WT/TPR/S/117 Trade Policy Review
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III. TRADE POLICIES AND PRACTICES BY MEASURE
(1) INTRODUCTION
1. Since its previous Trade Policy Review in 1998, Indonesia has undertaken systematic efforts
to increase the pace of its economic development by removing government-based constraints to trade,investment, and production.
2. The tariff has increasingly become Indonesia's main trade policy instrument, albeit a minor
source of tax revenue (less than 5% of the total).  The average applied MFN tariff is currently7.2% (2002), down from 9.5% in 1998.  Whereas the average applied MFN tariff for industrial
products is 7%, that for agricultural imports is 8.4%.  More than 83% of tariff rates are currently in
the range zero to 10%.  In line with long-standing sectoral support, the highest tariffs apply mainly to
alcoholic drinks/preparations and completely built-up motor vehicles (with cylinder capacity
exceeding 2,500cc).  Some 93% of tariff lines are bound, which imparts a high degree of
predictability to the tariff.  However, at 37.6% the simple average of final (i.e. 2005) bound MFN
rates considerably exceeds the average applied MFN rate, providing the authorities with a great dealof scope to increase applied tariffs within bindings.  Over 99% of applied tariff rates are ad valorem , a
feature that contributes to the transparency of the tariff.  Nonetheless, the structure of the tariff has
remained complex, involving 18 ad valorem  rates (the same as in 1998), and three specific rates (one,
since 2000, affecting rice, and two, since mid 2002, for sugar).
3. 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.  In thelight of apparently more liberal measures, WTO tariff quota commitments for milk and cream and its
products as well as for rice, have seemingly not been applied;  in the case of the former, the applied
tariff is well below the in-quota rate while for rice the applied rate is specific (for which a properly
calculated AVE is not available) rather than the ad valorem  in-quota rate.  In 2002, applied tariff rates
on 41 nine-digit HS items (mainly alcoholic beverages) exceeded their final bound rates (to be applied
by 2004) by up to 20 percentage points.  As a result of these considerations, the tariff continues to be
a potential obstacle to a more efficient allocation of domestic resources.
4. Computerized documentation requirements and customs clearance have facilitated both
imports and exports;  registration of importers has remained a major requirement.  Indonesia hasimplemented the WTO Customs Valuation Agreement as from January 2000.
5. The overall scope of import restrictions and licensing requirements seems to have become
more focused and strengthened through special import licences (as from 2002);  bans for sanitary
reasons have affected imports of chicken parts and fresh milk.  No origin-related restrictions have
been maintained, except those affecting trade with Israel.  Indonesia, has become quite an active user
of anti-dumping measures mainly against imports of base metals and chemicals from the region;
safeguards legislation was passed in 2002.
6. Mandatory standards have been expanded to cover more fertilizers and raw sugar;  new food
labelling requirements were passed in 1999.  Involvement in mutual recognition arrangements hasincreased.
7. Indonesia is not a signatory of the WTO Agreement on Government Procurement (GPA);  it
revised its government procurement regime to, inter alia,  increase domestic sourcing and improve
ethics.  Foreign suppliers have remained subject to specific requirements, and price preferences for
local producers of goods have doubled.  Countertrade transactions resulting from export performance
requirements for foreign firms tendering for certain types of government procurement contracts andIndonesia WT/TPR/S/117
Page 33
construction projects have fallen off considerably.  Indonesia has eliminated its extensive tariff and
tax incentives for local content in the automotive sector.
8. Exports of products subject to restrictive measures have been allowed only through registered
and approved exporters.  As from 2001, an export ban for round wood and wood chips has applied.
Exports of certain items have continued to be "supervised" (subject to approval) or "regulated"
(subject to quotas) to, inter alia,  promote higher-value-added downstream activities, upgrade the
quality of export products, and ensure adequate domestic supply of essential products.  Export taxes(on palm oil, crude palm oil and their derivative products, rattan, wood, minerals, sand) have been
simplified and reduced; only ad valorem  rates, which are calculated on the basis of
minimum/benchmark export price or export  check price (HPE), remain in force.
9. Efforts have been made to provide export finance, based on commercial considerations, to
firms that have no bad debt.
10. Support for production and trade has been provided through financial assistance for R&D and
regional tax incentives.  Indirect taxes have been levied in a non-discriminatory manner;  it is unclear
whether regional levies, and taxes are also non-discriminatory.  Trade distorting market support
(largely exceeding Green Box outlays) has been maintained for rice, and a subsidy for (domesticallymade) fertilizers for small-scale rice producers was re-introduced.  A petroleum fuels subsidy has
favoured the industrial and public sector, and market prices for fuel have applied only to a few
activities, including foreign flag vessels.  State involvement in the economy (including exclusive
import rights to domestic producers of certain sensitive items (such as rice, cloves, alcoholic
beverages, sugar, hot- and cold-rolled coil iron, and steel products)) has continued with a view to
assisting domestic production and/or promoting or exclusively controlling/restraining trade in
virtually all important sectors.  Price controls have been maintained for essential goods, services, andpublic utilities.
11. Indonesia has sought to strengthen protection of intellectual property rights by expanding its
international commitments.  Pursuant to WTO commitments, it has undertaken considerable work
with a view to passing TRIPS-related legislation, but institutional constraints have continued toimpede effective implementation.
12. Indonesia's competition policy framework has been put into effect;  most cases dealt with so
far relate to collusion on tenders.  Action has also been taken on consumer protection;  responsibilityis now shared between the Government and non-governmental organizations.
13. Difficulties have been encountered in meeting environmental policy objectives.
(2) M
EASURES DIRECTLY AFFECTING IMPORTS
(i) Registration and documentation requirements
14. As from 2003, importers are subject to registration requirements with two public entities
(Ministry of Finance/Customs, Ministry of Industry and Trade) to avoid fraudulent practices;  as of
1999, all importers (trading companies or producers) must have an Importers Identity Number (API).1
15. Basic documentation requirements seem to have remained virtually unchanged since 1998;
they include:  import declaration;  pro-forma invoice;  commercial invoice;  certificate of origin;  bill
                                                     
1 Decree of the Minister of Industry and Trade No. 550/MPP/Kep/10/1999 of 5 October 1999 amended
by Decree of the Minister of Industry and Trade No. 253/MPP/Kep/7/2000 of 4 July 2000.WT/TPR/S/117 Trade Policy Review
Page 34
of lading legalized by the carrier2;  insurance certificate;  special certificate for certain products;  and
packing list.
16. Since 1997, the Customs Directorate of the Mini stry of Finance has operated a post-entry
audit and partly paperless system.3  Import documentation is submitted at a first stage in a standard
form through computer diskette, followed by a hard copy.  At the four main ports ( Tanjung Priok  I, II,
III and Soekarno-Hatta  I-II), customs clearance, the payment of duties, and random verification can
(since 1997) be made through an Electronic Data Interchange (EDI) system;  at the time of the
previous Review, more than half of the banks were EDI-connected.4
17. Merchandise imports are processed by Customs through the green channel (90% of all goods
in 1998, 80% in 2001) or the red channel.5  Goods directed to the red channel undergo physical
examination and a check of the declared value.  Customs inspection may also take place afterimportation at the importer's warehouse.  Since May 2002, rice importation has been carried out solely
by importers registered with the Ministry of Industry and Trade with special import licences
(section (2)(v)) and have been subject to comprehensive red channel inspections at discharging ports;
"technical smuggling" (i.e. under invoicing and falsification of import documentation) of rice has
reportedly increased.
6
18. Responsibility for customs administration was fully transferred from preshipment inspection
firms (SGS and PT Surveyor Indonesia) back to the Directorate General of Customs and Excise in
1997.7
(ii) Tariffs
(a) General features
19. Since its previous Review in 1998, Indonesia has adjusted its tariff in accordance with the
implementation of its WTO commitments, the unilateral reduction programme (1995-03) 8, and its
domestic policy imperatives.  The level and structure of tariffs appear to have undergone fundamental
change (Table III.1).
20. The tariff has remained a relatively minor source of tax revenue, accounting for 4.7% (2003
estimates) of total tax revenues (section (4)(i), Table III.5);  nonetheless, it is an important instrument
of trade policy.  The tariff is a relatively complex instrument, containing 7,532 tariff lines, 4.5% morethan in 1998 and 21 rates (18 ad valorem , 3 specific).  A large number of the tariff lines (68%) are
subject to zero or 5% ad valorem  duties.  Bound tariff rates tend to be substantially lower than applied
rates and the gap has widened since 1998 as a result of scheduled tariff cuts, thus providing increased
scope for the authorities to raise applied MFN tariff rates.  During 2002, the authorities considered
raising applied rates on strategic commodities such as rice, wheat, soyabeans, and fruit, as well aselectronics, but it is unclear whether they did so.
                                                     
2 Directorate General of Customs and Excise of Indonesia (2002).
3 Country Commercial Guide (2002).
4 Bank participation in the system is essential, since the customs authorities can clear the goods
electronically only when confirmation of payment of duty (by the banks) is received through EDI (WTO, 1999).
5 Directorate General of Customs and Excise of Indonesia (2002);  WTO ( 1999).
6 Oryza Rice Market Report (2002).
7 Indonesian Customs Law 10/1995, effective on 1 April 1997;  WTO (1999).
8 WTO (1999).Indonesia WT/TPR/S/117
Page 35
Table III.1
Structure of MFN tariffs in Indonesia, 1998, 2002 and 2005
(Per cent)
1998 2002 U.R.a
1. Bound tariff lines (% of all tariff lines)b93.2 .. 93.2
2. Duty-free tariff lines (% of all tariff lines) 20.2 21.9 39.1
3N o n - ad valorem  tariffs (% of all tariff lines) 0.0 0.2 0.0
4 Tariff quotas (% of all tariff lines) 0.0 0.0 0.0
5N o n - ad valorem  tariffs with no AVEs (% of all tariff lines) 0.0 0.2 0.0
6 Simple average bound rate .. .. 37.6
Agricultural products (HS01-24) .. .. 47.3
Industrial products (HS25-97) .. .. 35.9
WTO agricultural products .. .. 47.7
WTO non-agricultural products .. .. 35.9
Textiles and clothing .. .. 29.3
7 "Nuisance" bound rates (% of all tariff lines)c.. .. 0.0
8 Simple average applied rate 9.5 7.2 ..
Agricultural products (HS01-24) 8.6 8.3 ..
Industrial products (HS25-97) 9.7 7.0 ..
WTO agricultural products 8.8 8.3 ..
WTO non-agricultural products 9.6 7.0 ..
Textiles and clothing 14.6 10.5 ..
9. Domestic tariff "spikes" (% of all tariff lines)d1.8 1.5 ..
10. International tariff "spikes" (% of all tariff lines)e14.5 3.4 ..
11. Overall standard deviation (SD) of tariff rates 15.7 11.1 ..
12. "Nuisance" applied rates (% of all tariff lines)c0.0 0.0 ..
.. Not available.
a Final bound calculations are based on the 1998 tariff schedule.  Including ITA.
b Representing fully bound rates.  Partially bound rates represent 2.4% of all tariff lines.
c "Nuisance" rates are those greater than zero, but less than or equal to 2%.d Domestic tariff spikes are defined as those exceeding three times the overall simple applied rate (indicator 8).
e International tariff spikes are defined as those exceeding 15%.
Note: 1998 tariff is based on 9-digit HS96 nomenclature, 2002 tariff is based on 9-digit HS02 nomenclature.  For 2002, 12 lines
carrying specific rates are excluded from the calculations.
Source: WTO Secretariat calculations, based on data provided by the Indonesian authorities.
21. The Ministry of Industry and Trade, Ministry of Agriculture, Ministry of Finance, Ministry of
Energy and Mining, Ministry of Forestry, Ministry of Defence and Security, Ministry of
Transportation, State Minister of Environment, BULOG, Board of Central Statistic (BPS), and theDrug and Food Control Board have maintained regu latory powers over tariff policy matters in the
context of a body called "Tim (Team) Tariff" (which has met every Wednesday since the early
1990s);  the Directorate of Customs of the Ministry of Finance is an enforcement agency.  The
customs tariff is announced in January (or June) of each year through a Decree of the Ministry of
Finance and published in the Official Gazette ;  it is also available online
(http://www.dprin.go.id/regulasi1/english).  Tariff changes may take place throughout the year,
entering into force through Ministerial Decree.  Indonesia has submitted its import data and customsWT/TPR/S/117 Trade Policy Review
Page 36
tariff annually to the WTO Integrated Database9;  it has also supplied tariff information regularly to
the APEC tariff database.10
(b) MFN tariff bindings
22. Indonesia's commitments on WTO tariff bindings are being implemented, except for the
largest part of non-agriculture items (bindings fully in force since 1995).  Different implementation
periods affect WTO-agriculture items (from 1995 to 2004)11, non-WTO agriculture products under
HS sections 15.04 and 16.03 (from 1995 to 1999)12 and Information Technology Agreement (ITA)
products (from 1997 to 2005).13  By 2005 Indonesia's simple average bound tariff rate is to drop to
37.6%.  At present, 93.2% (or 95.6% including partially bound items) of all tariff lines are bound as a
consequence of the Uruguay Round Agreement14 and the 1997 Information Technology
Agreement (ITA).  Bindings cover all agricultural tariff lines (WTO agriculture definition), and94.9% of manufactured products (91% of total imports of industrial products).
15  Bound rates range
from 9% to 210% for agriculture, and from zero to 150% for manufactured products.  Import
surcharges on all (bound and unbound) items were eliminated ahead of schedule (within a period of
ten years) in January 1996.
23. Between July 1996 and February 1999, Indonesia's binding commitments were waived from
the obligations under Article II of GATT 1994 to allow for the implementation of the recommended
amendments on 1 January 1996 to the Harmonized System nomenclature and, subsequently, to
undertake Article XXVIII negotiations.  The new Schedule of Concessions incorporating these
rectifications and amendments became effective on 18 February 1999.16
(c) Duty-free items
24. At present, 21.9% of Indonesia's tariff lines are duty free, up from 20.2% in 1998 (Chart III.1,
Table III.1).
                                                     
