:  security,
social, product development, and marketing.
14. The direction of Indonesia's future trade policy was towards, inter alia :  developing economic
resilience;  increasing productivity and intern ational competitiveness;  empowering domestic
products;  strengthening foreign trade strategy and po licy, mainly in connection with the effectiveness
of ASEAN as a free-trade area in 2003, and compatib ility of all policies with the WTO rules;  and
creating linkages between industry and policies, activities and use of invention and technology
development.  Economic development was to be ba sed on policies aimed at achieving high, equal, and
just prosperity for the people as well as on development of regional autonomy and active participation
of the people.  Policies were to be formulated in a transparent and responsible manner.  To accelerateglobal competitiveness, five main strategies had been formulated:  export development; development
of industries with competitive advantage;  strengthening of market institutions;  tourism development;
and improvement of science and technology capability.WT/TPR/M/117
Page 6
III. STATEMENT BY THE DISCUSSANT
15. The discussant (H.E. Mr. K.J. Weerasinghe), in his general remarks, recalled that although
Indonesia had faced the adverse effects of major political difficulties and crises (East Timor, Bali
bombing), its economy had stabilized, the IMF relationship had been restored and debt-service
obligations had been rescheduled.  The remaining challenges could be tackled with international
support and assistance, good governance, prudent macroeconomic management, and the right liberal
trade policy instruments.
16. With regard to economic environment, he recognized that there had been noticeable
macroeconomic improvements but that the economy remained fragile, burdened with a large public
debt overhang, fiscal pressures, and weak governance.  Privatization needed to be accelerated for the
156 state enterprises with numerous subsidiaries that were operating in Indonesia.  He asked the
authorities to elaborate on why privatization was lagging behind, and on plans to expedite theprivatization programme and remove exclusive import and export rights.
17. Indonesia's economic growth had previously been generated by foreign investment, but
performance had not been satisfactory since Indonesia's last TPR despite the large domestic market.
To revive growth, this should be an important pillar of the economic strategy.  He asked when the
new investment legislation was to be enacted and whether any specific measures were envisaged to
support the investment climate.  He also asked the authorities to share their experience on
decentralization and indicate whether there was any conflict between decentralized policies and those
of the central government, or whether decentralization had led to a positive competitive environment
for foreign investors.
18. Indonesia's participation in regional and bilateral agreements was limited but expanding and it
was committed to the multilateral trading system;  he was interested to know its thinking on
regionalism.  To what extent the pursuit of open regionalism would avoid trade diversion.  Whether it
would also be useful to expand the free-trade area to other south Asian countries and to look at the
merit of super-cumulative rules of origin, to include countries in the SAARC and ASEAN, and to
expand economic integration to South Asian countries.
19. On trade policy measures, he noted the decline in the average applied MFN rate, the large gap
between final bound and applied rates and that the latter exceeded the former on 41 items.  He asked
whether ad hoc tariff increases for wheat flour, rice, sugar, and steel were taken to protect domestic
producers from import surges or for other reasons;  and whether Indonesia considered these items to
be strategically important.  He wondered whether such ad hoc tariff increases were consistent with
Indonesia's overall trade policy regime, which had been quite liberal.
20. The scope of import restrictions and licensing for certain sensitive items appeared to have
increased through new special import licences, granted on the basis of domestic need, and exclusive
import rights to domestic producers.  The regime seemed to be somewhat opaque.  He sought
confirmation that these measures were consistent with WTO import licensing requirements and that
notification obligations in this area had been fulfilled.  While noting the implementation of the WTO
Customs Valuation Agreement as from 2000, he sought comments on the possible move away fromthe transaction value to a higher "customs price".  He observed that Indonesia's increasingly stronger
link between countertrade operations and government procurement practices could create trade
distortion.  He asked about the economic benefits of countertrade and the consistency of government
procurement methods with non-discriminatory principles of the WTO.  He urged Indonesia to share
its views on the multilateral framework on government procurement, as an active participant in theWTO Working Group in transparency in government procurement.  He asked what benefits Indonesia
could derive, from a developmental perspective, from the ongoing multilateral trade negotiations.WT/TPR/M/117
Page 7
21. He noted the regulatory developments and institutional constraints relating to the effective
protection of intellectual property rights (IPR S) and suggested more technical assistance on
investigative techniques and expertise for effective enforcement of IPRs.
22. On sectoral policy developments, he recognized the significance of food security for
developing countries and highlighted recent agricultural policy developments such as market supportfor rice, payments by the state agency BULOG, a nd the subsidy on locally made fertilizer for small-
scale rice producers.  He emphasized the need to maintain a balance between the liberalization of
agricultural trade and the flexible policies needed to protect the livelihood security of subsistence
farmers in rural areas.  Certain sensitive manufacturing sectors still faced high tariffs and non-tariff
restrictions.  He asked for the economic rationale for granting exclusive import rights to local
producers of some of the sensitive goods.
23. In banking, the granting of licences was subject to economic needs test and foreign banks
needed to be among the 200 largest banks in the world to obtain a licence in Indonesia;  these
requirements were not stipulated in Indonesi a's GATS commitment.  In the telecommunications
sector, he noted that partial liberalization was to be accelerated and asked whether the privatization of
the statutory duopolies, Telecom and Indosat, was envisaged.
24. Trade liberalization and other economic reforms had contributed to Indonesia's turnaround
following the Asian crisis.  Indonesia's commitment to  the multilateral trade liberalization process and
to the Doha Development Agenda (DDA) could help its economic recovery and to meet the country's
developmental and social challenges.  Therefore, Indonesia deserved continued support and assistance
from its trading partners.WT/TPR/M/117
Page 8
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY
25. Members appreciated the policy reforms and socio-political changes, which had contributed
to Indonesia's recovery from the 1997 Asian financial crisis and the stabilization of the
macroeconomic conditions.  Several Members expressed concern over the low level of foreign direct
investment (FDI) and enquired about action taken (particularly the new investment law) or envisagedin this respect.  Members noted the negative aspects and effects of recent decentralization in several
areas.  Several Members recalled that many additional interests and issues of concern in numerous
areas (foreign investment;  standards and technical requirements;  IPRs;  specific sectors, etc.) were
embodied in their advance written questions.