9 WTO document G/MA/IDB/2/Rev.15, 17 September 2002.
10 APEC Tariff Database  [Online].  Available at:  http://www.apectariff.org/ [20 September 2002].
11 The authorities indicated that since the WTO Agreement on Agriculture does not require a staged
implementation process,  Indonesia and other developing countries are permitted to implement theircommitment at the end of implementation in 2004.
12 These sections cover fish fats/oils and meat/fish/crustaceans extracts/juices.
13 The ITA, which was agreed at the Singapore Ministerial Conference, has 40 participants
(February 2001, counting European Communities as one) an d provides for the elimination of customs duties and
other duties and charges on computers, telecom equi pment, semiconductors, semiconductor manufacturing
equipment, software, and scientific instruments, on an MFN basis (WTO document G/IT/1/Rev.17,16 February 2001).  The ITA does not cover consumer electronic goods.  In 2001, Indonesia was among the 15
th
leading exporter of IT goods (WTO, 2002, Table IV.45).
14 Schedule XXI-Indonesia, 15 April 1994.
15 The 317 presently unbound tariff lines concern sensitive manufactured products (approximately 10%
of non-oil imports in 1998) such as iron and steel, certain chemicals, plastics and rubber products, somepharmaceuticals, machinery, ships, aircraft and parts, motor vehicles and parts (WTO, 1999).
16 WTO documents WT/Let/318, 18 February 1999;  G/MA/W/23/Rev.1, 6 June 2001.Indonesia WT/TPR/S/117
Page 37
(d) Specific duties
25. Specific duties replaced ad valorem  duties for rice and sugar seemingly to avoid under-
invoicing practices;  the authorities seem to favor specific duties because they are based on volume
rather than a declared value, which may be false.  Since January 2000, rice and rice flour imports have
been subject to a specific duty of Rp 430 per kg. (claimed by the authorities to be equivalent to an
ad valorem  rate of approximately 30%, at an exchange rate of Rp 10,000 per U.S. dollar).17  B y
November 2002, specific duties (in force since July 2002) affecting raw sugar and white sugar hadreportedly been increased to Rp 550 (from Rp 450) per kg. and Rp 700 (from Rp 534) per kg.,
respectively
18, although the authorities have not confirmed this increase to the WTO Secretariat.  No
information on these changes has been notified to the WTO.
(e) Tariff quotas
26. Under WTO market-access commitments, Indonesia has had tariff quota commitments since
1995, which have not been applied so far because of a seemingly more liberal regime in place (i.e.
applied rates lower than in-quota rates and quota-free imports).19  These commitments concern milk
                                                     
17 Decree of Ministry of Finance No. 568/KMK.01/1999;   USTR (2002).
18 Reuters,  31 March 2003.
19 WTO document G/AG/N/IDN/23, 8 October 2001.
05001,0001,5002,0002,5003,0003,5004,000
Duty free >0- 5 >5-10 >10-15 >15-20 >20-25 >25MFN 1998
MFN 2002Number of tariff linesChart III.1                                                
Distribution of MFN tariff rates, 1998 and 2002
Tariff rates
Figures in parentheses denote the share of total lines.   For 2002 total does not add up to 100% as no tariff rate is 
available for 0.2% (representing 12 lines carrying specific rates).
WTO Secretariat calculations, based on data provided by the Indonesian authorities.Note:
Sourc e:WT/TPR/S/117 Trade Policy Review
Page 38
and cream and its products (in-quota bound rate 40%, applied MFN rate 5%), and rice (in-quota
bound rate 90%, applied MFN rate Rp 430/kg. (section (d) above).20
(f) Applied MFN tariffs
27. Since its previous Review, Indonesia has introduced changes to its tariff in accordance with
the scheduled implementation of its binding commitments (section (b) above), its domestic policy
considerations, and the reform packages.  Between 1998 and 2002 the overall simple average appliedMFN tariff rate fell from 9.5% to 7.2% (Table III.1).
21  In line with the APEC goal of free and open
trade, tariff reductions are to continue with the objective of implementing a three-tier customs tariff
(zero, 5%, and 10%).
28. Many of Indonesia's bound rates are considerably higher than the applied duties, thus
imparting a degree of uncertainty to its tariff.  The current gap of 30.4 percentage points between theaverage bound and applied MFN tariff rates provides considerable scope for the authorities to raise
applied rates within bindings.  The widening of this gap since 1998 is mainly the result of  unilateral
reductions in applied rates;  applied rates have been increased in very few instances.
22  The difference
between average applied and bound rates in 2002 was much higher for agricultural products than for
industrial products (Chart III.2).   The authorities indicated their willingness for negotiating further
cuts to the bound rates.
29. In 2002, applied tariff rates on 41 nine-digit HS items exceeded their (final) bound levels by
up to 20 percentage points (mainly alcoholic drinks), but this may be corrected through the
implementation of binding commitments in 2004;  as indicated earlier, the authorities do not intend to
implement their binding commitments progressively.
30. The average rate of customs duty collected on total imports dropped to about 0.8% in
1999/00, then rose again to about 2% (1999/00) (Cha rt III.3).  This rate has remained much lower
than the average applied MFN rate, thus indicating the widespread use of preferences and exemptions.
(g) MFN tariff dispersion
31. The potential efficiency losses associated with the customs tariff depend not just on the
average applied MFN tariff rates, but also on the dispersion of those rates across products.  Tariff
dispersion indicators show that the dispersion in applied MFN tariff rates has fallen since 1998 withtariff "spikes" and the standard deviation in tariff rates all declining (Table III.1 and Chart III.1).  This
decline in dispersion is due, inter alia,  to reduction of the maximum ad valorem  rate (from 200% to
170%) as well as a higher concentration in lower rates (e.g. zero, 5%, 10%).  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;  completelybuilt-up sedan/station wagon motor vehicles with a cylinder capacity exceeding 2,500cc (three nine-
digit HS96 items) are subject to the third highest rate of 80%.
                                                     
20 Part I-B, Schedule XXI – Indonesia, 15 April 1994.
21 During this period tariffs on a large number of items were lowered while on a few sensitive items
tariffs were  reimposed (sugar, rice) or raised (hot- and cold-rolled coil products) (APEC, 2001);  Dow Jones
Newswires , 8 November 2002;  USTR (2002)).
22 The authorities indicated that Decree of the Mini stry of Finance No. 378/K.MK.01/1996 contains the
unilateral tariff reduction schedule up to 2003.Indonesia WT/TPR/S/117
Page 39
(h) MFN tariff escalation
32. Changes in the customs tariff have affected the pattern of tariff escalation differently in each
activity.  Since 1998, it has remained relatively unchanged for textiles and leather, chemicals, and
fabricated metal products and machinery (Chart III.4 and Table AIII.1).  More pronounced escalation
is apparent for semi-processed products in the food, beverages, and tobacco industry as well as forpaper, printing and publishing (due to a reduction of tariffs on final products).
(i) Duty concessions/ exemptions
33. During the period under review, Indonesia's scheme for the concessional entry of imports has
remained unchanged.  Products eligible for duty exemption or relief include
23:
- machinery for the establishment and development of industry (e.g.
telecommunication equipment and networks, as from 2002)24;
                                                     
23 ASEAN (undated)
24 Decree of the Minister of Finance No.474/KMK.01/2002, 19 November 2002.05101520253035404550
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21Chart III.2
Average applied MFN and final bound tariff rates, by HS section, 1998 and 2002
Note:
Source : Average applied MFN 
1998  (9.5%)
01   Live animals & prod.        
02   Vegetable products03   Fats & oils      04   Prepared food, etc.05   Mineral products06   Chemicals & products07   Plastic & rubber
08   Hides & skins09   Wood & articles10   Pulp, paper, etc.11   Textiles & articles12   Footwear, headgear13   Articles of stones
14   Precious stones, etc.15   Base metals and prod.16   Machinery17   Transport equipment18   Precision instrument19   Arms & ammunition
20   Miscellaneous manuf.21   Works of art, etc.Average applied MFN 
2002  (7.2%)Per cent
Average bound
 (37.6%)MFN 1998 Bound MFN 2002
Calculations for 2002 exclude 12 lines carrying specific duties.   Only HS sections 02, 03, 08, 09 and 11 are 
fully bound.  HS sections 19 and 21 are fully unbound.
Secretariat calculations, based on data provided by the Indonesian authorities.WT/TPR/S/117 Trade Policy Review
Page 40
- goods and materials for the establishment and development of industry for a specified
period of time;
- equipment and substances used to prevent environmental pollution;
- seeds and breeding animals for the establishment and development of agricultural
industry, animal husbandry, or fishery;
- marine products caught by licensed hauling vessels;
- goods exported to undergo repair, processing, or testing;
- goods re-imported in the same state;
- goods that are naturally damaged, whose quality has deteriorated, that are destroyed
or have decreased in volume or weight between the time of transportation on the
Customs Territory and the time of import approval for home use;
- human therapeutic substances, blood grouping and tissue typing reagents;
- goods imported by the Government for public purposes;  and
- goods for temporary admission.
024681012
1998 1999 2000 2001 2002 2003Source :  Bank Indonesia, Indonesian Financial Statistics; UNSD, Comtrade database;  and the Indonesian authorities .Chart III.3                                       
Share of customs duties collection in total import value and indirect tax revenue, 
1998-03
Per cent
Share of custom duties revenue
to total indirect tax revenue
Share of custom duties revenue
 to total import value
Note:       From 1998 until 2000 custom duties revenue and indirect tax revenue is based on fiscal year (eg. for 1998 1997/98                 data are used).Indonesia WT/TPR/S/117
Page 41
02468101214161820
Food,
beverages
and tobaccoTextiles and
leatherWood and
furniturePaper,
printing and
publishing Chemicals Non-metallic
mineral
products Basic metal Fabricated
metal
products and
machineryOtherChart III.4
Tariff escalation by 2-digit ISIC industry, 1998 and 2002
02468101214161820
Food,
beverages
and tobaccoTextiles and
leatherWood and
furniturePaper,
printing and
publishingChemicals Non-metallic
mineral
products Basic metal Fabricated
metal
products and
machineryOtherAverage applied rate in manufacturing
(10.0%)
Not applicable.
Calculations for 2002 exclude 12 lines carrying specific rates.
WTO Secretariat calculations, based on data provided b y the Australian authorities.n.a.
Note:
Source :Per cent
First sta ge of processin g Fully processed Semi-processedPer cent
Average applied rate in manufacturing
(7.5%)1998
2002WT/TPR/S/117 Trade Policy Review
Page 42
(j) Tariff preferences and rules of origin
Preferences
34. Indonesia continues to grant preferential tariff treatment for products covered under the
ASEAN CEPT, and the Global System of Trade Pr eferences among Developing countries (GSTP)
(Chapter II(6)(ii));  these permit reductions of up to half of the MFN rate.
Rules of origin35. Since 1998, no changes seem to have been made to Indonesia's rules of origin.  Indonesia
notified the WTO that it has no judicial decisions or administrative rulings of general application
relating to non-preferential rules of origin.
25  Indonesia intends to ensure full compliance with the
internationally harmonized rules of origin laid  down by the World Customs Organization (WCO).26
Specific rules of origin apply to ASEAN members in order for them to benefit from preferential tariff
under the Agreement on the CEPT.27  According to CEPT rules, a product is generally deemed to be
of ASEAN origin if a minimum of 40% of its c ontent originates in any member country, the 40%
local content applying to both single-country content and cumulative-ASEAN content.  For textiles
and textile products, the local-content requirement can be expressed either as a percentage (the 40%
level) or based on the principle of substantial transformation.  Indonesia participates actively in theASEAN Customs Policy Implementation and Work Programme (PIWP) (Plan of action for
implementing ASEAN Customs Vision in 2020);  I ndonesia coordinates work in the two key areas:
Customs Post Clearance Audit, and Customs Valuation.
28
(iii) Customs valuation
36. Since January 2000, Indonesia has fully implemented the WTO Customs Valuation
Agreement.29  In September 2001, the authorities notified the WTO of the Government Regulation on
Customs Valuation for the Calculation of Import Duties.30  Indonesia did not request a reservation to
maintain a system of minimum values for a lim ited time under paragraph 2 of Annex III of the WTO
Agreement on Customs Valuation.  Indonesia has invoke d a transition period of three additional years
to apply the computed value method under Article 20.2, and paragraphs 3 and 4 of Annex III (no
expiry date).31
37. To ensure smooth implementation of the Agreement, Indonesia has, inter alia,  held training
for customs and excise officials on customs valuat ion, expanded computerization and sought technical
assistance from other developing Members of WTO.  The authorities indicated that the
implementation of the Agreement resulted in an in crease in tax revenue and transparency in the
calculation of the customs value.  Nevertheless, difficulties were encountered in completing a
database as well as problems with post clearance audit due to hidden payments between seller andbuyer.
                                                     
25WTO document G/RO/N/16, 5 March 1997.
26 APEC (2001).
27 WTO document G/RO/N/4, 7 August 1995;  WTO (1999).
28 ASEAN online information.  Available at:  http://www.aseansec.org/economic/customs/
custmain.htm [11 December 2002].
29 APEC (2001).
30 WTO document G/VAL/N/1/IDN/1, 27 September 2001.
31 WTO document G/VAL/2/Rev.15, 21 October 2002.Indonesia WT/TPR/S/117
Page 43
(iv) Other levies and charges
38. In addition to fees for cargo handling, imported and domestic goods are subject to internal
indirect taxes, which apply to imported and domestically produced goods alike (section (4)(i)(a)).
(v) Import prohibitions, restrictions, and licensing
39. During the period under review, no automatic import licensing appears to have been imposed.
Non-automatic licensing requirements have seemingl y been in place to enforce import prohibitions,
restrictions, and controls that may be operated for reasons of human health, hygiene and sanitation,
animal and plant life, environmental conservation, and essential security, in compliance with domestic
legislative/policy requirements as well as international commitments.32  Trade with Israel has
remained restricted.
40. Imports of chicken parts (as from September 2000)33 and luxury cars (from February to
1 June 2000) have been banned;  the latter prohibition was revoked for fiscal purposes (i.e. to collect
more tax revenue from import duties on cars).34  Imports of video tapes, laser discs, and other
entertainment products for both exhibition and private use seem to have been controlled through a
censor board.35
41. In the Uruguay Round, Indonesia undertook to remove all non-tariff barriers on 179 bound
items (98 manufactured products, 81 agricultural products (except for those subject to state trading)).
But as noted in its previous Trade Policy Review, despite efforts to reduce the scope of import
licensing as a trade distorting device, its economic significance has remained strong.36
42. The product coverage of import restrictions/prohibitions remains unclear.  The authorities
indicated to the Secretariat that by December 2002, the importation of 179 nine-digit HS items was
restricted and 41 nine-digit HS items were prohibited.   However, according to other sources, the
product coverage of restrictive licensing requirements has been gradually reduced since the previousReview, to 141 tariff lines in 2002 from 160 in 1998.
37  Import restrictions and special licensing
requirements seem to have been imposed or maintained, inter alia,  on meat and poultry products
(Importer Letter of Recommendation required, as from September 2000)38, cloves (as from
July 2002), alcoholic beverages, artificial sweeteners, lube oil, hand tools, engines, pumps, and
                                                     
32 The items include:  narcotics, psychotropics, explosive materials, firearms and ammunition,
fireworks, defined books and printed materials, audio and/or visual recording media, telecommunication
equipment, colour photocopiers, parts and equipment thereof, endangered species of wild fauna and flora, andparts thereof, certain species of fish, medicines, food and beverages not registered at the Department of Health,dangerous materials, pesticides, ozone-depleting substa nces and goods containing ozone depleting substances,
wastes, and culturally valuable goods (Directorate General of Customs and Excise, 2002).
33 The authorities indicated that this is to deal with:  chicken leg/quarters without Halal Certificate from
U.S. islamic bodies;  and the particularly low price of chicken leg/quarters, which are seemingly a secondary
option to breast meat.
34 Decree of the Minister of Industry and Trade No. 49/MPP/Kep/2/2000, 25 February 2000, to ban the
import of cars 4,000cc and larger or with a price tag exceeding US$40,000;  Decree of the Minister of Industryand Trade No. 192/MPP/6/2000, 2 June 2000 .
35 Country Commercial Guide (2002).
36 At that time, import licensing protected the most sensitive products, which accounted for the bulk of
remaining licences (agricultural commodities, alcoholic beverages, motor vehicles, certain chemicals, iron andsteel products, and scrap material) (WTO, 1999).
37 USTR (2002), p. 189;  WTO (1999).
38 USTR (2002), p. 189.WT/TPR/S/117 Trade Policy Review
Page 44
tractors.39  Since March 2002, special import licences have affected sensitive items such as rice
(reimposed as from May 2002)40, corn, soya beans, sugar, textiles, textile products,41 footwear,
electronics, and toys;  the authorities indicated that these licences, which are granted on a
domestic-needs assessment basis, are in place to fight smuggling and to balance supply and demand in
a transparent manner.
43. Transparency has been improved slightly through the availability of some information on
import prohibitions on the Internet (http://www.beacukai.go.id).  Nevertheless, notification of
Indonesia's laws, regulations, and administrative procedures, as well as replies to the Questionnaire
on Import Licensing Procedures (annual) has been submitted to the WTO only once, in
October 199842;  no further information on import licensing has been made available to the WTO
since then.
(vi) State trading
44. While efforts have been made to privatize state-trading entities (largely in connection with
IMF requirements in this area (Chapter I)), widespread state involvement in the economy has
continued with a view to assisting domestic production and/or promoting or exclusively
controlling/restraining trade in virtually all important sectors (Table III.2).  In 1998, state participationseemed particularly pronounced in activities such as agri-industry and consumer goods, logistics,
financial services, and construction/building materials (Chart III.5).  Exclusive import rights have
been maintained for certain firms or certain categories of goods (alcoholic beverages
43, sugar) or
expanded (cloves (as from July 2002), textile cloth (as from 2002), hot- and cold-rolled coil iron and
steel products, as from 8 November 2002 and through 2003) depending on the product.44
Table III.2
State involvement in the economy, 2000
Entities ActivityDegree of government ownership/
situation in privatization programme
GOODS
Agriculture and forestry
Badan Urusan Logistik (BULOG)aRice 100%
PT Perkebunan Nusantara IVaPlantation 100%;  10-35% to be privatized
PT Perkebunan Nusantara IIIaPlantation 100%;  10-35% to be privatized
Manufacturing
PT Indo FarmaaPharmaceutical 100%;  10-49% to be privatized
PT Pupuk KaltimaFertilizer 100%;  10-49% to be privatized
PT Kimia FarmaaPharmaceutical 100%;  10-35% to be privatized
PUSRI (holding)bFertilizer holding 100%;  100% to be privatized
Table III.2 (cont'd)
                                                     
39 Country Commercial Guide (2002).
40 Oryza Rice Market Report (2002).  In August 2000, the National Logistics Agency (BULOG) lifted
the restriction on rice imports;  however, BULOG had left open the possibility of re-imposing the restriction inthe future, if local prices were depressed or to prevent a rice glut.
41 Decree No. 732/2002.
42 WTO documents G/LIC/N/1/IDN/1, 2 November 1998;  G/LIC/N/3/IDN/1, 2 November 1998;  and
G/LIC/W/17, 4 September 2002.
43 Imports are authorized for three registered importers, including one state-owned enterprise.
44 Imports of these items have been permitted only by local producers of similar products and by
registered importers (Decree of the Ministry of Industry and Trade cited in Dow Jones Newswires ,
8 November 2002).Indonesia WT/TPR/S/117
Page 45
Entities ActivityDegree of government ownership/
situation in privatization programme
Mining and energy
PT Tambang Batu Bara Bukit AsamaCoal mining 100%;  10-35% to be privatized
PT Aneka TambangaMining 65%;  14% to be privatized
PT Tambang TimahbMining 65%;  up to 65% to be privatized
PT Perusahaan Umum Listrick Negara (PLN) Electricity ..
PT Perusahaan Pertambangan Minyak dan Gas
Bumi Negara (PERTAMINA)Petroleum and natural gas mining ..
Perusahaan Gas Negara (PGN) Gas distribution ..
Water
PDAM DKI Jakarta (PAM JAYA) Water supply (Jakarta) ..
PDAM Kodya Dati Il Bandung Water supply (Bandung) ..
PDAM Tirtanadi Medan Water supply (Medan) ..
SERVICES
Telecommunications and media
PT TelkombTelecom 65%;  up to 14% to be privatized
PT IndosatbTelecom 65%;  up to 14% to be privatized
Banking
PT Bank Mandiri (Persero) Bank ..
PT Bank Negara Indonesia (Persero) Commercial bank ..
PT Bank Rakyat Indonesia (Persero) Commercial and foreign exchange bank ..
PT Bank Tabungan Negara (Persero) Commercial bank ..
Transportation
PT Angkasa Pura IIaAirport 100%;  49% to be privatized
PT Garuda Indonesia Civil aviation ..
PT Pelayaran Nasional Indonesia (PELNI) Shipping company ..
PT Perusahaan Pertambangan Minyak dan Gas
Bumi Negara (PERTAMINA)Tanker services ..
Tourism
PT Wisma NusantarabHotel/office 42%;  up to 42% to be privatized
PT Perhotelan dan PerkantoranbHotel/office 100%;  100% to be privatized
JIHDbHotel management 3.3%;  up to 3.3% to be privatized
Other
PT SucofindoaSurveying 95%;  15-20% to be privatized
Agency for Strategic Industries (BPIS)bCoordinates for production of capital
goods100%;  100% to be privatized
PT Kerta NiagaaTrading 100;  100% to be privatized
PT SarinahbRetail 100;  up to 75% to be privatized
Badan Koordinasi Pernanaman Modal (BKPM)
(Investment Co-ordinating Board)Development organization ..
Commercial Advisory Foundation in Indonesia
(CAFI)Development organization ..
.. Not available.
a Fast-track SOE in 2000.
b "Standby" fast-track SOE in 2000.
Source: East Asia Analytical Unit, Department of Foreign Affairs and Trade, Australia (2000), Indonesia: Facing the
Challenge  [Online].  Available at:  http://www.dfat.gov.au/publications/indonesia/index.html [21 October 2002];
Embassy of the United States in Jakarta, Indonesia, Recent Economic Report:  GOI Revamps State-Owned
Enterprise Masterplan (3 July 2000)  [Online].  Available at:  http://www.usembassyjakarta.org/econ/
imigoi070600.html [4 October 2002];  the Europa World Yearbook (2001), 42 Edition, Europa Publications 2001,
London;  and WTO document G/STR/N/7/IDN, 23 August 2002.WT/TPR/S/117 Trade Policy Review
Page 46
45. Indonesia met its latest WTO notification requirements on state trading in August 2002 (full
notification);  in accordance with past practice, its notification covered only the rice trading operationsof the National Logistics Agency (Badan Urusan Logistik's, BULOG) (Table III.2).
45  The authorities
indicated that BULOG is the only SOE in Indonesia;   as from May 2003, BULOG is to be turned into
a (financially accountable and transparent) semi-profit organization (Perum BULOG), but its rice-
related responsibilities are to remain unchanged.46
(vii) Government procurement
46. Government procurement is used as a significant instrument of industrial policy.  Indonesia is
not a signatory to the WTO Agreement on Government Procurement (GPA), but is an activeparticipant in the Working Group on Transparency in Government Procurement
47;  it passed new
legislation in 2000.48  The new regime substantially revised but did not cancel existing government
procurement regulations dating back to 1994.49  Its explicit policy objective is to "increase the use of
domestic production, design and engineering with  the aim of expanding domestic employment and
national industries".  Other key changes include new ethics guidelines for procurement officials(although the decree lacks detailed enforcement rules), set-asides for small and medium-sized
enterprises (SMEs), and special rules for consulting services.
                                                     
45 WTO document G/STR/N/7/IDN - G/STR/N/8/IDN, 23 August 2002.
46 The Jakarta Post , 10 and 11 February 2003.
47 Non-participation in the GPA means that Indonesia is not bound by the WTO principles and rules on
transparency and non-discrimination in this area.
48 Presidential Decree No. 18/2000.  Available online at:  http://www.kimpraswil.go.id/publik/
DasarHkm/awal.htm [20 November 2002].
49 Indotradezone.com (2002).Chart III.5
Number of SOEs by sector, 1998
Source : Department of Foreign Affairs and Trade, Australia (2000), East Asia Analystical Unit,  Indonesia:  Facing the
              Challenge  [Online].  Available at http://www.dfat.gov.au/ publications/indonesia/index.html [21 October 2002].Agri-industry & consumer goods 
33
Energy
3
Tourism
10
Strategic industries
13
Telecommunications & media
4 Financial services
19Logistics
32Mining
4Construction & 
building materials
18Forestry, paper & wood products
8
Note:     SOEs allocation by sector as found at the source.Indonesia WT/TPR/S/117
Page 47
47. Between 1998 and 2000, the Indonesian government procurement market for goods, services,
and public works is estimated to have increased from 5.7% to 7% of GDP  annually.50  No further data
on public expenditure (central/local government agencies, SOEs) for the purchase of goods and
services and public works were available from the authorities.
48. Practices discriminating against foreign suppliers have been maintained since the previous
Review of Indonesia;  their participation in procur ement contracts is subject to certain conditions.
Foreign suppliers are authorized to participate in large contracts only (i.e. those exceeding at least
twofold the minimum amounts/value set for local suppliers, Table III.3).
Table III.3
Government procurement thresholds
(Rupiah)
Type of contractor Contracting-out services Goods/services Consulting services
Small-scale or cooperatives <1 billion <500 million <200 million
Medium 1 billion-10 billion 500 million-4 billion 200 million-1 billion
Large >10 billion >4 billion >1 billion
Foreign suppliers >25 billiona>10 billiona>2 billiona
a Contracts over this limit require the winning contractor, foreign or domestic, to "cooperate with a small or medium-scale
company or cooperative in the implementation of the contract".
Source:  Indotradezone.com, Indonesia's New Government Procurement Regulations , [Online].  Available at:
http://www.indotradezone.com/Informasi/frame_Procurement.html [20 March 2002].
49. Procurement of foreign goods is authorized only when goods are not produced domestically,
or when the technical specifications of domestic products fail to meet required standards.  Explicit
requirements and instructions are set (but not mandatory for contracts funded by foreign aid) for the
use of domestically sourced material, services or labour (including experts);  cooperation with a local
SME or cooperative in the implementation of the contract is required.  Price preferences are set at15% for domestic goods (50% higher than the previous rate)
51 and 7.5% for services.52  Foreign firms
bidding on certain government-sponsored construction or procurement projects may be asked to
purchase and export the equivalent in selected Indonesian products.53
50. Four procurement methods apply:  tenders;  direct selection54;  direct appointment55;  and
self-management.56  Special provisions and procedures (general selection57, direct selection, direct
appointment58) apply to the procurement of consulting services.
                                                     
50 This estimate reflects the share of general government consumption expenditure to GDP, and is
based on BPS (Central Bureau of Statistics) statistic s (available at:  http://www.bps.go.id/index.shtml).  No
other data were made available to the Secretariat.
51 WTO (1999).
52 Indotradezone.com (2002).
53 Bureau of Economic and Business Affairs/U.S. Department of State (2002).
54 The supplier is selected through direct negotiation after comparing bids.
55  The supplier is selected directly.  In cases of small purchases, single supplier, or urgent need, the
procedure is subject to approval of minist ers or heads of local government or SOEs.
56  The planning and execution of the contract is carried out by the prospective purchaser of the
goods/services using its own workers and equipment or contract workers.
57 Participants are selected thro ugh a pre-qualification process.
58 Method applicable to contracts below Rp 50 mil lion or in cases where the procurement process
resulted in a single bidder.WT/TPR/S/117 Trade Policy Review
Page 48
51. SOEs with shares listed on the stock exchange remain exempt from government procurement
requirements.59
52. At the time of the previous Review, all government agencies and state-owned enterprises
were responsible for their own procurement in the case of contracts not exceeding Rp 10 billion.60
Above this amount (involving about 250 contracts per year), contracts were submitted for finalapproval to the Central Procurement Team (TEP), an inter-ministerial body.  Prices were ultimatelycontrolled by the Finance and Development Supe rvisory Agency (BPKP), an independent public
auditor reporting to the House of Representatives.
53. Complaints have been reported about irregulari ties in the administration of tenders relating to
the purchase of banknote paper by Bank Indonesia and of telecommunications equipment by the state-
owned telecommunications companies PT Telkom and Indosat.
61
(viii) Countertrade
54. Indonesia's countertrade regime appears to have remained unchanged.  Countertrade policy is
aimed at linking imports relating to procurement by ministries, public-sector institutions and
SOEs with exports of non-oil commodities other than those banned, restricted, and controlled, or on
the negative list of countertrade.  Public procurement operations excluded from countertrade activitiesare: those financed through a soft loan from the World Bank, IBRD, IDB, or ADB;  those involving
technology transfer and services of consultant, surv eyor, or lawyer;  and imports for joint venture with
a foreign company.  At the time of the previous Review, most countertrade activities were generated
under two government schemes involving:  export performance requirements for foreign firms
tendering for certain types of government procurement contracts and construction projects (financed
by domestic funds, value between Rp 500 million and Rp 10 billion);  and foreign investment
companies located in bonded areas or export-processing zones entitled to use countertradearrangements (with their parent companies) for the duty/tax-free importation of equipment for
production (including raw materials, intermediate capital goods and machinery, factory equipment,
and components), against the exportation of their final product.
62  Products eligible for countertrade
have been reviewed every year by the Ministry of Industry and Trade.
55. Since the previous Review, the level of countertrade transactions has fallen off considerably,
as the Government almost ceased all major tender activities63;  in 2000, total countertrade dropped to
US$3.2 million before rising to US$17 million in 2001.  Countertrade operations are expected to pick
up as the Government's awarding of tenders increases.64
(ix) Local-content requirements
56. Apart from local-content requirements in connect ion with government procurement contracts
(section (vii) above), no other requirements of this type seem to be in force.  Indonesia eliminated all
local-content requirements notified under the WTO Agreement on Trade-Related Investment
Measures (TRIMs) ahead of schedule (end of the five-year transition period set on 1 January 2000)65;
                                                     