26. The representative of Japan indicated several aspects of and the mutual benefits from the
close bilateral relationship in the political, cultural , economic, trade, and investment fields, including
the possibility of a WTO-consistent bilateral economic partnership agreement (EPA).  Infrastructure(e.g. unfinished access routes between ports and production bases, insufficient electricity supply) in
Indonesia needed to be further improved so as to at tract more FDI;  Japan provided assistance for the
construction of adequate infrastructure, for example, through yen-loan programmes.
27. There was need to enhance the support industries, which provided electronic and machinery
parts to the main industries.  His delegation expected the Indonesian authorities to implement theimportant measures contained at their April 2002 "Mid-Term Action Plan for Small and Medium
Enterprises Development (MTAP)".  He noted problems caused by the labour movement in recent
years and hoped that upon implementation of the March 2003 labour law factories could operate in a
stable manner.
28. He pointed out that regional decentralization had given rise to a new form of confusion (e.g.
regulatory and taxation matters) and expressed the hope that regional autonomy was to be enhanced
by considering its effect on foreign investment.  Problems relating to legal implementation
(inappropriate implementation of laws, regulatory unpredictability, smuggling) confused foreign
investors and affected their decisions.  Japan hoped that the new draft investment law would be
enacted in due course.
29. Although Indonesia had become a party to th e WIPO Copyright Treaty, and IPRs were
increasingly important, its piracy rate was the third highest in the world;  therefore Japan urged the
Indonesian authorities to take further enforcement measures.
30. He welcomed the fact that foreigners could hold up to 95% in equities of ocean freight
services, and noted the progress in reforms in the financial services sector.
31. The representative of Canada indicated the magnitude of his country's trade and investment
links with Indonesia.  Indonesia was now experiencing  a period of consumer-led growth that could be
one of the foundations for an improved economic future.  Decentralization, while a positive
development in many respects, had also led to a confusing and overlapping regulatory regime (e.g.
forestry concessions).  Despite recent regulatory and institutional reform plans (Anti-Corruption
Commission in 2002, envisaged amendments to bankruptcy provisions in 2003), more aggressive
measures could be undertaken to strengthen the rule of law to improve the business and commercialenvironment.
32. Indonesia had resisted protectionist pressures in the face of difficulties that had arisen from
the 1997 Asian financial crisis.  Instead, it had implemented trade liberalization and other structural
reforms, mainly unilaterally but in line with its multilateral commitments and, at times, exceeded
WTO obligations such as in financial services.  However, a climate of commercial uncertainty arosefrom an increasingly ad hoc trade policy formulation.  She noted that although MFN tariffs had
declined, there was a large difference between bound and applied rates and high tariffs remained forWT/TPR/M/117
Page 9
certain manufacturing sectors.  With respect to government procurement, Canada noted that foreign
companies continued to face difficulties in attempting to bid on government procurement projects as a
result of, inter alia,  a non-transparent/discriminatory tendering process and countertrade provisions
that required foreign firms to meet export-performance guarantees.
33. When a country combined the rule of law, transparency, a fair regulatory regime, and open
markets, the results could be beneficial to that country and its trading partners.  She was hopeful of
the contribution of technical assistance in this regard.  Canada was looking forward to the benefits that
Indonesia, together with other recipient countries, would derive from the Canada-funded five-year
APEC Economic Integration Programme, which was focused on building capacity to function
effectively in the WTO, meet their WTO obligations, and facilitate regional and global trading
relations.
34. The representative of New Zealand applauded Indonesia's increased and continued
commitment to maintaining an open trade regime.  His delegation encouraged Indonesia to maintain
the momentum of economic and trade reform, as well as to strengthen the rule of law and government
transparency, the major impediments to doing business in Indonesia.
35. Trade liberalization, in particular in the agriculture sector, was a core element of poverty
alleviation, though the path to increased prosperity needed continued structural adjustment.  A highpriority of Indonesia's trade policy was to expand and diversify its exports, therefore he urged
Indonesia to continue to push for the highest level of ambition possible in the current round of
negotiations and to table its offer on further liberalization of trade in services.
36. He was concerned over recent signs of possible policy backsliding in key areas such as rice
and sugar, which might signal a more protectionist stance.  True food security could only be obtainedthrough an open international market, and an ambitious outcome from the Doha Round would help to
attain this objective.  Tariff escalation on agricultural and forestry products increased the potential for
distortion in the allocation of resources in the economy;  therefore he urged Indonesia to reconsider
this policy and continue to seek ways to make its economy more competitive across the board.
37. The representative of China stated that as a result of the smooth development of bilateral
political relations, bilateral economic, trade, and investment cooperation had shown a sustained and
healthy momentum.  There had also been close and friendly cooperation in multilateral, plurilateral,
and regional fora.  The economic situation in Indonesia remained fragile, and measures were needed
to overcome the difficulties.  The recovery and development of the Indonesian economy would
contribute to the regional economy as well as the global economy.
38. Despite trade liberalization achievements so far, China wished to see Indonesia improve its
adherence to the multilateral rules governing import restrictions and customs valuation, and lower thethreshold in the area of trade in services.
39. The representative of Australia highlighted the rising bilateral trade flows between his
country and Indonesia.  A range of measures to boost further the bilateral economic and trade
relationship had been considered at the sixth Australia-Indonesia Ministerial Forum, (March 2003).