59 Bureau of Economic and Business Affairs/U.S. Department of State (2002).
60 WTO (1999).
61 USTR (2001).
62 WTO (1999);  U.S. Commercial Service (2002).
63 As indicated in the previous Review, prior to  the Asian crisis, the value of countertrade was
US$400 million (1997);  this fell to US$195 million in 1998 and US$287 million in 1999.
64 U.S. Commercial Service (2002).
65 WTO documents G/TRIMS/N/1/IDN/1, 1 June 1995;  G/TRIMS/N/2/Rev.9, 28 September 2001.Indonesia WT/TPR/S/117
Page 49
these consisted of requirements on fresh milk and cream (1998), utility boiler equipment (1998), and
soybean cake (1996).  Furthermore, in accordance with IMF and WTO obligations, in connection with
its substantial lowering of tariff rates in all market segments by mid-1999, Indonesia eliminated the
extensive tariff and tax incentives for local content for the automotive sector (Chapter IV(4)).66
(x) Contingency measures
(a) Anti-dumping and countervailing measures
57. Indonesia is a relatively recent but quite active user of these practices.  Until late 1995, when
the first anti-dumping legislation was passed, tariffs and surcharges were used to protect industries
against foreign imports when national or private interests were considered to be affected.67  The
institutional framework was established in 1996, and anti-dumping and countervailing laws were
notified to the WTO Committees on Anti-Dumping Practices and on Subsidies and CountervailingMeasures;  the legislation was reviewed by these Committees in 1997.  In 2001, the regulatory
framework was amended for procedures and requirements for an investigation of importation of a
product alleged to be dumped or subsidized;  the authorities indicated that the new regulation wouldbe notified to the WTO.
68
58. Indonesia has regularly submitted semi-annual reports on actions in this area to the relevant
WTO Committees.  Since 1998, Indonesia's recourse to anti-dumping action has shown a generally
downward trend (Chart III.6, Tabl e AIII.2);  with 43 cases initiated between 1996 and 2002, Indonesia
was the world's 11th largest user of such measure.69  Of the 27 anti-dumping investigations initiated
between 1998 and June 2002, 15 were subject to provisional measures, nine resulted in definitivemeasures (involving anti-dumping duties) out of which seven remained in force in February 2003.
Actions affected mainly base metals (steel) and ch emicals originating mostly in countries from the
region.  No countervailing measures have been taken during the period under review.
(b) Safeguards
59. As a result of pressure from local manufacturers, in December 2002 Indonesia introduced the
first regulatory framework for a safeguards mechanism
70;  in February 2003, the authorities indicated
their intention to notify this legislation to the WTO.  Under the new regulation, safeguards may take
the form of higher import duties applied initially for a period of six months, but may stay in place forfour years, depending on the findings of the investigation.
71  In February 2003, its implementation was
pending as the institutional framework was not set;  the authorities considered the possibility of
enlarging the responsibility of the Indonesian Anti-dumping Committee to cover safeguardsinvestigation.
                                                     
66 In 1996, Indonesia withdrew motor vehicles from its original notification (WTO document
G/TRIMS/N/1/IDN/1/Add.1, 28 October 1996).  In 1997, the granting of duty and sales tax exemptions underthe 1993 and 1996 schemes on imported parts and components conditional upon local content have been subjectto the WTO dispute settlement procedures (WTO document WT/DSB/M/47, 18 September 1998).
(USTR, 2002;  APEC, 2001.)
67 More information on the legislative and institutional background may be found in WTO (1999).
68 Decree of the Ministry of Industries and Trade No. 216/MPP/Kep/7/2001 revising Articles 1, 2, 3, 4,
5, 6, and 8 of the MOIT Decree No. 261/MPP/Kep/9/1996.
69 Data based on Indonesia's notifications to the WTO Secretariat.
70 Presidential Decree No. 84/2002 regarding safeguard measures of 16 December 2002, as indicated
by the authorities.  This development seems to have been prompted by the difficulties of local manufacturers
under pressure from the massive importation of textile and electronics products from China (The JakartaPost.com, Ruling drafted to safeguard local industries [Online].  Available at:  http://www.thejakartapost.com/
detailbusiness.asp?fileid=20020218.J01 [18 February 2002]).
71 The Jakarta Post.com, Ruling drafted to safeguard local industries.WT/TPR/S/117 Trade Policy Review
Page 50
0246810
1998 1999 2000 2001 Jun-02
Source :  Notifications to the WTO.Poland  3.7
United Arab 
Emirates  3.7
India
14.8 EU15
7.4
 Malaysia
3.7China
11.1Products of the chemical
 or allied industries
33.3(b) By product 
Per cent(c) By origin 
Per centChart III.6
Anti-dumping cases, January 1998 - June 2002
(a) By number of cases initiated
Final measures No final measures
Russia  3.7Pending cases
Vegetable products 
11.1Chinese Taipei
 3.7Korea, Rep. of
18.5Singapore
7.4Thailand
3.7Base metals & articles thereof
40.7
Machinery & mechanical 
appliances;  electrical equip.
14.8Australia
7.4
Japan
11.1Indonesia WT/TPR/S/117
Page 51
(xi) Standards and other technical requirements
(a) Standards
General framework
60. Since Indonesia's previous Review, the inst itutional framework regarding standards has
remained largely unchanged;  in 2000, the authority of the National Standardization Agency of
Indonesia (Badan Standardisasi Nasional, BSN) , the non-department governmental institution
responsible for the development of standardization72, was enhanced.  Standardization activities
undertaken in various institutions are coordinated within the National Standardization System (Sistem
Standardisasi Nasional, SSN) established by BS N.  The SSN is a basis and guide for every
standardization activity in Indonesia.  Under this system, the role and responsibility of each ministry
or technical institution in metrology, standards, testing, and quality assurance are being improved.Furthermore, producers, consumers, associations, and scientists have seemingly participated more
actively in the development and activities of standardization.  The SSN ensures that Indonesia
National Standards (SNI) is the only Indonesian national standard, which is agreed by all parties
through consensus at the central and regional levels in Indonesia.
61. Indonesia has updated its legislative framework in this area, most recently in 2000.
73
Standards have continued to be set on a non-discriminatory basis.  As indicated in the previous
Review, they are generally based on international standards, including those set by the Codex
Alimentarius Commission, the International Orga nization for Standardization (ISO), and the
International Electrotechnical Commission.
Mandatory standards
62. By February 2003, there were 187 mandatory SNIs, consisting of the 74 under the Ministry of
Industry and Trade, and 113 under the Ministries of Agriculture and of Marine Affairs.  Since its
previous Review, Indonesia has increased the number of mandatory SNIs under the responsibility of
the Ministry of Industry and Trade from 56 (1998) to at least 74 (2002, Table III.4).74  These now
cover, inter alia,  raw sugar, wheat flour for foodstuff, battery cells, cement, tyres, plastics, fertilizers
(virtually all SNIs passed in 2002), and steel items;  they relate to community safety, security, health,
environment conservation and/or economic considerations.
                                                     
72 This includes:  the assessment and formulation of national policy in national standardization;
coordination of functional activities in carrying out BSN tasks;  facilitation and direction of standardization
activities by governmental technical institutions;  organizing national and international standardization
cooperation;  general administration service in general planning;  and organization and working structure,
personnel, finance, archiving, encrypting, and infrastr ucture (online information by the BSN.  Available at:
http://www.bsn.or.id/default_eng.htm [7 September 2002]).
73 Government Regulation No. 102/2000.  Information on regulations in force may be found in BSN
online information, List of BSN Guidelines .  Available at:  http://www.bsn.or.id/BSN_guidelines.htm
[26 March 2002].
74 Table III.4 takes into account compulsory SNIs affecting industry and trade;  those affecting
agricultural, fisheries, and husbandry items are not take n into account as this information is available online
only in the Bahasa language and access to the website directory is difficult.  WTO documents G/TBT/N/IDN/1,15 January 2001;  G/TBT/N/IDN/2, 10 December 2001;  G/TBT/N/IDN/3, 23 April 2002;  and
G/TBT/N/IDN/4, 23 April 2002.WT/TPR/S/117 Trade Policy Review
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Table III.4
Mandatory SNIs in industry and trade, 2002
No. Title No. SNI Ministry decree Date
1 Portland Cement 15-2049-1994 256/M/SK/II/1979 22/11/79
2 Dry Cell Battery 04-2051-1990 256/M/SK/II/1979 22/11/79
3 Urea Fertilizer 02-2801-1998/Rev. 1992 256/M/SK/II/1979 22/11/79
4 Concrete Reinforcement Steel Bars 07-2052-1997/Rev. 1990 256/M/SK/II/1979 22/11/79
5 Galvanized Steel Sheet 07-2053-1990 256/M/SK/II/1979 22/11/79
6 Fluorescent Ballast for 50 Hz Alternating Current 04-3561-1994 256/M/SK/II/1979 22/11/79
7 Hot Rerolled Equilateral Rectangels Steels with Round
Edge07-2054-1990 256/M/SK/II/1979 22/11/79
8 Electric Bulb 04-3560-1994 256/M/SK/II/1979 22/11/79
9 Zinc Coated Steel Pipes 07-0039-1987 288/N/SK/7/1980 10/07/80
10 Low Carbon Steel Wire 07-0040-1987 288/N/SK/7/1980 10/07/80
11 Welding Electrode Seated by Low Carbon Steel 07-0049-1987 288/N/SK/7/1980 10/07/80
12 Round Edge Profile Channel Hot Rolled Steel 07-0052-1987 288/N/SK/7/1980 10/07/80
13 Low Carbon Steel Wire Rood 07-0053-1987 288/N/SK/7/1980 10/07/80
14 Rerolled Concrete Reinforcment Steel Bars 07-0065-1987 288/N/SK/7/1980 10/07/80
15 Zinc Coated Steel Sheet with Colored Paint Layer 07-0066-1987 288/N/SK/7/1980 10/07/80
16 Carbon Steel Pipe for Machine Structure 07-0067-1987 288/N/SK/7/1980 10/07/80
17 Carbon Steel Pipe for General Structure 07-0068-1987 288/N/SK/7/1980 10/07/80
18 Union Pipe (Conduit) 07-0069-1987 288/N/SK/7/1980 10/07/80
19 Hot Rerolled Equilateral Rectangles Steel with Round
Edge07-0070-1987 288/N/SK/7/1980 10/07/80
20 Spiral Welded Steel Pipe 07-0071-1987 288/N/SK/7/1980 10/7/80
21 XLPE Material for Electrical Cable Insulators Rated
Voltage 1 kV up to 30 kV04-2697-1992 407/M/SK/10/1980 03/10/80
22 PVC Insulated Wire Rated Voltage 450/750 Volt (NYA) 04-2698-1999/ Rev. 1992 407/M/SK/10/1980 03/10/80
23 PVC Insulated and Seated Cables, Rated Voltage
300/500 Volt (NYM)04-2699-1999/ Rev. 1992 407/M/SK/10/1980 03/10/80
24 PVC Insulated and Seated Cable with 0,6/1 kV Nominal
Voltage (NYY, NAYY)04-2701-1999/ Rev. 1992 407/M/SK/10/1980 03/10/80
25 PVC Insulated and Seated Underground Cable, Steel or
Aluminum Wire Shelded with 0,6/1 kV Nominal
Voltage (NYFGbY/NAYYFGbY/NYRGbY/NAYRGbY/NYFGaY/NAYGaY/NYRGaY/NAYRGaY)04-2700-1999/ Rev. 1992 407/M/SK/10/1980 03/10/80
26 Performance Test of Alternating Engine Power for
General Use05-0119-1987 312/M/SK/9/1984 12/09/84
27 Performance Test of Benzene Combustion Engine for
Motor Vehicles09-0120-1995/Rev. 1987 312/M/SK/9/1984 12/09/84
28 Term of Alternating Engine 05-3562-1994 312/M/SK/9/1984 12/09/84
29 Water Debit Measurement 09-0140-1987 312/M/SK/9/1984 12/09/84
30 Performance Test of Centrifugal Pump 05-0141-1987 312/M/SK/9/1984 12/09/84
31 Test Methods for Prime Mover of trial Run for Shipping. 09-0142-1987 312/M/SK/9/1984 12/09/84
32 Plain Cement Asbestos Sheet 03-1027-1989 317/M/SK/8/1986 11/08/86
33 Symetrycal Corrugated Asbestos Cement Sheet 03-2050-1990 317/M/SK/8/1986 11/08/86
34 Lead Acid Batteries for Vehicles 09-0038-1999/ Rev. 1987 400/M/SK/12/1987 09/12/87
35 PVC Insulated and Sheated Flexible Cable with 500 V
Nominal Voltage (NYMHY)04-3234-1992 74/M/SK/2/1988 17/2/88
36 PVC Insulated and Sheated Flexible Cable with 500 V
Nominal Voltage (NYMHY Oval)04-3235-1992 74/M/SK/2/1988 17/2/88
37 PVC Insulated and Sheated Flexible Wire with 1000 V
Nominal Voltage (NYAF)04-3226-1992 74/M/SK/2/1988 17/2/88
38 PVC Insulated and Sheated Flexible Double wire and
Triple Wire with work up to 380 V (NYZ/NYD)04-3237-1992 74/M/SK/2/1988 17/2/88
Table III.4 (cont'd)Indonesia WT/TPR/S/117
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No. Title No. SNI Ministry decree Date
39 PVC Insulated and Sheated, Twin up to Quintuplets
Cables 380 V Nominal Voltage (NYAF)04-3238-1992 74/M/SK/2/1988 17/2/88
40 Pressure Vessel 1-A 05-3563-1994 6/M/SK/I/1989 20/01/89
41 Brake Fluid for Motor Vehicle 06-2768-1992 334/M/SK/12/1989 22/12/89
42 Motor Vehicles Information 09-0604-1989 83/M/SK/8/1990 14/08/90
43 Motor Vehicles Identification Number (VIN) 09-1411-1989 84/M/SK/8/1990 14/08/90
44 Drinking Water 05-3553-1994 120/M/SK/10/1990 24/10/90
45 Pozolan Portland Cement 15-0302-1999/ 29/M/SK/2/1995 16/02/95
46 Lime Pozolan Cement 15-0301-1989 29/M/SK/2/1995 16/02/95
47 Mixed Portland Cement 15-3500-1993 29/M/SK/2/1995 16/02/95
48 Tyres for Passenger Cars 06-0098-1998/ Rev. 1987 29/M/SK/2/1995 16/02/95
49 Tyres for Truck and Buses 06-0099-1996/ Rev. 1987 29/M/SK/2/1995 16/02/95
50 Tyres for Light Truck 06-0100-1996/ Rev. 1987 29/M/SK/2/1995 16/02/95
51 Tyres for Motorcycles Edible Salt 06-0101-1998/ Rev. 1987 29/M/SK/2/1995 16/02/95
52 Salt 01-3556-2000/ Rev. 1994 29/M/SK/2/1995 16/02/95
53 Tin Coating weight on Cans for Foods and Beverages 09-2652-1998/ Rev. 1992 29/M/SK/2/1995 16/02/95
54 Artificial Feeds for Shrimp 01-2724-1992 - -
55 Wheat Flour for food stuffa01-3751-2000 323/MPP/Kep/11/2001 -
56 Self-ballast lamps for general lighting services 04-6504-2001 337/MPP/Kep/11/2001 -
57 Ammonium Sulphate Fertilizerb02-1760-1990 140/MPP/Kep/3/2002 03/05/02
58 Triple Superphosphate Fertilizerb02-0086-1992 140/MPP/Kep/3/2002 03/05/02
59 Triple Superphosphate Plus-Zn Fertilizerb02-2800-1992 140/MPP/Kep/3/2002 03/05/02
60 Nitrogen Phosphore Potassium Fertilizerb02-2803-1992 140/MPP/Kep/3/2002 03/05/02
61 Ammonium Chloride Fertilizerb02-2581-1992 140/MPP/Kep/3/2002 03/05/02
62 Dolomite Fertilizerb02-2804-1992 140/MPP/Kep/3/2002 03/05/02
63 Potassium Chloride Fertilizerb02-2805-1992 140/MPP/Kep/3/2002 03/05/02
64 Mono Amonium Phosphate Fertilizerb02-2810-1992 140/MPP/Kep/3/2002 03/05/02
65 Urea Amonium Phosphate Fertilizerb02-2811-1992 140/MPP/Kep/3/2002 03/05/02
66 Diamonium Phosphate Fertilizerb02-2858-1992 140/MPP/Kep/3/2002 03/05/02
67 Super Phosphate Fertilizerb02-3769-1995 140/MPP/Kep/3/2002 03/05/02
68 Natural Phosphate Fertilizerb02-3776-1995 140/MPP/Kep/3/2002 03/05/02
69 SP-36 Plus Zn Fertilizerb02-4873-1998 140/MPP/Kep/3/2002 03/05/02
70 Borat (Borac Acids) Fertilizerb02-4959-1999 140/MPP/Kep/3/2002 03/05/02
71 Sipramin (Supplement Fertilizer in liquid) Fertilizerb02-4958-1999 140/MPP/Kep/3/2002 03/05/02
a Not identical to international norms;  it is intended to improve people's nutrition through fortification of wheat flour using  micro
nutrient.
b Not identical to international standard because the so-called "hara" element needed by Indonesian soil is different from other
countries' soil.
Note : The authorities indicated that these SNIs are compulsory for domestic products only;  those from No. 1 to 54 were not not ified to
the WTO.
Source : National Standardization Agency of Indonesia [Onlin e].  Available at:  http ://www.bsn.or.id/fpdb/INDAG_
WJB_en.asp;  and Indonesian authorities.
Voluntary standards
63. Most (97%) of the 6,311 SNIs remain voluntary.   As from 2000, draft SNIs are formulated by
a Technical Committee on the basis of consensus among the technical institutions of each ministry
involved.  SNIs are based on international/regional standards or foreign national standards throughWT/TPR/S/117 Trade Policy Review
Page 54
adoption or adaptation of relevant standards.  In February 2003 the BSN was in the process of
evaluating the alignment of SN I with international standards.
Testing and certification
64. Since 2000, standards implementation and conformity assessment have been carried out
through accreditation and certification.  Certification is performed by certification bodies, inspection
bodies, training providers, and accredited laboratories.  Since September 2002, the NationalAccreditation Body of Indonesia (KAN) has assisted the BSN in providing accreditation to
laboratories, certification bodies
75, and inspection bodies.76  Accredited certification bodies and
testing/calibration laboratories issue certificate s in accordance with their accreditation terms and
coverage.
International cooperation65. International cooperation on standardization has been conducted through Indonesia's
participation in the work of bodies such as  the Codex Alimentarius Commission (CAC), the
International Organization for Standardization (ISO ), the International Electrotechnical Commission
(IEC), the ASEAN Consultative Committee on Standards and Quality (ACCSQ), the International
Laboratory Accreditation Conference (ILAC), the Asia Pacific Economic Cooperation (APEC) and
the WTO Committee on Technical Barriers to Trade.
66. As a result, since the previous Review, Indonesia's involvement in mutual recognition
arrangements (MRAs) has expanded with KAN's si gnature of the Pacific Accreditation Cooperation
MRA (August 2000), the International Accreditat ion Forum MRA (November 2001), the Asia Pacific
Laboratory Accreditation Cooperation MRA (May 2001)  and the International Laboratory
Accreditation Cooperation (June 2001).
77  Indonesia has maintained its 1996 mutual recognition
arrangement with the Philippines for product certification and approval schemes of tyres and tyreproducts, plywood, accumulators, matches, and incandescent lamps.
78  Indonesia is also involved in
the preparation of MRAs for acceptance of testing reports and certificates for some products, such as
electrotechnics, cosmetics, pharmaceuticals, and foodstuff, in the context of ASEAN.
Transparency
67. Since 2001 virtually all standards-related information has been made available online79 and at
BSN's Standard Information Centre. BSN is an IS ONET (ISO Information Network) reference point
and the WTO enquiry point responsible for notification matters in the framework of the WTO
Agreement on Technical Barriers to Trade (TBT).80  Between 2000 and 2002 (April), Indonesia made
seven notifications under the TBT Agreement of technical regulations (including on food labelling
and advertising) prior to their implementation81;  the timeliness of submission allowed for 30-60 day
comment period.
                                                     