The two countries shared a commitment to comprehe nsive agricultural trade reform in the context of
the Doha Round.
40. Australia noted the general reduction in applied tariff but had some concerns about evidence
of increasing protectionist sentiment in Indonesia as well as on the impact of this development on
trade and the longer-term implications for Indonesia's competitiveness.  An open trade policy was a
key element of sustainable economic growth.WT/TPR/M/117
Page 10
41. The representative of the European Union noted that despite progress Indonesia still faced
serious economic challenges due to recent external and internal developments.  He welcomed the
further deepening of reforms and their impact on poverty alleviation and sustainable exploitation of
national resources.  An effective judicial system, good governance, and a clampdown on corruption
were fundamental.
42. As a result of Indonesia's export diversification policy, bilateral trade and investment relations
between Indonesia and the EU were among the most  important of all the ASEAN countries;  FDI
inflows from the EU and Indonesia's large bilateral trade surplus were a financial cushion helping to
serve the large external debt.  The EU remained convinced that the decline in investment was
attributed to factors such as corruption and legal uncertainties, security problems, labour conflicts, and
less competitive wage structure as well as to the "confusion" resulting from the ongoing
decentralization process in Indonesia.  He urged the authorities to continue improving theinfrastructural environment so as to attract more FDI.
43. Indonesia's regional and multilateral trade policy could be described as "wait and see", and
essentially followed the initiatives of other developing countries.  Recent policy seemed to be more
proactive towards bilateral agreements, outside the ASEAN context.  He asked for the Government's
long-term expectations for the country's economy in a trade policy context focussed on bilateral ratherthan multilateral liberalization.  He wondered whether reforms at multilateral level would help
Indonesia to improve its economic environment, in particular make it more investor-friendly.
44. Indonesia had made good progress in opening up its external trade regime through annual
deregulation packages, involvement in WTO negotiations, pressure from the IMF reform programme
and regional commitments.  However, some protectionist habits seemed to re-emerge occasionally tosatisfy claims from interests groups.  He requested the Government's view on the issue of ad hoc
trade-policy-making and the measures it intended to take to overcome structural problems.  By end
2003, a Trade Support Programme designed by the European Commission to provide a technical
assistance (training) was to be operational.
45. He emphasized the important linkage between  trade and growth and how the successful
conclusion of the DDA negotiations would boost international economic growth in the long-term.
The authorities had not made a clear reference to the ongoing DDA negotiations although Indonesia
had a lot to gain from the round;  therefore he, inter alia,  encouraged Indonesia to get more actively
involved in the multilateral trading system.  Th e EU remained open to explore ways in which
maximum advantage could be taken of the European market.
46. The representative of Thailand speaking on behalf of the ASEAN congratulated Indonesia for
its determination and resolve in overcoming a series of serious problems since its last TPR in 1998, as
well as for its positive economic developments in several areas and its renewed efforts to accelerate
structural and macro reforms.
47. Indonesia had substantial trade and investment  links with its ASEAN FTA partners, though
there had been a slight decline in the share of ASEAN's exports to Indonesia due mainly to the rapid
increase in Indonesia's trade with other countries.
48. Indonesia's active participation in international/multilateral/regional fora, liberal
trade/investment policies, unilateral MFN tariff  reductions, binding commitments, and reduction of
non-tariff barriers, were appreciated.  Liberalization in financial, telecommunications, and shipping
services had exceeded those of Indonesia's major trading partners;  this autonomous liberalization to
receive credit from participants in the current round of services negotiations.
49. The representative of the United States recognized Indonesia's severe economic and political
challenges since its last TPR, and the magnitude of its efforts (e.g. fiscal and monetary policy) toWT/TPR/M/117
Page 11
overcome their effects.  The United States had supported these efforts by providing an additional
US$100 million in GSP benefits and undertaking a joint US$350 million initiative to develop the oil
and gas sector.
50. The United States applauded Indonesia's leadership in promoting regional trade liberalization
through the APEC and the ASEAN Free Trade Area (AFTA) initiatives.  The United States andIndonesia had made a solid commitment to strengthen their bilateral relationship through a Trade and
Investment Framework Agreement.
51. Indonesia had been a leader in promoting overall trade liberalization, significantly lowering
tariff barriers and dismantling many formal non-tariff barriers, though there was limited progress on
legal reform and economic governance.  The United States was concerned about the recent adoption
of trade measures on several products (e.g. agricultural tariffs, import ban on chicken parts, textile
licensing requirements), and sought confirmation on Indonesia's continued commitment to tradeliberalization.  Recent textile licensing requirements had raised similar concerns:  the United States
expected Indonesia to abide by its WTO obligations and to dismantle its licensing requirements for
textile products, as they went far beyond a licensing procedure, and restricted and distorted trade.
52. This TPR would help draw Indonesia's attention to areas where it could further liberalize its
regime and attract investment.  She urged Indonesia to comply with the WTO Agreement on CustomsValuation, and requested an update on the customs reform strategy.  The United States looked forward
to Indonesia supporting global trade policies to impr ove trade facilitation as it did within APEC and
ASEAN.  To improve the investment climate Indonesia would also need to address the lack of
contract enforceability and improve protection of IPRs, the transparency and predictability of its
regulatory environment, the consistency and enforcem ent of its legal system, and other reforms.  She
reiterated the U.S. offer of assistance in addressing IPR-related challenges.
53. The representative of Norway expressed appreciation for Indonesia's strong commitment to
the multilateral trading system.  The basically open trade regime was one of the principal reasons for
the impressive growth of the Indonesian economy.  Bilateral trade with Indonesia had increased and
many Norwegian companies were represented.
54. Indonesia played a very active role in the WTO and wanted a strong rules based multilateral
system.  Norway trusted that Indonesia would assist in ensuring a non-agricultural market-access
result in the Doha Round that entailed real market-access openings.  Norway hoped that Indonesia
would support the work in the anti-dumping negotiations aimed at ensuring avoidance of abusive anti-
dumping investigations in the future.
55. Norway hoped to find solutions in the agricultural negotiations that took into account the non-
trade concerns both in developing and developed countries rather than tariffs only.  In services,overall market access in Indonesia was fairly liberal, though further liberalization of the energy sector
was needed.  It would be in Indonesia's interest to allow foreign ships access to coastal trade.
56. Norway expected Indonesia's full support for investment negotiations in the WTO.
57. The representative of the Separate Customs Territory of Taiwan, Penghu, kinmen and Matsu
highlighted the bilateral trade and investment relations with Indonesia.  The advance written questions
of Chinese Taipei were aimed at learning more about Indonesia's trade-related policies and measures
so as to explore opportunities for further bilateral cooperation.
58. Indonesia's tourism industry had suffered most se verely from a series of unfortunate incidents
in recent years.  Despite efforts to revive tourism, Presidential Decree No. 18/2003 restricted the visa-
free facility to only 11 countries and territories (previously covering 48 countries) excluding ChineseWT/TPR/M/117
Page 12
Taipei.  He asked the Indonesian authorities to re-assess its policy and to consider withdrawing the
implementation of this measure.
59. As Indonesia expected an increase of its countertrade activities, there might be opportunities
for Chinese Taipei, especially in view of Indonesia's abundant oil, gas, and other natural resources.  In
this context, Chinese Taipei was therefore interest ed in acquiring more information with regard to
Indonesia's countertrade practices and procedures.
60. The representative of Hong Kong, China, recall ed the very solid and long-standing bilateral
trade and investment relations maintained with Indonesia.  Hong Kong, China looked  forward to
Indonesia's continued growth under a stable environment.  Trade liberalization under the DDA would
contribute to Indonesia's growth and development strategy.
61. Indonesia's efforts in tariff reduction and simplification were encouraging signs.  He asked
Indonesia to share its thinking on the possible direction of future tariff reforms, such as furtherreducing high tariffs and escalation, as well as bridging the large gap between bound and applied
rates.  A simpler tariff structure in general could benefit consumers and industrial users alike.  In a
global setting, reduction of tariffs could also enhance trading opportunities, including south-south
trade.
62. The representative of India recalled the long-standing bilateral historical and cultural ties
between his country and Indonesia, and expressed confidence that trade and economic relations
between the two countries would strengthen further in the years to come.  He refered to the highly
painful and deep economic and structural ongoing reforms, which had led to economic recovery.
Despite economic and political difficulties, Indonesia's faith in and commitment to the multilateral
trading system was unwavering.  Trade liberalization was seen as an important instrument for povertyalleviation.  The introduction of exemplary tariff and non-tariff measures had made the Indonesian
trade regime highly open and transparent, while reforms in the financial sector even exceeded the
WTO obligations;  these were not easily achievable tasks for a developing country.
63. The representative of Switzerland welcomed Indonesia's continued progress in regaining
macroeconomic stability on the basis of sound policies and structural reforms (particularly in the
banking sector).  However, the investment climate was burdened seemingly by corruption and a weak
judicial sector as well as unpredictability regarding the implementation of the decentralization laws
and the opaque proliferation of local regulations and taxes.  Switzerland strongly encouraged the
authorities to step up efforts to implement major stru ctural reforms in key areas such as the rule of law
and governance, while maintaining a liberal trade and investment regime.  Switzerland sought
information on the strategy to strengthen the legal framework as well as on its concept to harmonize
laws and enhance transparency.  He was further interested to hear about experiences regardingcompetition among the different investment entities in attracting foreign investment.
64. Protection of IPRs and dispute settlement in this area were significant factors in trading
relations and investors' decisions.  Although Sw itzerland welcomed Indonesia's efforts, further
progress was necessary to improve legal certainty and law enforcement.  He sought further
information on measures planned to combat counterfeiting and piracy more efficiently.  With regardto tariffs, he encouraged Indonesia to further narrow down the large gap between bound and applied
rates.
65. Indonesia was an active participant in the ong oing DDA negotiations and in some instances
Switzerland's and Indonesia's positions were far apart, especially on the desirability to adapt the WTO
framework to the contemporary economic environment (the so-called Singapore issues).
66. The representative of Argentina praised the improvements in the Indonesian economy, which
still seemed to be fragile.  Growth, though meaningful, was lower than in other countries in theWT/TPR/M/117
Page 13
region.  In the light of a contraction in export markets, a fall in tourism, and a significant reduction in
foreign investment, stabilization policies and structural reform took on great relevance.
67. During the Uruguay Round, Indonesia committed to the elimination of all non-tariff barriers.
He sought clarification on the implementation of restrictions, special rules, and licences on imports of
meat products, including poultry, and sensitive items such as rice, corn, soya beans, textiles, etc.  Hisdelegation requested clarification on the treatment of imports from countries labelled as foot and
mouth endemic.  He asked whether only meat and meat products were affected or whether dairy
products corn, hides, oil, seeds, etc. were also covered?
68. The representative of Korea underlined his country's close bilateral economic relations with
Indonesia, which had undoubtedly contributed to the development of the two countries.  Indonesia
continued to influence economies throughout Asia and around the world.  Korea requested
simplification of Indonesia's import procedure.  A post-entry audit system had been introduced but
under the revised Customs Act of April 1997 an importer had to submit import documents in the form
of computer diskette and then go through an on-site inspection by customs officials at the importer's
warehouse.  With regard to tariff rates on steel products, Korea asked Indonesia to apply the raised
tariff rate on steel products for only one year as was originally planned.  Preshipment inspections on
some steel and textile products, were conducted at the expense of the importers concerned weakeningthe price competitiveness of these products.  He wondered whether these inspections should be
conducted on limited occasions and in a careful, cost-effective manner.  Indonesia was a large user of
anti-dumping measures.  The frequent initiation of an anti-dumping investigation alone could do great
damage to the concerned industry of the exporting countries, therefore he hoped that Indonesia would
be more cautious about initiating such measures.