75 Certification bodies (CBs) cover product certification, ISO 9000 quality system certification (QSC),
personnel certification,  ISO 14000 environmental management system certification (EMSC), HACCP systemcertification and training providers.
76 BSN online information.  Available at:  http://www.bsn.or.id/default_eng.htm [7 September 2002].
77 National Accreditation Body (KAN) (undated).
78 WTO (1999).
79 Available at:  http://www.bsn.or.id.
80 WTO document G/TBT/ENQ/20, 13 March 2002.
81 No notifications were submitted in 1998 and 1999.Indonesia WT/TPR/S/117
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(b) Sanitary and phytosanitary regulations
68. Compliance with health and safety requirements (including registration with the Ministry of
Health) as well as with SNIs is required for all food items.  In addition to other conditions, as from
May 2000 certificates accompanying imported fruit must state that the fruit is free from fruit fly, and
for potatoes that they are free from wart disease ( Synchrytrium endobioticum ).82  Between May 1996
and May 2001, import restrictions have applied on fresh fruit from New Zealand.83
69. Certain food items require a halal  certificate and approval prior to importation84;  in
September 2000, the importation of chicken parts was banned, apparently to protect local industry and
to ensure that imports were halal .85  Certificates assuring that food is dioxin-free have been required;
in 1999 a temporary ban on imports of Belgian and Dutch farm, poultry, and food products was
imposed because of concerns over dioxin contamination.86  Since 2001, Indonesia has banned imports
of fresh milk from Argentina because of the outbreak of Foot and Mouth Disease (FMD) there;  an
FMD-connected ban on Argentine corn was in force until November 2001.87
70. Since 1996, the production, importation, and distri bution of food supplements (defined as
vitamins, minerals, extracts, plant substances, amino acids, concentrates or any combination) must,
inter alia,  be by licensed pharmaceutical companies or local-government-licensed food supplement
companies, and be manufactured in compliance with food manufacturing practices.88  Hygiene and
safety requirements have been set as well as maximum daily limits for vitamin and mineral amounts.  
71. All processed food products must be tested by the National Agency of Drug and Food Control
(BPOM).  Upon implementation of the 1998 C onsumer Protection Law, as from July 2000 a
registration number (ML) must be obtained from BPOM to import food products.  Following
complaints that the ML-related procedures were time consuming and costly, the BPOM granted
temporary MLs for food items that, according to the authorities, had already entered Indonesian
territory, but had not received the approval from BPOM.89  The authorities indicated that the time
limit for completion of all ML registration procedures had been extended until December 2002, and
no more MLs would be granted afterwards.  Importation of live animals also required an inspection
certificate from the Indonesian Veterinary Service.
72. All medical devices, cosmetics, and household health supplies must be registered with the
Director General of Food and Drugs.  Imported and locally produced medicines alike require a
certificate of analysis from the manufacturer.  Brochures (in Indonesian) must accompany over-the-
counter medicines for distribution in Indonesia.  Retailers must confine their sales of patent medicines
to those of recognized companies (retailers are prohibited from repacking or mixing operations).90
                                                     
82 Dun & Bradstreet, Inc. (2001), p. 633.
83 WTO documents G/SPS/R/20, 16 January 2001 and G/SPS/R/22, 5 October 2001.
84 Dun & Bradstreet, Inc. (2001), p. 635;  WTO document G/SPS/GEN/92, 15 September 1998;  and
Economist Intelligence Unit (2002), p. 51.
85 Regulation on importation procedures of animals and products derived from animals released by
Director General of Livestock, on 30 June 2000, and Regulation of the Government No. 69 on Food Labelling
and Advertisement of 21 July 1999.
86 Economist Intelligence Unit (2002), p. 51.
87 WTO documents G/SPS/R/25, 18 January 2002 and G/SPS/R/27, 2 August 2002.
88 Dun & Bradstreet, Inc. (2001), p. 635.
89 USTR (2002).
90 Dun & Bradstreet, Inc. (2001), p. 635.WT/TPR/S/117 Trade Policy Review
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International cooperation
73. To meet requirements in developed country markets with respect to pesticide residues,
micro-biological contaminants, additives, and heavy metal content of fish and poultry products, by
2001 the Ministry of Agriculture was trying to establish and strengthen a certification body on quality
systems based on the FAO/CAC Hazard Analysis Critical Control Point (HACCP), and testing
laboratories.91  The Indonesian agricultural, livestock, and fisheries sector seems to have been
successful in implementing the HACCP quality management system programmes;  consequently, an
MRA has been signed with  the EU92, and studies have been made examining the possibility of
developing SPS-related MRAs with the Netherlands and New Zealand.  Indonesia has undertaken
bilateral informal discussions with other ASEAN partners with a view to facilitating transparency in
trade in food.
Transparency
74. Between 1998 and 2002, 16 notifications relating to SPS requirements on food safety, animal
health, and plant protection were submitted to the WTO Committee on Sanitary and Phytosanitary
Measures;  Indonesia also notified its enquiry point and national notification authority.93  In the
context of the work of this Committee, Indonesia indicated its requirements for capacity building andtraining in relation to food safety, and animal and plant health.
94 At SPS Committee meetings, some
Members expressed concern over Indonesia's import re strictions relating to Foot and Mouth Disease
and fruit flies (fresh fruit from New Zealand).95
(c) Marking, labelling, and packaging
75. Since 1979, the SNI mark (indicating conformity w ith the relevant standard) has been either
compulsory (item involving safety and health aspects subject to mandatory SNI) or voluntary.96
Drugs and pharmaceuticals must be marked on the immediate container to show origin, nature,
composition, quality, quantity, and registration number.
76. Under new food labelling requirements, effective as from 1999, all packaged food products
distributed in Indonesia must be labelled exclusively in Bahasa  language, Arabic numbers, and Latin
letters97;  the authorities indicated that the use of any other language, number and letters is allowed as
long as there are no other synonyms for the purpose of food trade with foreign countries.  The use ofstickers was authorized temporarily (i.e. until enactment of the new regulation).
77. Since 1999, specific wording has been required for the labels of certain food items, including
milk products, baby food, alcoholic beverages, and halal  food, to indicate their content.
98  The date of
minimum durability (expiration date) has been required for food items.  Food additives must be
                                                     
91 APEC (2001).
92 The number of recognized fish industries on the quality management system has increased from 155
(1994) to 259 (February 2003).
93 These national institutions are important in receiving and disseminating information concerning SPS
measures (G/SPS/GEN/27/Rev.9, 14 March 2002).  Indonesia is a member in the three international standard-
setting bodies explicitly referred to in the SPS Agreement:  the Codex Alimentarius, the International Office forEpizootics, and the International Plant Protection Convention  (G/SPS/GEN/49/Rev.4, 30 April 2002).
94 WTO documents G/SPS/GEN/295/Add.6, 13 February 2002 and G/SPS/R/27, 2 August 2002.
95 WTO document G/SPS/GEN/204/REV.2, 15 February 2002.
96 National Standardization Agency of Indonesia (BSN) (undated).
97 Government Regulation No. 69/1999 on Food Labelling and Advertisement.
98 Government Regulation No. 69/1999 on Food Labelling and Advertisement (WTO document
G/SPS/N/IDN/9, 26 July 2000).Indonesia WT/TPR/S/117
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identified.  As from January 2001, any food containing genetically engineered or irradiated products
must be labelled in compliance with BPOM requirements.99
78. As indicated earlier (sections (xi)(a) and (xi)(b)), since 1998, Indonesia has notified to the
WTO Committee on Technical Barriers to Trade several mandatory standards including two related to
food labelling requirements.100
(3) MEASURES DIRECTLY AFFECTING EXPORTS
(i) Registration and documentation
79. As in the case of imports of restricted items (section (2)(v)), exports of products subject to
specific export measures (section (3)(ii) and (3)(iii)) have been allowed only through registered and
approved exporters.101
80. Basic documentation requirements for exports have remained unchanged since the previous
Review.  They include, basically, an export declaration (PEB) in diskette form, unless an international
document (e.g. ATA Carnet, TRIPTIEK, CDP Carnet consignments by PT Pos) is used.  Physical
inspection of merchandise exports is required for suspected cases of customs or internal tax fraud,
temporary exportation/importation, items subject to e xport tax (PE), use of drawback system facilities
(BAPEKSTA), and gold powder/ingots/bars.102  Since August 2001, inspections have been carried out
by the Customs Office (LPBC), taking over PT Sucofindo's (Surveyor) functions;  inspection may
take one day and no fee is involved.
(ii) Export prohibitions, restrictions, and licensing
81. During the period under review, export prohibitions and restrictions have been maintained to
ensure:  protection of natural resources and endangered species (e.g. in accordance with CITES);
promotion of higher-value-added downstream indust ries;  upgrading the quality of export products;
adequate supply of essential products;  and controls on items subject to international commitments(e.g. MFA).
103
(a) Export prohibitions
82. Indonesia bans exports of certain live fishery products, rubber of low quality, rubber
materials, crude leather of reptile, ferrous scrap/waste (except if originating in Batam Island), round
wood and wood chips (as from 2001)104, and CITES-protected wild animals and natural plants.105  To
                                                     
99 Dun & Bradstreet, Inc. (2001), p. 635.
100 WTO documents G/TBT/Notif.00/478, 29 September 2000 and G/TBT/Notif.00/383,
5 September 2000.
101 Approved exporters are considered the companies or individuals already recognized by the Ministry
of Industry and Trade as exporters of certain goods subject to the provisions in force (Decree of the Minister of
Industry and Trade No. 182/MPP/Kep/4/1998, 20 April 1998).
102 ASEAN (undated).
103 APEC (2001).
104 Joint Decree of the Minister of Forestry and the Minister of Industry and Trade No. 1132/KPTS/-
III/2001 and No. 292/MPP/Kep/10/01 concerning Export Termination of Round Wood and Wood Chips.
105 Decree of the Minister of Industry and Trade No. 57/MPP/Kep/I/2002, 31 January 2002 on the
amendment to attachment to decree of the Minister  of Industry and Trade No. 558/MMP/KEP/12/1998 on
general provisions in the export field as already amended for several times and the latest by decree of theMinister of Industry and Trade No. 294/MPP/Kep/10/2001 (available at: http://www.dprin.go.id/regulasi1/english/ inat2002.asp [25 March 2002]).  APEC Electronic Individual Action Plan (e-IAP) (2001).WT/TPR/S/117 Trade Policy Review
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combat a fertilizer shortage, as from August 2000 export of urea has been banned. As from 2002,
exports of sea sand have been suspended with a view to protecting the ecosystem;  the authorities
indicated that sea sand exportation may be undertaken by registered exporters under an annual quota
system, presently suspended.106
83. Exports to Israel remain banned.
(b) Export restrictions ("supervised" exports)
84. To ensure an adequate domestic supply of certain agricultural, mineral, and industrial
products at reasonable prices, Indonesia has maintained its export approval requirements for so-called
"supervised" products.107  In January 2002, supervised exports were:  certain live bovine animals, live
fish, palm nuts/kernels, lead and bauxite ores/concentrate, petroleum oils/products, urea fertilizer,
crocodile leather (wet blue), unprotected wild animals and plants, silver/goldunwrought/powder/ingots/semi-manufactured, waste/scrap of cast iron/alloy steel/tinned iron
steel/stainless steel/copper/brass/aluminium.  No data on approvals granted/refused, reasons for
refusal, or the reason for not notifying these restrictions to the WTO have been provided by the
authorities.
(c) Export licensing and quotas ("regulated" exports)
85. Since the previous Review in 1998, the system of regulating exports through licensing and
quotas (including product coverage) has remained unchanged; 
 at that time, the lack of transparency
and adverse economic effects of the system were noted (e.g. administrative discretion in quota
allocation to approved exporters encouraging the fo rmation of powerful export cartels, notably in the
wood, plywood, and rattan industries).108  As of January 2002, Indonesia regulated exports of certain
types of manioc (destined for the EU)), coffee and its extract/essence/concentrate/preparations
(Association of Coffee Producing Countries), textiles and clothing (MFA export quotas)109, rubber,
veneer and plywood or similar laminated wood, and teakwood.110  No further information on the use
of these measures was available from the authorities.
(iii) Export taxes
86. To promote downstream processing and higher-value-added exports, Indonesia has
maintained its export taxes on certain commodities;   in the light of its IMF commitments, it reduced
the scope and rates of tax, which are now ad valorem  only.  Between 1999 and February 2001, the
                                                     