69. The representative of Venezuela shared many of the concerns of the authorities, in particular
those related to the challenge of defining policy against a background of structural vulnerability.
Unilateral reforms in financial services, progress in regional trade liberalization, the implementation
of the WTO Customs Valuation Agreement, and the updating of the investment legislation were
significant milestones, which proved Indonesia's commitment to the multilateral trading system.Despite friendly bilateral ties, the volume of bilateral trade flows did not reflect existing potential.
She hoped that trade relations between the two coun tries would expand and that certain initiatives
(exchange of information between central banks, reciprocal promotion protection of investment,
promotion of SMEs, science and technology, and inter-institutional cooperation) being negotiated
bilaterally would take form.
70. The representative of Brazil noted his country's close relationship with Indonesia;  it was
working hard to translate this relationship into a mo re expressive bilateral trade.  Indonesia's reforms
had contributed to stabilizing the economy and to fostering economic growth, and Brazil hoped that
Indonesia would soon overcome its remaining economic difficulties.
71. The representative of the Slovak Republic praised Indonesia's trade, structural and macro
policy reforms, but noted that the economy was burdened by a large public debt overhang and fiscal
pressures.  There was a positive sign in the continuing effort to develop a national poverty reductionstrategy by 2004, focused on pro-growth and development policies, including trade liberalization.
While the Government appeared to have recently reviewed its resolve to undertake major reforms,
Indonesia could take advantage of the multilateral system to further lock-in and advance its unilateral
reforms in several areas (e.g. deregulation and privatization).
72. Indonesia generally applied its trade policies on a non-discriminatory basis with a proactive
regional and bilateral trade approach;  "open regionalism" would help Indonesia and its WTO trading
partners to maximize benefits and avoid possible trade diversion.WT/TPR/M/117
Page 14
73. An increased use of tariff and non-tariff measures for specific sectors was not consistent with
Indonesia's liberal and open trade regime.  The large gap between bound and applied tariff rates gave
a certain unpredictability to the tariff.  The product coverage of import restrictions was unclear and
the restrictiveness of non-automatic import licensing was accompanied by exclusive import rights
accorded to domestic producers.  State-trading enterprises, countertrade transactions, exportrestrictions, IPR protection, and the situation in banking services were also of concern.
74. The representative of Djibouti highlighted the close ties between his country and Indonesia,
which, similarly to all developing countries, had some difficulties in implementing the various WTO
rules.  He called on Members not to raise too many unnecessary questions at this meeting because
Indonesia was endeavouring to comply with WTO rules.
75. The representative of Malaysia regretted that a number of extraneous issues (in particular
relating to governance) had been raised at this meeting.  He believed that Members should stick
closely to the spirit and objective of the TPR, which was to look at a Member's economic, trade, and
investment policies.WT/TPR/M/117
Page 15
V. REPLIES BY THE REPRESENTATIVE OF INDONESIA AND ADDITIONAL
COMMENTS
76. The Chairperson invited the representative of Indonesia to focus his responses on three main
themes:  (i) economic environment;  (ii) trade policies and measures;  and (iii) sectoral policies.
77. The representative of Indonesia confirmed that, as proposed, his delegation had grouped its
responses under three themes.  In his oral response, he would address the more general points
underlying the written questions, and some of the concerns highlighted in Members' interventions on
the first day of the meeting.  Replies to the written questions had been circulated and any outstanding
responses that could not be provided during the meeting would be supplied in due course.
(i) Economic environment
78. The representative of Indonesia stated that in addition to the change from an authoritarian to a
democratic political system, and from centralized government to regional autonomy, his country had
had three presidents since1998, compared with tenures of 21 and 32 years in power for the first and
second presidents.  After the 1998 downturn of the economy, the IMF and other international
institutions helped the Indonesia to move toward  recovery; the Government was fully aware that
challenges remained since some issues could only be addressed over the medium and long  term.  The
pace of political reforms was faster than that of economic reforms and the interpretation of laws oftendiffered between central and local governments and even between government and parliament.
79. Democracy had resulted in the emergence of local rules and regulations such as local taxes
and levies;  the Central Government had abolished hundreds of these rules and regulations, which
were not in line with the spirit of the law, and any new local rules involving taxes and levies must be
approved by the Central Government in order to avoid unnecessary additional tax burdens.  Provincialgovernments were authorized to apply taxes on vehicles, water transportation, gasoline, and land
improvements, including water reticulation.  Local governments could impose taxes on hotels,
restaurants, advertising, streetlights, category C mines, and parking services.
80. In the area of investment, the Government had taken an Investment Policy Reform Initiative,
to encourage domestic and foreign investment;  the new Investment Law had been submitted to theState Secretariat.  The Investment Coordinating Board (BKPM) had established an internal task force
(National Investment Team) to resolve all kinds of investment/business cases as well as to assist
investors.  Another substantial measure was the poli cy concerning the division of investment-related
administrative responsibility among the provincial, regency, city, and central governments.
81. With respect to monetary policy, the new law on central bank had provided the bank with
many instruments to manage monetary issues independently;  this had brought out macroeconomic
stability in areas such as interest rates, exchan ge rates, and inflation over the last two years.
82. Fiscal consolidation was aimed at maintaining fiscal sustainability by streamlining
expenditure, cutting subsidies (on specific products and utilities), and raising domestic revenues
through improved tax collection and a broadened tax base.