106 Presidential Decree No. 33/02; Joint Decree of the Minister of Industry and Trade
No. 89/MPP/KEP/2/2002, Minister of Marine and Fishery No. SKB.07/Men/2002 and State Minister for theEnvironment No. 01/MENLH/2/2002, 14 February 2002.
107 WTO (1999).
108 WTO (1999).
109 The degree of utilization (share of in-quota exports to total quota level) of MFA-related quotas has
varied depending on the market and items.  In 2002, the situation in the different markets was:  for theUnited States utilization exceedeed 60% for most item categ ories (several at 100%);  Canada exceeded 60% for
less than half of product categories (up to 92%);  EU  exceeded 60% for virtually all product categories (up to
95%) and Turkey exceeded 60% for half of the product  categories exceeding 60% (up to 90%).  During the
period under review, these quota-restricted markets have been the destination of up to 46.1% of exports of the
product categories concerned.
110 Decree of the Minister of Industry and Trade No. 57/MPP/Kep/I/2002, 31 January 2002 on the
amendment to attachment to decree of the Minister  of Industry and Trade No. 558/MMP/KEP/12/1998 on
general provisions in the export field as already amended several times, the latest of which by decree of theMinister of Industry and Trade No. 294/MPP/Kep/10/2001.  APEC (2001).Indonesia WT/TPR/S/117
Page 59
number of products subject to export tax was reduced slightly from 12 nine-digit HS96 items
(including coconut oil) to four groups of commodities (i.e. rattan, wood, minerals, sand, and palm oil);
the range of rates was narrowed (from 10%-40%, to 1%, 3% and 15%) and the level and dispersion of
rates (from seven to three) were also cut.111  Export taxes are calculated on the basis of a formula
containing a minimum/benchmark export price or export check price (HPE).112  The introduction of an
export tax on leather was under consideration in November 2002.  Such taxes constitute implicitassistance to the downstream activities for the products involved.
(iv) Export check (benchmark) prices
87. Indonesia has continued to set and regularly update export check prices (HPEs) for items
subject to export taxes to simplify tax collection as well as to combat under-invoicing;  an HPE has
been set at US$3 per cubic metre for sea sand to prevent environmental damage, even though exportsof this item are prohibited.
113  HPEs do not always correspond to world prices;  despite rising
international prices, the authorities indicated that the HPEs for crude palm oil and its derivative
products remained fixed.
(v) Export assistance114
(a) Grants
88. According to the relevant notifications to th e WTO, during the period under review Indonesia
did not provide any direct subsidies to rice exports.  Under WTO commitments, Indonesia has to
ensure annual cuts in export subsidization for rice;  budgetary outlays should be reduced from
US$27.7 million (1995) to US$21.5 million (2004), covering a progressively reduced volume of rice
exports from 295,000 tonnes to 257,000 tonnes, respectively.115
(b) Duty and tax concessions
89. The operation of the duty exemption and drawback schemes remains unchanged
(section (2)(ii)( i)).  Imported or domestically purchased inputs used in the manufacture of exported
products are apparently exempt from custom duties and internal taxes, which may be refunded upon
exportation of the final product.  The authorities indicated that no subsidized credit has  been available
to agricultural and small and medium-sized firms (section (4)(ii)).
(c) Free-trade export zones and similar schemes
90. Indonesia has continued to operate its free-trade zones and industrial estates, which are
combined in several bonded warehouse areas administered by SOEs (mainly the island of Batam,
Nusantara Harbour, and the Port of Tanjung Priok).116  Bonded zones are intended for the processing
                                                     
111 Decrees of the Minister of Finance No. 30/KMK.01/1999, 29 January 1999,
No. 567/KMK.017/1999, 31 December 1999, an d No. 66/KMK.017/2001, 9 February 2001.
112 The export tax formula is:  export tax rate X export check price (HPE) X number of units of goods
X exchange rate.
113 Decree of the Minister of Industry and Trade No. 641/MPP/KEP/9/2002, 23 September 2002.
114 According to notifications submitted to the WTO between 1998 and June 2002, five countervailing
actions have been taken against Indonesian exports of certain polyester (fibres, yarn) and steel (plate, rolled flat)
products, by Canada, the EU, and the United States.
115 Schedule XXI-Indonesia, Part IV – Section II;  APEC Secretariat online information.  Available at:
http://www.apec-iap.org/document/INA_2001_IAP.htm [28 March 2002].
116 The establishment of new free-trade zones (Sab ang, Dumai, Batam, Bintan, Karimun, Natuna,
Bitung, Morotai, and Biak) was under consideration in 2002.WT/TPR/S/117 Trade Policy Review
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and assembly of goods, including their design, engineering, sorting, initial inspections, and packaging.
Companies may be 100% foreign owned for five years, and 95% ownership thereafter is permitted,
provided 100% of the product is exported.117  Companies operating in bonded zones have been
required to export at least two thirds  of their production, excluding components, which can be sold on
the domestic market provided domestic sales do not exceed 50% of realized export value.  In the
context of the 1999 Automotive Policy (Chapter IV (4)(ii)), the limits on the levels of domestic salesallowed from automotive production facilities in bonded zones have been raised, from 50% to 100%
of export value in the case of components, and from 25% to 50% of export value in the case of fully
assembled products.
118  The authorities indicated that apart from the exemption from import duties
and the facility to sell a part of the output to the domestic market, no other incentives are available to
firms established in these zones.
(d) Export finance, guarantees, and insurance
91. Since September 1999, the state-owned PT Bank Ekspor Indonesia Persero (BEI) has ensured
pre- and post-shipment finance and guarantee facilities (for exports and imports), which were
formerly operated by Bank Indonesia (the central bank).119  To enhance export activities, the BEI
guarantees letters of credit (L/C) and issues guarantees for domestic exporters who need loans fromlocal banks.  Guarantees have been refused for lo ans to companies with bad debts (i.e. most export-
oriented firms);  BEI assesses exporters (and importers) on the basis of normal prudential banking
norms.  Terms and conditions of finance are set in accordance with commercial considerations.
120
Low-interest funding from Japan's Export-Import (J-EXIM) Bank and from the Miyazawa Plan isused to finance BEI, which had initial capitalization of Rp 3 trillion.
121
92. The state-owned Export Insurance Indonesia (ASEI)122 remains the major source of export
insurance for products other than oil and gas;  as from December 1999, its scope was expandedthrough a memorandum of understanding signed with the state-owned Asuransi Jasaraharja Putra
(AJP) to provide export insurance coverage to SMEs.  In 2002, ASEI entered into general insurance
business to provide one-stop service to its clients as well as to maximize its net worth equity.
123
ASEI's core business involves export credit insurance and guarantee as well as bonds (constructionbonds, customs bonds
124, etc.).  Premium rates for the comprehensive policy range from 0.2% (for a
short term irrevocable L/C for shipments to the United States, Australia, Europe, and Japan) to 4%
(for a one-year L/C to several high-risk countries) of the gross invoice;  the rate is determined by
country risk, the presence of payment security (or lack thereof), and the period of credit.125  F o r
                                                     
117 Partnership for Busi ness Competition (2002).
118 U.S. Embassy Jakarta (1999).
119 Regulation No. 37/1999, 25 May 1999, regarding state capital participation of the Government of
the Republic of Indonesia for establishment of the limited liability company (Persero) in the banking field.
120 The amount of financing depends on its working capital needs within one trade cycle, with a
maximum of 90% from the L/C or total sales contract.  The maximum period of repayment is 360 days, andfinancing is available in rupiah or U.S. dollars.  The guarantee fee is 0.25% of the amount of L/C opened, and
there is a confirming fee charged by the lending bank, a maximum of 2% per annum.  The interest rate on loans
guaranteed by BEI is based on its prime lending rate, and the interest rate applied to the exporter by the lendingbank is the BEI lending rate plus margin, for both rupiah and U.S. dollar loans.
121 Economist Intelligence Unit (2002), p. 54.
122 ASEI also offers credit guarantee against risks of  payment default by the exporter on credit granted
by banks or other financial institutions, and a guarantee for credit beyond the maximum legal lending limit.
123 ASEI is classified as a general insurance company subject to general insurance laws and regulations.
124 Customs bonds  are a guarantee against the nullification (non-payment) of the import tax on goods
to be re-exported.  In case of failure to re-export, the Government (through the Director-General of Customs andExcise) may liquidate the bond corresponding to the payment of the import tax due .
125 Economist Intelligence Unit (2002), p. 53.Indonesia WT/TPR/S/117
Page 61
SMEs, the ASEI has covered claims of export payment risks, and the AJP those for loss of goods;  the
premium tariff of 0.2%–2.2% of export value is based on export destination, exporters' terms of
payment, and L/Cs.
(4) MEASURES AFFECTING PRODUCTION AND TRADE
(i) Taxation
93. Indonesia has reduced steadily its reliance on direct taxes to less than 48% of its tax revenues
(Table III.5).  The VAT and the sales tax on luxury goods have remained the main indirect tax
components followed by excise taxes and taxes on international trade (customs duties, export taxes).
Table III.5
Structure of direct and indirect tax revenue, 1997-03
(Rp billion and per cent)
1997/98a1998/99a1999/00a2001b2002b2003b,c
Total (Rp billion) 70,935 96,082 107,124 184,736 214,713 254,140
(Per cent of total)
Income tax  48.50  51.30 51.30 50.21 48.13 47.58
VAT on good and services and tax on
sales of luxury goods 35.50  29.50 30.80 30.23 31.57 31.78
Import duties 4.20 2.30 3.50 5.32 5.51 4.70
Excise duties 7.20 8.30 9.70 9.54 10.46 11.00
Export tax 0.20 4.80 0.80 0.38 0.14 0.20
Land and building tax 3.70 3.30 3.40 3.40 3.50 3.90
Other taxes 0.70 0.50 0.50 0.92 0.69 0.84
a Data for fiscal years from Bank Indonesia statistical publication.
b Data for calendar years provided by the authorities.
c Estimates.
Source: Bank Indonesia, Indonesian Financial Statistics,  September 2002;  and data from the Indonesian authorities.
(a) Indirect taxation
94. As indicated in Chapter I, apart from regional tax reform, the indirect tax system has not
undergone any major changes.  Indonesia currently levies the following indirect taxes:
- since 1985, a 10% value-added tax (VAT)126 on the sales price of domestic goods and
the c.i.f. value plus customs duties for imports and services (including imports,
commerce, and processing)127;
                                                     
126 Special VAT rates are levied on building servi ce charges (4% of invoice value);  travel agents
services (1% of invoice value);  the sale of cigarettes (8.4% of invoice value);  courier services (1%);  total salesby retailers (10% of the sales price);  self-building (4% of  total costs);  and factoring services (0.5% of the total
fee).
127 Goods exempt from VAT include:  agricultural, plantation and forestry products, harvested, picked
or tapped directly from the source (such as grain, palm oil, and rubber);  animal-husbandry products;
hunting/catching or farming livestock;  fishery products;  mining and drilling products gathered directly (such asoil and salt);  basic necessities (such as rice and iodised salt);  food and drink served in hotels and restaurants;shares, bonds and other commercial pa per;  electricity, except for luxury housing estates;  and pipe water.
Services exempt from VAT are:  health care;  orphanages;  funerary;  postal;  banking;  insurance and financial;WT/TPR/S/117 Trade Policy Review
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- since January 2001, a luxury sales tax on 37 groups of goods at rates ranging from
10% to 75%.128
95. In principle, indirect taxes are levied in a non-discriminatory manner;  the authorities
indicated that since 2000, the luxury sales tax and the VAT have no longer been levied solely on
imported goods.129  At the time of the previous Review, it was indicated that sales taxes levied on
cigarettes (lower rate for Indonesian-made Kretek  cigarettes), certain non-alcoholic beverages,
motorcycles with engine capacity of less than 250cc and motor vehicles, were not in line with the
non-discrimination principle.  In 1998, the exemption fr om luxury sales tax provided in favour of the
National Car Programme was the subject of a dispute settlement case at the WTO;  as a result, this
measure was eliminated. 130
96. To facilitate tax collection and ensure greater compliance, since 1995  Indonesia has
maintained an extensive withholding tax system cons isting of a prepayment and a final income tax (on
interest from savings deposits, Bank Indonesia Certificate (SBI).131
97. In 2001, in connection with wider regional autonomy and related tax decentralization, various
regional levies and taxes were adopted.132
(b) Direct taxation
98. Since the previous Review, Indonesia has chan ged income tax rates for enterprises and
individuals.  Personal tax rates were lowered in 200 1.  Statutory tax rates have been set at:  5% (down
from 10% in 2000) on taxable income up to Rp 25 million;  10% (from 15%) on income from
Rp 25 million to 50 million;  15% (from 30%) on income between Rp 50 million and 100 million;
25% (from 30%) on income between Rp 100 million and 200 million;  and 35% (up from 30%) for
income exceeding Rp 200 million.133 Corporate income tax rates now are set at 10% (up to
Rp 30 million), 15% (from Rp 30 million to Rp 100 million) and 30% (above Rp 100 million).  Asindicated in the previous Review, effective tax rates may be considerably less than these statutory
rates, as a result of various tax concessions, especially for certain firms in the industrial sector or for
companies located in certain regions.  The outcome is  significant variation in effective tax rates, and
thus in the tax incentive to invest, across industries and even enterprises.
                                                                                                                                                                    