83. Privatization would increase efficiency and transparency.  In the last four years state-owned
entities in manufacturing, banking, telecommunications, hotels, and other services had beenprivatized.  The privatization programme was to be continued in due course, including the sale of all
assets of companies under the Indonesia Banking Restructuring Agency (IBRA).
84. Regarding institutional issues, Indonesia had increased efficiency so as to better serve the
society.  Efforts were also made to reform the le gal and judicial system and to establish a committeeWT/TPR/M/117
Page 16
to audit of assets of state officials;  however, there were some problems in implementing these
reforms but Indonesia was fully committed to increasing efforts to improve institutional efficiency.
85. Indonesia placed great importance on bilateral, regional, and multilateral relations.  Indonesia
was not against bilateral arrangements such as FTAs provided they increased the utilization of
comparative advantage for both countries involved.  Indonesia had not yet engaged in any bilateralarrangements but had agreed, the previous weeks, to start a joint study to examine the possibility of
establishing a Closer Economic Partnership with Japan.  Indonesia's participation in arrangements on
a regional basis, such as ASEAN-China, AS EAN-India, ASEAN-CER, and ASEAN-Japan, had
expanded.
86. On multilateral issues, Indonesia had participated actively in all WTO ministerial meetings
and would contribute to making the Cancun Ministerial meeting a success.  However, Indonesia was
facing difficulties in implementing some of the WTO rules and regulations due to lack of humanresources in term of skills and experience.  He thanked the WTO Secretariat, the World Bank, the
United States, the EU, Australia, and Japan for providing technical assistance enabling Indonesia to
participate more actively in the DDA.
87. The discussant thanked Indonesia for its useful and comprehensive replies to the numerous
questions raised by many delegations.  He noted developments in decentralization.  He sought
clarification on unanswered questions such those relating to state involvement in the economy (e.g.
exclusive import and export rights, and privatization).  He asked for a more elaborate reply on the
benefits from participation in the DDA.
88. The representative of Indonesia replied that some of the questions, such as state trading
enterprises, would be dealt with in the trade policies part of his replies.  He repeated that Indonesia
participated actively in WTO negotiations, saw the importance of DDA and would contribute
positively to the success of the Cancun meeting.
(ii) Trade policies and measures
89. The representative of Indonesia emphasized that as part of the economic recovery
programme, his Government had significantly reduced tariff and non-tariff measures, thus making its
trade regime one of the most liberal among developing countries.  Social and moral concerns as well
as reducing tension between the rich and the poor were behind the maintenance of high tariffs for
alcoholic beverages and automotive products.
90. Licences were used mainly to control the importation of certain hazardous goods to protect
human, animal, and plant life as well as to prevent smuggling or the illegal entry of various products
into the Indonesian territory.  Given the 18,300 islands, thousand miles of seashore and the limited
number of customs officials, licences were the best instrument against smuggling, which distorted thephilosophy of trade liberalization.
91. Concerning the decree on import licensing on textiles, this was not contrary to the provisions
of the WTO Agreement on Import Licensing Procedures because it provided only for administrative
import procedures.  There was no discrimination against foreign producers provided that all
requirements set under the decree were fulfiled.  The decree could not be considered as a non-tariffbarrier because the import volume and value of the products concerned had increased substantially
since its issue and entry in force.
92. Customs procedures had been simplified through the use of electronic data interchange, thus
importers did not need to be present physically at the port or the customs premises.  The customs
administration provided for special treatment to  selected importers who could be inspected by
customs officers at their factory warehouse.WT/TPR/M/117
Page 17
93. The luxury sales tax policy was used to narrow the gap between the rich and the poor and it
was reviewed periodically on the basis of social and economic developments.  There was no plan to
reduce the luxury sales tax on motor vehicles and motorcycles because they were still categorized as
luxury goods that only few people could afford.
94. BULOG, which was to stabilize the price and supply of staple food and ensure food security,
was the only state-trading enterprise notified under WTO Article XVII of GATT 1994;  no other
state-trading enterprise could be considered within the meaning of Article XVII.  Indonesia's regime
of government procurement was very much in line with UNCITRAL standards and its regulatory
framework was based on the principles of efficiency, effectiveness, competitiveness, transparency,
non-discrimination, and responsibility;  however, th ere remain many problems at the implementation
and operational level.  Countertrade was a means for accelerating international trade by using
different goods payment tools;  it formed part of Indonesia's strategy to boost its exports.
95. On standards, SPS, and labelling requirements, he explained that all processed food
domestically produced and imported had to be controlled through pre- and post-market controls to
protect consumers health.  Proof of compliance with all requirements was through a registration
number:  MD (for domestic products) and ML (imported products).  He acknowledged that there were
some problems with the registration process due to  a lack of understanding between exporters and
importers.
96. Indonesia's exports restrictions were mainly classified in three categories:  approved,
controlled, and banned products.  Approved export products, covering textiles manioc, coffee, forestry
products, were subject to monitoring;  controlled export commodities, covered cow/buffalo, live fish,
palm kernel oil, oil and gas, fertilizer, crocodile leather (wet blue), wild animal, gold and silver, wasteand scrap, mostly based on CITES conditions;  and banned export commodities, covered several
fisheries products, forestry products, mining products, animals, plants, and heritages goods, which
were banned under CITES.
97. Indonesia had taken significant steps to protect IPRs, ratify international treaties and comply
with international norms.  However, law enforcement was unsatisfactory for various reasons:  sinceIndonesia was new to this arena most Indonesians di d not know precisely what an IPR law was;  in
addition, it lacked human resources, skills, experience, and technology at institutional level.  To cope
with this situation, the authorities had taken measur es such as:  preparating a Government Regulation
on IPR Laws;  providing public education on IPRs (t raining, workshops, seminars);  and establishing
a National Committee for anti-infringement, counterfeiting, and piracy.  These measures would
contribute to and enhance fair competition, a conducive environment for innovation, as well as
flourishing research and development.