religious;  educational;  non-commercial arts and broadcasting;  public transport;  manpower;  hotel;  and
telecommunications.
128 Rates are set at: 10% (soft drinks, cosmetics, televisions, radios and tapes, air-conditioning
equipment);  20% (carpets, sanitary goods, "l uxury" home appliances like washing machines and air
conditioners, and musical instruments);  30% ( boats, golf and skiing equipment);  40% (alcoholic beverages,leather products, wool and silk carpets, gold-made ite ms, footwear, furniture, and porcelain), 50% (aircraft,
helicopters, etc.);  and 75% (other alcoholic beverages). Government Regulation No. 145/2000 as amended by
Government Regulation No. 7/2002 and Government Regulation No. 6/2003, 1 February 2003.
129 Law No. 18/2000 on Value Added Tax and Luxury Sales Tax.
130 WTO document WT/DS54/R, WT/DS55/R, WT/DS59/R, WT/DS64/R, 2 July 1998.  Government
Regulation No. 14/1998 and Circular Letter of Director General of Tax No. SE-02/PJ.5/1998.
131 Indonesia applied a final tax (payable on certain transactions) in the shipping, airline, and foreign
gas and drilling industries.  This tax has been extended to other forms of income, including rent, interest on bank
deposits, interest/discounts on traded bonds, proceeds on  listed company share disposals, property disposals by
real-estate developers, individuals, and construction contracting firms, and income derived from planning,supervision, and consulting services.
132 Partnership for Busi ness Competition (2002).
133 U.S. Embassy Jakarta (2001b).Indonesia WT/TPR/S/117
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99. As from July 2001, new regulations affecting the forestry sector, required reforestation funds
to be paid three years in advance.134  The principle of fairness and non-discrimination (toward foreign
entities) is embodied in existing tax legislation.  Routine tax audits seem to boost the actual tax rate by
a significant margin.
(ii) Production assistance
100. Since its previous Review, Indonesia has continued to provide assistance to domestic
producers largely in the form of tax incentives (sections (2)(ii)( i) and (3)(v));  new legislation on these
incentives entered into force as from January 2001, replacing the 1996 legislative framework.135  At
present, industry- and/or region-specific (decentralization) incentives are available in the form of:
investment tax allowance (income tax reduction up to 30% of the realized investment spread over six
years), accelerated depreciation and amortization;  loss carried forward facility (up to ten years), and a10% income tax on dividends (possibly lower if stipulated in the provisions of an existing tax
treaty).
136  A Rp 6 trillion (US$660 million) fiscal stimulus package (exemption from/reduction of
luxury tax) was put in place to help businesses coping with rising production costs triggered by the
simultaneous increase in fuel prices, electricity tariffs, and telephone charges.  In early 2003, a second
package was under consideration (elimination/reduction of luxury tax rates on some 45 items, mainlyelectronics), to boost domestic demand and help local goods to compete with smuggled items.
137 
101. The authorities have indicated that no subsidized credit is now available.  At the time of the
previous Review, the Export-Import Bank of Indonesia maintained several subsidized credit
programmes, primarily aimed at agriculture and SMEs;  the entire structure of subsidized credits was
to be modified by ongoing economic reforms.138
102. Indonesia has provided trade-distorting mark et price support for rice through BULOG
(section (2)(vi));  in 2000 budgetary outlays stood at Rp 2.2 trillion or 71% of total domestic supportnotified.
139  In 2000, spending on Green Box measures was dominated by domestic food aid
operations (34%) and general services (e.g. estate crops, food crops and horticulture development
programmes);  this type of spending was Rp 887.5 billion or about 29% of total domestic support.
Reportedly, the 2003 Budget (Rp 1,315 billion) re-i ntroduced the fertilizer subsidy (for urea, SP-36,
ZA, NPK) for small-scale rice producers until 2005;  quantitative limitations exist and the subsidylevel varies from Rp 94 to Rp 250 (in the case of urea) per kg., depending on the type of fertilizer.  It
seems that this subsidy is accorded exclusively to domestically produced fertilizers.
103. Financial support for research and development activities has been maintained, mainly to
promote high technology and technologically sophisticated industries;  it accounts for about 0.18% of
GDP.
104. The Petroleum fuels (BBM) subsidy (50% of the market price in 2001 and 75% in 2002)
140,
which is destined for the industrial and public sector, has been maintained though budget outlays that
                                                     
134 Economist Intelligence Unit (2002), p. 28.
135 The 1996 legislation (Government Regulation No. 45/1996), which was seemingly applied in a
discretionary manner, is discussed in WTO (1999).  Economist Intelligence Unit (2002), p. 28.
136 Investment Cooperating Board (2001).
137 The Jakarta Post , 11 January 2003.
138 USTR (2002).
139 WTO documents G/AG/N/IDN/26, 5 October 2001 and G/AG/N/IDN/26/Corr.1,
27 November 2001.
140 Decrees Keppres No. 10/1999, 1 February 1999, No. 45/2001, 1 April 2001, and No. 9/2002,
16 January 2002.WT/TPR/S/117 Trade Policy Review
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have been reduced gradually (Chapter IV);  the authorities indicated that this type of public support
has reduced their capability to fund programmes relating to poverty reduction, improvement of the
health service, education, etc.  The market price of fuels (i.e. Mid Oil Platt's Singapore plus 5%)
applies only to general mining, oil and gas mining, foreign-flag-bearing ships, and ships with foreign
destination.  Ceiling and floor prices are in force.
105. Price controls (operated through so-called administered prices) have continued in order to
prevent overshooting of prices for a handful commodities and services deemed essential for the
population.141  They affect rice, petrol, electricity, liquefied petroleum gas, salt, cement, hospital
services, potable/piped water, city transport (depending on the region), air transport, telephone
charges, trains, toll road tariffs, and post.
(iii) Competition and consumer policy
(a) Competition policy142
106. Indonesia passed its first competition (anti-monopoly) law in 1999143;  despite alleged overall
weaknesses of the legal regime and the new law (see below), this legislation is reportedly a key tool in
reducing collusion and other restrictive practices that have contributed to inefficiency and corruption
in the Indonesian economy.  The law prohibits and/or severely restricts specific anti-competitivebusiness practices such as contracts (oligopoly, price-fixing, restrictive market-sharing arrangements,
boycotts, cartels, and trusts), activities (such as monopoly leading to unfair competition or excessive
control of marketing or production, joint market control that created obstacle for the new entries), and
other practices that involve abuse of dominant market position. 
 Sanctions may take the form of fines,
compensation for damages, termination of certain activities or actions that caused damages, and
re-tendering.  The legislation is aimed at establ ishing a climate conducive to business through fair
competition, thus ensuring equal business opportunities and increasing national economic efficiency.
107. According to some observers, the law has failed to make a clear distinction between anti-
competitive business conduct and market structure, and lacks a precise definition of the "relevant
market" to be used when investigating a complaint of  anti-competitive behaviour, which is to be dealt
with by KPPU on a case-by-case basis.  In a ma rket such as Indonesia's – a vast archipelago with
many geographically dispersed and segmented markets where a firm or group of firms with a smallmarket share at the national level may take market control at the provincial or regional market – there
seems to be a need to define a market in a way that will enhance overall competition.
  The authorities
indicated that action is to be taken in this respect.
108. Since June 2000, an independent Commission for the Supervision of Business Competition
(KPPU) has been entrusted with policy advisory tasks and all implementation aspects of thelegislation;  action may be taken on the basis of presumed monopolistic practices and/or unfair
business competition reported by the public or by business, or cases discovered by the Commission.
144
Initial resource constraints are being resolved progressively with, inter alia,  the support of foreign
national, regional, and international institutions su ch as Ausaid (Australia), the German Competition
Commission, USAID (United States), the European Commission (EU), and the World Bank.Indonesia has also benefited from technical assistance from the Japan Fair Trade Commission, the
Korea Fair Trade Commission, the U.S. Federal Trade Commission, and the World Bank.  During the
                                                     
141 Economist Intelligence Unit (2002), p. 32.
142 See Competition Indonesia online information at:  http://english.pbc.or.id/.
143 Law No. 5/1999 on Prohibition of Monopoly Practice and Unhealthy Business Competition,
5 March 1999.
144 Partnership for Busi ness Competition (2002).Indonesia WT/TPR/S/117
Page 65
period under review, Indonesia has participated actively in the work of the WTO Working Group on
the Interaction between Trade and Competition Policy.
109. Between June 2000 and December 2001, 40 cases were reported and seven cases were
handled;  three were on KPPU initiatives, the rest were based on complaints from the public.145  Most
of the cases dealt with by the KPPU related to  tender collusion (70%) involving an SOE or a
governmental agency, as well as government-tri ggered discrimination and price stipulation (economy
class airfare, taxi tariff, fuel distribution), monopolistic behaviour (involving SOEs Pertamina, State
Electricity (PLN), Jamsostek, Telkom) and anti-competitive international trading and domestic market
structure (anti-dumping measures in favour of wh eat flour and carbon black).  During 2002, 47 cases
were reported to the KPPU;  it handled eight cases (five reported by the public or business actors, and
three cases upon KPPU's initiative), no information was available with respect to the other cases.
(b) Consumer policy
110. A comprehensive Law on Consumer Protection (LCP) enacted in 1999 (effective as from
21 April 2000), was a major step forward in the protection of consumer rights.146  The LCP regulates
unfair competition, standard clauses, warranties and guarantees, advertisements, and product liability,
as well as the establishment of the institutional framework for consumer protection in Indonesia.Consumer protection is defined as "all efforts ensuring legal certainty to provide protection to
consumers", thus underscoring the importance of legal certainty in Indonesia;  it seems that the LCP is
seen as the umbrella that will integrate and strengthen law enforcement in the area of consumer
protection.
147  The responsibility for consumer protection is now shared between the Government and
non-governmental organizations.  The National Consumer Protection Board (NCPB) and the
Consumer Dispute Settlement Board (CDSB) are to be entrusted with LCP implementation;  in
February 2003 these institutions were being prepared. Consumer protection organizations that meetlegal standing requirements (i.e. registered NGOs), as set under the LCP, may represent consumers at
the courts.
(iv) Intellectual property rights
111. Indonesia expanded its commitments on protection of intellectual property rights (IPRs) by
becoming a party to the World Intellectual Property Organization (WIPO) Copyright Treaty
(6 March 2002)148;  it now participates in 7 out of 21 treaties administered by the WIPO.149  Indonesia
is considering ratifying treaties such as the WIPO Performance and Phonograms Treaty and the
Budapest Treaty on the International Recognition of Deposit of Microorganism for the purpose of
                                                     
145 Partnership for Busi ness Competition (2002).
146 Prior to the LCP, several laws contained provisions relating to consumer protection (e.g. Law
No. 2/1966 regarding Hygiene, Law No. 15/1985 regarding Electricity, Law No. 23/1992 regarding Health, LawNo. 7/1996 regarding Food, and Law No. 10/1998 regarding Amendment of Law No. 7/1992 regarding
Banking).  Asia Pacific Consumer Law (undated).
147 Asia Pacific Consumer Law (undated).
148 Law No. 19/2002 effective as from 29 July 2002.  See Ministry of Industry and Trade online
information.  Available a t:  http://www.dprin.go.id/default_e.htm [10 December 2002].
149 Indonesia is also a party to the Conventio n Establishing the World Intellectual Property
Organization (as from 1979, ratified in 1997), the Paris Convention for the Protection of Industrial Property (as
from 1950, ratified in 1997), the Berne Convention for the Protection of Literary and Artistic Works (ratified in
1997);  Hague Agreement Concerning the International Deposit of Industrial Designs (as from 1950, ratified in1986);  the Patent Cooperation Treaty (ratified in 1997);  and Trade Mark Law Treaty (ratified in 1997).Information provided by the Indonesian authorities;  and WIPO online information.  Available at:http://www.wipo.int/treaties/general/parties.html#1 [9 December 2002].WT/TPR/S/117 Trade Policy Review
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Patent Procedure.  Indonesia participates actively in the discussions on the establishment of Patent
Law Treaty, which may be used as a standard for the procedure and protection.
112. Like several other developing WTO Members, Indonesia missed its January 2000 deadline for
ensuring full implementation of the Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS).  Nevertheless, pursuant to its TRIPS obligations, in December 2000 new legislation
on industrial designs, layout-designs of integrated circuits, protection of plant varieties, and tradesecrets entered into force
150;  by July 2001, amendments had been passed to the existing patent, trade
marks and copyright legislation.151
113. Since its previous Review, Indonesia has particip ated actively in the work of the Council for
TRIPS, and gave extensive replies to questions raised at the review of its legislation in the year
2000.152  Indonesia has benefited from legal and techni cal assistance (mainly training and workshops)
provided by Australia, the EU, Japan, Switzerland, the United States, the International Union for the
Protection of New Varieties of Plants, the Worl d Bank (see below), Wo rld Customs Organization,
World Health Organization, and WIPO.
Institutional issues and enforcement action
114. Since 1998 policy formulation (including the development of legislation) has rested with the
Presidential Commission on IPRs, which consists of high-ranking officials from the government
agencies involved in IPR matters (i.e. Ministry of Justice, Customs, Police).  The administration of
IPR registration has been carried out by the Directorate General of Intellectual Property Rights.
Enforcement has been the responsibility of the Attorney General, Police, Customs and the courts.  A
key issue for the effectiveness of the IPR regime is the coordination of activities between these
different offices and agencies and at national and regional levels.  Indonesia is currently
contemplating a more integrated administrative organization and putting in place, in cooperation withthe World Bank, an integrated information system on IPR, which would connect the various actors
involved (central and regional offices, Ministry of Justice, Police, Customs).
115. Border enforcement procedures are found in Articles 54 to 64 of the Customs Law, which
reflect the procedural requirements set in Articles 51 to 60 of the WTO Agreement on TRIPS (Special
Requirement Related to Border Measures).  Technical assistance has been undertaken in the form oftraining for Customs and the Police as well as judges and attorneys, and employees of the Department
of Trade and Industry.  Between 1998 and 2002, seizur es at ports and airports seem to have largely
involved video compact discs (VCD);  seizures dropped considerably in 2002.
116. Despite regulatory developments and other initiatives, by 2000, law enforcement was the
most crucial problem as public awareness of and support for IPR protection was limited.
153
                                                     