98. The discussant recalled that there were additional tariff policy issues to discuss, including
ad hoc tariff increases for, inter alia,  food security reasons, and specific duties on agricultural
commodities.  On customs valuation, he sought a response to references to a shift away from the
transaction value to a somewhat higher customs pr ice.  He sought a more elaborate reply on the
rationale for the issue of import licences exclusively to domestic producers of particular goods.  Thepublic education programme on IPRs and the National Committee were useful tools;  it appeared that
Indonesia really needed technical assistance and support to implement its IPRs legislation.
99. The representative of the United States applauded and recognized Indonesia's extraordinarily
low import duties.  She reiterated her delegation's question on whether Indonesia had any intention of
lowering its bound rates in the ongoing Round so as to provide greater certainty to business.
100. The representative of Indonesia indicated that the tariff bindings resulted from Uruguay
Round commitments while reductions on applied rates had been undertaken on a unilateral basis and
upon IMF request.  Other tariff issues (e.g. on agricultural items) would be explained in the discussionWT/TPR/M/117
Page 18
on sectoral policies.  The import licensing regime did not distinguish between domestic and foreign
goods provided the regulations had been observed.  Customs sometimes used the reference (rather
than the transaction) value so as to correct the import price against under-invoicing.  Efforts were
being undertaken to help people understand IPRs and their importance to the Indonesian economy,
and the importance of abiding by international rules.  The issue of IPRs had just been introduced inthe curriculum of the law school in Indonesia.
(iii) Sectoral policies
101. The representative of Indonesia indicated that the agriculture sector employed more than
100 million people living in rural areas.  Agricultural development was undoubtedly a strategic
instrument to increase the standard of living and to improve the quality of life in Indonesia.  In this
context, food security, rural development, and poverty alleviation were imperative.  Therefore,
Indonesia participated actively in the WTO negotiations on agriculture.  Indonesia had reducedsignificantly its applied tariff rates in the agriculture sector and had abolished non-tariff measures
such as import licensing restrictions and the state import monopoly for cloves, rice, sugar, and other
strategic products.  Indonesia was among the most liberal developing countries in terms of opening its
market (e.g. for corn and soyabean), while other countries still supported their farmers through huge
subsidies (domestic support, export subsidies).  The drastic trade reforms in the agriculture sector hadhad an adverse impact on farmers incomes, and tariff cuts had led to decline in productivity (e.g. for
rice and sugar);  therefore, temporary policies and regulations had been put in place in order to allow
farmers time and flexibility to adjust.
102. Indonesia continued to support trade liberalization in services at multilateral as well at
regional level;  it remained a net importer of services.  This situation was discouraging for manyIndonesians and cast some doubt on liberalization in the services sector beyond the GATS
commitments (bank and non-bank financial services).   Balancing the need for market liberalization
and the improvement of domestic capacity would become a hot trade policy issue for Indonesia in the
years to come.  More liberal approaches had been reflected in new legislation for oil and gas,
electricity, telecommunication, and education.  Measures to strengthen the capacity of the servicessector were being taken progressively through institutional coordination and discussion.  The services
activities of export interest to Indonesia had been identified and promoted.
103. Liberalization of services depended on developments in sound rule-making negotiations in
multilateral as well as regional fora.  Successful negotiations on emergency safeguard measures
(ESMs) would be an important consideration for Indonesia to further its liberalization policy.
104. The banking sector was crucial for financing the economic development of Indonesia, and
recovery was heavily dependent upon the successful completion of the banking restructuringprogramme.  Two major restructuring strategies had been undertaken:  the recap programmes and
temporary blanket guarantee scheme;  and the strengthening of the banking system.  Policies had
remained focused on efforts to maintain the bank rehabilitation programme and the banking system
resilience programme, which had improved significantly the performance of the banking sector.  The
number of existing banks had been streamlined to 141 by the end of 2002, comprising five state-owned banks, four formerly taken-over banks, three recapitalized banks, 69 category "A" banks,
24 joint banks, ten foreign banks, and 26 regional development banks (BPDs).
105. Making the non-bank financial system more responsive to market signals as well as prudential
issues, particularly aspects of the operation of financial (including insurance) entities, had been a
focus of attention.  Several of the non-bank financial subsectors were under the control of the Ministryof Finance, i.e. capital market, insurance, pension-fund, finance companies (credit card companies,
factoring companies, venture companies, and leasin g companies).  All insurance companies had to be
licensed, strengthen their capital base and improve their management;  the laxness of the past would
no longer be tolerated.WT/TPR/M/117
Page 19
106. Indonesia's transportation sector had great development potential;  it also played a very
important role in boosting development in other sectors.  Measures were taken systematically to
improve infrastructure and encourage increased private-sector participation.  Foreigners could
participate in international shipping in a joint vent ure with local partners, involving up to 95% equity.
Foreign investment in inter-island shipping services (domestic shipping) was prohibited under thecabotage principle.  However, in case of insufficient Indonesian capacity, for certain commodities and
certain routes, the Government could selectively permit the use of foreign vessels in Indonesian
waters for a certain period.
107. There were no entry barriers to foreign vessels in Indonesian ports, provided they met
international safety operation and crew standards.  Auxiliary services such as stevedoring and freight
forwarding activities were undertaken by a national company, though measures had been taken to
allow greater foreign participation.  A foreign investor could participate in certain port activities, suchas extending port capacity, construction, and management but only in joint venture with a local
partner and in joint operation with PT. Pelindo.
108. Commercial air transportation and general sales agent (GSA) services were open to foreign
investors;  market access was based on bilateral or multilateral agreement and the company had to
station its representative in Indonesia.
109. Tourism had been strategic to the country's development over the past 15 years;  following the
Bali bombing tragedy, a recovery action plan, which did not affect market access or national
treatment, was put in place to restore confidence in the international and domestic markets.
110. In principle, the telecommunications law envisaged the spirit of anti-monopoly practices.
Competition would increase gradually so as to improve the quality and quantity of services, andenhance regulatory aspects.  Indonesia was considering establishing an independent regulatory agency
by the end of 2003.
111. In the energy sector, Indonesia had passed legislation in 2001 to remove the state monopoly
(Pertamina) on upstream oil development and the distribution of petroleum products.  In line with
IMF commitments and to restrain domestic consumption, subsidies for domestic petroleum productshad been reduced gradually.  The new Electricity Law allowed for market competition rather than
state monopoly in certain areas.  The industry would be restructured to allow fair competition in
power generation and retail.  However, private participation in the form of independent power
producers (IPPs) would be continued in areas where competition was not implemented.
112. Unemployment, which would be much higher if under-employment was also taken into
account, was likely to continue rising until substantive growth had been restored.  This required
improving the investment climate and the intermediary function of the banks, as well as easingbusiness and trade restrictions.  This worrisome crisis-related situation had caused labour unrest and
disputes.  Related job-market constraints ha d obliged Indonesia to maintain a long-standing
conservative attitude toward foreign workers to ensure job opportunities for domestic workers;  a
National Professional Certification Board was being set up to develop training standardization and
certification.
113. The discussant stated that while there were about 100 million people in the world working in
agriculture, about 40 million people were living with less than US$1 per day.  Some of the tariff
increases on rice, sugar, and wheat were for specific reasons;  these temporary adjustment measures
should not become permanent elements of the policy  framework.  It was also important that the
tourism recovery programme would be applied in a non-discriminatory manner rather than beingconfined to national treatment.WT/TPR/M/117
Page 20
114. The representative of the United States clarified that although the applied duties were low,
there was quite a gap between the applied and the bound rates, which was a point of uncertainty for
businesses.  Her delegation was seeking indication/c larification of Indonesia's intentions in lowering
the level of bound rates during the market access negotiations of the ongoing Round.
115. The representative of Indonesia indicated the average bound and applied tariff levels.
Notwithstanding its need for flexibility in tari ff policymaking, Indonesia was considering lowering
bound rates and participate actively in the DDA.WT/TPR/M/117
Page 21
VI. CONCLUDING REMARKS BY THE CHAIRPERSON
116. We have had a very productive discussion of the trade policies and practices of Indonesia.
We owe this to the full and forthright engagement of the Indonesian delegation, led by
Mr. Pos Hutabarat, Director General for International Trade and Industry Cooperation, to our
discussant, Ambassador J.K. Weerasinghe, and to Members' keen interest in Indonesia's policies.
117. Members praised Indonesia's efforts to undertake macroeconomic, trade and structural
reforms in the wake of the 1997 crisis.  As a consequence of these reforms, particularly fiscal
consolidation, the economy seems to have stabilized.  Members sought clarification of the impact of
the rapid moves to decentralize government and enhance regional autonomy on trade and investment.
They also noted the difficult external and internal circumstances facing the Indonesian authorities,
expressing particular concern over recent trends in investment.  The need for progress in regulatory,
enforcement, institutional, and transparency matters was stressed.
118. Indonesia's active participation in the WTO and commitment to multilateralism was
acknowledged.
119. Members noted that as a result of unilateral liberalization, Indonesia's tariff had declined to an
average of 7.2% in 2002.  Several Members also raised questions about the large gap between bound
and applied rates.  They also noted that policy in certain sensitive areas was formulated on an ad hocbasis.  Some Members sought clarification on the use of "check" prices for customs valuation
purposes and the use of import restrictive licensing and anti-dumping measures.  Questions were
asked on Indonesia's strengthening of its legislation on intellectual property rights legislation and
enforcement of these rights.  Members noted policy developments in agriculture and forestry.
120. On sectoral issues, with regard to manufacturing, Members noted the persistence of tariff
peaks and NTBs on sensitive products, such as textiles and steel.  On services, Members praised the
extent of unilateral liberalization and sought clarification of market-access conditions for certain
activities;  in some services sectors, reforms went beyond Indonesia's WTO obligations.
121. Members also sought clarification on several more specific issues including:
• the status of approval of the new law on and other revival plans for foreign
investment;
• participation in regional and bilateral trade liberalization agreements;
• several tariff policy matters, notably customs valuation and bound tariffs;
• WTO notification of import licensing procedures, state trading practices, and
labelling requirements;
• standards formulation and conformity assessment;
• genetically modified organisms and labelling requirements;
• government procurement objectives and practices;
• export restrictions, promotion, and finance;
• legislation on patents, copyright, trade marks, geographical indications, and
protection of undisclosed information;  piracy rate and enforcement;
• national treatment, GATS commitments, and developments in financial services;
• deregulation/liberalization plans in telecommunications;
• policy developments in the tourism sector.
122. Members expressed their appreciation for the oral and written responses provided by the
delegation of Indonesia and looked forward to responses to outstanding questions.WT/TPR/M/117
Page 22
123. In conclusion, it is my strong sense that we  all highly appreciate Indonesia's stance and active
participation in moving the WTO's agenda forward.  It is clear from Indonesia's experience that the
full benefits of reform require sustained efforts, a long period of adjustment, and the support of the
multilateral system – particularly through liberal market access.  In this context, it is hoped that
Indonesia will take advantage of the opportunities presented by the DDA.  On the one hand, Indonesia
can take into account the concerns expressed by Members during this Review;  on the other, it can
bring to Members' attention, the importance of their responding to Indonesia's developmental needs in
these negotiations.
__________