150 WTO document IP/C/W/270, 31 May 2001.
151 The 2001 legislation covers:  Law No. 14 on Patents (replaced the Patent Law of 1989 as amended
in 1997);  Law No. 15 on Marks (replaced the Marks Law of 1992 as amended in 1997);  and Law No. 19 onCopyrights (replaced the Copyrights Law No. 12 of 1997 regarding the amendment of Law No. 6/1982 onCopyrights as amended by Law No. 7/1987).
152 Indonesia's replies (including statistics) are contained in WTO document IP/Q/IDN//1,
IP/Q2/IDN/1, IP/Q3/IDN/1, IP/Q4/IDN/1,  4 August 2000.
153 Notwithstanding these efforts, Indonesia has remained on the "priority watch list" since 1998
(except for the year 2000, "watch list" only) under "Special 301" of the amended 1974 (1988) Trade Act of theUnited States (USTR, National Trade Estimate reports 1999-2002).
With the assistance of the United Nations Development Programme (UNDP), WIPO, IP Australia and
the Japan Patent Office (JPO), Indonesia has conducted a series of public information and awareness seminars inIndonesia WT/TPR/S/117
Page 67
Non-observance of IPR legislation is considered a crime and is therefore handled by the Police and
special IPR investigators.154  According to the Directorate General of Intellectual Property Rights
(DGIPR), limited resources do not allow for staff training and proper administration and enforcement
of IPR legislation.155  Furthermore, a growing underground economy compounds the difficulty of
controlling a territory composed of 13,500 islands.  In addition, the authorities recognize 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 criminal penalties;  and
deficiencies in the judicial mechanism.
117. As a result of poor investigative techniques, poor handling of evidence and lack of
expertise156, the judicial system is considered to be ineffective in enforcing IPRs.157  Civil litigation
has been the most common form of IPR enforcement in the domestic market-place.  From 1999 to
2002, criminal cases, which were handled by the Civil Servant Investigators (PPNS) of DGIPR,
involved 29 offences consisting of 13 cases on copyrights, 11 cases of trade marks, and 5 cases of
patents.  In relation to law enforcement, DGIPR also participates in the appointment/designation of
expert witnesses;  it appointed/designated expert witnesses in 25 cases of copyright infringement,7 cases of patent infringement and 78 cases of trademark infringement in the period 1999-02.
Penalties for violations have been toughened and may include both imprisonment (up to seven years
(copyright)) and monetary fines (up to Rp 1 billion (copyright/trademarks)).  Nevertheless, there has
been particular concern over increased piracy over recent years (section (b) below).
(a) Industrial property
Patents and utility models
118. As indicated earlier, patent legislation was most recently revised in July 2001.
158  Products
and production processes are protected for a period of 20 years commencing from the filing of the
patent application, subject to certain requirements.  Compulsory licensing and a provision that limits
protection for patents "implemented" in Indonesia (i.e. used for domestic production) are now in
force.  Regarding pharmaceuticals, joint-venture co mpanies are prevented from acting as licensees of
any foreign company other than their parent, unle ss the company can prove that it has been producing
the drug in other countries under a licensing agreement159;  this provision obliges foreign
pharmaceutical firms to seek a locally owned firm or invest within Indonesia and licence its own
affiliate.
119. Under new legislation, fines for patent infringement were increased and an independent
Patent Commission was established to rule on disputes and appeals.  The new legislation transferred
                                                                                                                                                                    
almost all major cities, e.g. Jakarta, Surabaya, Semarang, Medan, Ujung Pandang, Bandung, Denpasar,
Yogyakarta, Padang, and Manado.
154 WTO document IP/Q/IDN//1, IP/Q2/IDN/1, IP/Q3/IDN/1, IP/Q4/IDN/1,  4 August 2000.
155 Economist Intelligence Unit (2002), p. 25.
156 Reportedly, cases brought in court are seriousl y backlogged due to inefficient procedures, the
significant documentation needed to support prosecutions, unfamiliarity with IPR matters, and the regular non-
availability of judges, witnesses, or defendants.  In 2000, out of 208 cases bro ught to the courts, only two were
decided and 206 cases were pending (International Intellectual Property Alliance, 2002).
157 International Intellectual Property Alliance (2002).
158 This new law revised/amended Patent Law No. 13 of 1997.
159 Economist Intelligence Unit (2002), p. 29.WT/TPR/S/117 Trade Policy Review
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jurisdiction of the patent cases from the district  (criminal cases) to the commercial court though
reportedly the judges of the latter court have no IPR expertise.160
Protection of plant varieties
120. Indonesia passed a new law for the protection of plant varieties in December 2000.161
Indonesia has not ratified the UPOV Convention.162
Trade marks
121. In 2001, Indonesia amended its (Trade) Mark Law (in force as from August 2001)163 with a
view to streamlining provisions on registration of marks and de-registration of marks fraudulently
obtained.164  Trademarks may now be protected for a period of ten years (extendable) from the date of
receipt.  Trademark rights are determined on a first-to-file basis rather than on a first-use basis.165
After registration, the mark must actually be used in commerce.  The law offers protection for service
marks and collective marks and sets forth a procedure for opposition after examination by the
trademark office;  opposition must be submitted within three months of publication, which follows
substantive examination.  No distinction is ma de between "famous" marks and "well-known" marks
(the sole term used by the law).  The legislatio n provides protection to "well-known" trademarks,
although, to the detriment of several foreign marks, the registration procedures for trademarks as"well known" have not been fully developed yet;   a regulation on this matter is being prepared.
Cancellation actions are now intended to be easier as they may be filed at the commercial court.
166
122. Under new legislation, the mark registration process has become faster though it is still
manual (i.e. without electronic means, pending completion of office automation);  the law requires no
more than 14 months and 10 days to complete the whole process (from submission of the application
until the issue of the certificate of mark).  According to the authorities, at present there is no backlog
in processing a mark application for registration, "although some cases require more time".Reportedly, trademark registration has remained a lengthy process due, inter alia,  to human resource
constraints.  Until recently the Trade Mark Office had a batch of applications for registration in the
tens of thousands.
167  Moreover, after registration is granted, the Trade Mark Office may take up to
12 months to issue the certificate of registration, which is needed to commence enforcement
proceedings.
123. The Indonesian Trade Mark Appeals Board, which was established in 1995, became
operational in January 2001.
                                                     
160 Economist Intelligence Unit (2002), p. 25.
161 Law No. 29/2000 on the Protection of Plant Varieties is administered by the Department of
Agriculture.
162 UPOV (2003).
163 Mark Law No. 15/2001 amendment to the Mark Law No. 14 of 1997.
164 Reportedly, several international rights holders have lost rights to their marks to local registrants,
because of the complicated and bureaucratic process fo r de-registration.  Economist Intelligence Unit (2002),
pp. 25-26 and 28-29;  Investment Indonesia Online (2002).
165 Economist Intelligence Unit (2002), p. 26.
166 Previously cancellation actions were difficult to implement and requests had to be lodged within
five years of the trademark registration date.
167 Economist Intelligence Unit (2002), p. 27.Indonesia WT/TPR/S/117
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Industrial designs
124. The new Law on Industrial Design has secure d protection of new industrial designs for a
period up to ten years from the date of receipt.  An industrial design is considered to be new if, at the
date of its receipt, it is not the same as previous disclosures.168  Since June 2001, applications have
been submitted to and processed by the Directorate General of Intellectual Property Rights.   As at
December 2002, 4,271 applications had been submitted.
Trade secrets
125. Under the new law169, trade secrets cover methods of production, processing, sale or other
information in the area of technology and/or business;  no time limitation is set and protection remains
in force as long as the trade secret is maintained and not disclosed to the public.  Protection is
afforded to information that is secret in nature and of economic value.170
126. The registration of the transfer of rights and of trade secret licence agreements has been
undertaken by the Directorate General of Intellectual Property Rights.
(b) Copyright and related rights
127. In line with WTO TRIPS and with WIPO commitments, copyright legislation was last
amended in 2002171, and several implementing regulations have been prepared (on copyrights held by
the State172, management of information, optical discs, IPR consultants, Copyright Council), as well
as presidential decrees (on filing an application and licensing agreements).  The law now affords
protection to foreign and domestic works, expands the scope of coverage and raises the terms of
protection to international standards in line with newly acquired commitments.  Copyrights for
literary, educational, and scientific volumes, architecture, maps, dramatic, musical, or artistic work,
are granted for the lifetime of the author plus 50 years.  Copyright protection for computer programs,
phonograms, performances, broadcasting works, and cinematography works is granted for 50 years;protection for photography works is granted for 25 years from their first publication.
173  T h e
legislation does not include provisions for reme dies against end-user piracy, e.g. unauthorized
copying of a legitimate copy.174
128. Piracy rates for optical media (i.e. audio CDs, video CDs (VCDs), DVDs, and CD-ROMs
containing business software applications and/or entertainment software) and books in English-language (textbooks, reference books, and computer related volumes) are of particular concern to the
international community;  the domestic market is dominated by pirated optical media products and
Indonesia now seems to have enough production capacity to export these items.
175  According to a
                                                     
168 Law No. 31/2000;  Investment Indonesia Online (2002), Industrial Design .
169 Law No. 30/2000.
170 More information may be found in Investment Indonesia Online (2002), Trade Secret .
171 Law No. 19/2002, 29 July 2002 [Online].  Available at:  http://www.dprin.go.id/regulasi/english/
2002/07/LAW_19.HTM [11 December 2002].
172 According to statements by the Director-General of Intellectual Property Rights (Ministry of Justice
and Human Rights), following agreement between the authorities and software developers, the new regulationsare to allow the public sector institutions to escape punishment stipulated by the law, given their role in society(The Jakarta Post , 13 February 2003).
173 Investment Indonesia Online (2002).
174 International Intellectual Property Alliance (2002), p. 150.
175 Reportedly, optical media production capacity ex panded alarmingly in 2001, to at least 70 illicit
production lines from fewer than a dozen a year earlier;  this capacity seems far in excess of Indonesia'sdomestic demand.  This may be the outcome of the intensification of the fight against copyright infringement,WT/TPR/S/117 Trade Policy Review
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recent study by Business Software Alli ance, Indonesia's piracy rate was the 3rd highest in the world
(share of pirated retail sales to total software sales), although there was a slight decline, from 89% in
2000 to 88% in 2001.176
129. To address the problem, in addition to the ban on pirated video and audio works, police forces
conduct regular raids on shops offering pirated material;  these raids have resulted in the seizure of
large amounts of illegal optical media and diskettes.177
(v) Other measures (environmental)
130. Indonesia is a party to numerous international or regional environmental treaties (Table III.6),
and is preparing to fulfil its commitments under th e Kyoto Protocol, for which ratification is to be
completed by 2003.
Table III.6
Environmental treaties to which Indonesia is a party
Treaty Ratified by Indonesia
United Nations Convention on Biological Diversity (UNCBD) 23 August 1994
UNEP – Convention on International Trade Endangered Species of Wild Fauna and Flora Cites) 28 December 1978
United Nations Framework Convention on Climate Change (UNFCCC) 23 August 1994
International Plant Protection Convention 1977
Convention on The High Seas 1961
Convention on the Prohibition of the Development, Production and Stockpiling of Bacteriological
Biological) and Toxin Weapons and on their Destruction1991
Convention Concerning the Protection of the World Cultural and Natural Heritage 1989
Convention on the Physical Protection of Nuclear Material 1986
United Nations Convention on the Law of the Sea (Unclos) 1993
International Tropical Timber Agreement 1995
ASEAN Agreement on the Conservation of Nature and Natural Resources 1988
Convention on Early Notification of a Nuclear Accident 1993
Vienna Convention for the Protection of the Ozone Layer and Montreal Protocol on Substances that
Deplete the Ozone Layer as Adjusted and Amended by the Second Meeting of the Parties London 27-29 June 19901992
Convention for the Prevention of Pollution from Ships (1973) 1986
Protocol of 1992 to Amend the International Convention on Civil Liability for Oil Pollution Damage
(1969)1999
Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their
Disposal1993
International Convention on the Establishment of an International Fund for Compensation for Oil
Pollution Damage1978 and 1998
Convention on Wetlands of International Importance Especially as Waterfowl Habitat 1991
United Nations Convention to Combat Desertification in those Countries Experiencing Serious
Drought and/or Desertification, Particularly in Africa1998
International Plant Protection Convention 1977
Source: WTO Secretariat.
                                                                                                                                                                    
audio and video piracy elsewhere in the region, with IPR pirates finding refuge in Indonesia (International
Intellectual Property Alliance (2002).
176 Business Software Alliance (2002).  The Business Software Alliance (BSA) represents leading U.S.
software and computer technology companies (e.g. Compaq, Digital, IBM, Intel, Apple, Microsoft, Novell,Lotus).
177 These actions had to be carried out by extra poli ce units, due to riots that broke out during the first
round of investigations.  Of the 1 million pirate CDs seized, 80% were international and local music, and 20%were movies.  Documentary records covering sales and deliveries revealed that on average the 28 retailersraided sold over 280,000 pirate optical discs per week to East and West Java, Timor, Sulawasi, Kalimantan,Irian Jaya, and Lombock (International Intellectual Property Alliance, 2002).Indonesia WT/TPR/S/117
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131. Indonesia seems to be facing major environmental problems such as rapid deforestation
(owing to illegal logging and agricultural burning),  air pollution (caused by motor vehicles), water
pollution, and carbon emissions.  Since its previ ous Review, Indonesia has updated its regulatory
framework in this area178;  legislation puts the onus on companies to maintain records so that they can
defend themselves if prosecuted.  In 2001, the list of the types of businesses subject to analysis on
environmental impact was updated to be extended to businesses located near preserved areas ordeemed to have an important impact on the environment.
179
132. A major constraint in implementing  policy in this area seems to be the fragmentation of
information;  various Ministries, such as Mines and Energy, Agriculture, Forestry, and Public Works,
collect data, but these are not cross-referenced with other data held.  The Environmental Impact
Management Agency (BAPEDAL) has no enforcemen t powers, but relies on voluntary compliance by
industry with its various environmental progra mmes (e.g. Clean River Programme, Blue Sky
Programme, Cleaner Production Programme180).  The 1999 target for phasing-out leaded petrol was
not met.  Various industrial operators have yet to fulfil their original commitment to install
waste-water-treatment plants;  disputes over water pollution involving mining companies have been
difficult to settle because of a lack of internatio nally accredited laboratory facilities to determine
levels of toxic pollutants.  Efforts have seemingly been made to ensure that the energy industry
becomes a pioneering force in the country's sustainable development.  Reportedly, inadequate
enforcement of environmental regulations has increased pressure from donors and local
environmental groups.  The authorities indicated that compliance programmes have been developed
such as the enhancement of environmental inspection and Environmental Performance Rating
Programme (PROPER).  Experience from impl ementing PROPER has shown that compliance
difficulties were partly due to lack of technology;  in response, the Ministry of Environment isdeveloping policies to enhance gradual compliance.
133. Indonesia has participated in the work of the WTO Committee on Trade and Environment;  it
submitted a paper on agriculture and environment together with other WTO Members.
181
                                                     
178 It now consists mainly of:  Law No. 23 of 1997 regarding Environmental Management;  Law No. 5
of 1990 regarding Conservation of Natural Resources;  GR No. 18 of 1999 regarding the Management of theWaste of Hazardous & Toxic Materials;  GR No. 19 of 1999 regarding the Control of Marine Pollution;
GR No. 20 of 1999 regarding the Control of Water Pollution;  GR No. 27 of 1999 regarding Analysis of
Environment Impacts;  GR No. 41 of 1999 regarding the Control of Air Pollution;  GR No. 80 of 1999 regarding
Area Ready for Construction and Independent Environment Ready for Construction;  GR No. 54 of 2000regarding Institution for Providing Service in Settling Environmental Disputes out of Court;  Presidential DecreeNo. 10 of 2000 regarding the Agency Controlling En vironmental Impacts.  British Embassy in Indonesia
(2001a).
179 Decree 17/2001 of May 2001.
180 This programme contains written guidelines for specific industries, such as textiles, electroplating,
tapioca, tanning, pulp and paper, palm oil, and gold mining .
181 WTO document WT/CTE/W/106, 11 February 1999.