RESTRICTEDWORLD TRADE
ORGANIZATIONWT/TPR/G/117
28 May 2003
(03-2741)
Trade Policy Review Body Original: English
TRADE POLICY REVIEW
INDONESIA
Report by the Government
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), the policy statement by the Government of Indonesia is attached.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Indonesia.Indonesia WT/TPR/G/117
Page 3
CONTENTS
Page
I. INTRODUCTION 5
II. ECONOMIC ENVIRONMENT 5
a. Main Economic Indicators 5
b. Export Performance 6
c. Investment Performance 7
III. PROGRESS ON ECONOMIC POLICIES REFORMS 7
a. Letter of Intents (LOI) 7
b. Monetary 8
c. Taxation 8
d. Privatization 10
e. Integrated Economic Development Zone (KAPET) 10f. Decentralization Policy 11g. Energy 11
h. Manpower 12
IV. TRADE POLICY AND TRADE RELATED POLICY DEVELOPMENTS 12
a. Trade Policy 12
b. Tariffs 13
c. Non Tariffs 14d. Trade Defense 14e. Agriculture 15f. Competition Policy 15
g. Consumer Policy 16
h. Government Procurement 16i. Standardization 16j. Banking Policy 17k. Non-Bank Financing Sector 17
l. Transportation 18
m. Tourism 20
n. Investment 20o. Communication and Information Sector 21p. Intellectual Property Right 21
V. REGIONAL TRADE ARRANGEMENT 22
a. ASEAN 22
b. APEC 23
VI. FUTURE ECONOMIC AND TRADE POLICY DIRECTIONS 23Indonesia WT/TPR/G/117
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I. INTRODUCTION
1. Since the establishment of the World Trade Organization in 1994, International trade policies
among the member countries have gone to the right path.  Business and trade activities can only be
realized if legal aspect in doing business is ensured.  Not only do business activities need legal
certainty in running their business, but also every government has interests to create transparent and
predictable regulations.  Considering the very basic and important principles in promoting businessactivities in every region, this trade review mechanism is done to help and to evaluate whether trade
policies are on the right path.
2. Indonesia is on its fourth trade policy review mechanism and is in the process of transitions to
improve its economic, political and social conditions.  Indonesia is now on the process of entering a
full democratic era in all aspects.  Following a sharp decline of economic growth in 1997 to 1999, thecountry’s economy has been gradually stabilized with positive signs in macro-monetary conditions,
while the socio-political condition improved in line with the newly elected administration under
President Megawati in 2001.
3. The Indonesia’s trade policy review  prepared by the government consists of several chapters,
including economic environment, progress on economic policy reforms, trade and trade related Policydevelopments during the period of 1999 – 2002, and finally Future Trade Policy Directions.
4. Economic Environment describes the main macroeconomic indicators, exports and
investment performance. Progress on economic reforms describes letter of intents under IMF,
Monetary Policy, Taxation, Privatization, Integrated  Economic Development Zone (KAPET),
Decentralization Policy, Energy and Man Power. Trade and Trade Related Policy Developments
1999-2002 describes Trade Policy, Agriculture, Tariff and Non Tariff, Trade Defense, Competition
Policy, Consumer Policy, Government procurement, Standardization, Trade in Services(transportation, tourism, investment), Intellectual Property Right. Finally, Future Trade Policy
Directions tries to explain domestic and foreign trade policies.
II. ECONOMIC ENVIRONMENT
a. Main Economic Indicators
5. The 1997 Asian crisis has led the Indonesia economy to deep recession in 1998.  The GDP
dropped drastically from 7.8% in 1996 to 4,7% in 1997 and to minus 13,2% in 1998 and real incomes
dropped from US$1,055 in 1997 to US$514,8 in 1998.  The inflationary rate rocked to 77,63% in
1998.  The skyrocketing inflation rate was not only contributed by the sharp depreciation of the rupiah
but also by the disruption of distribution system as well as high interest rates resulting from tight
monetary policy. Other indicators can be seen from the number of people living below poverty levelwhich increased to 80 million (40%) from 22 million (11%), besides a large increase in
unemployment (17%).  It is indeed no exaggeration to say that the development achievement in three
decades was drastically wiped out by severe economic crisis.
6. With conducive domestic and overseas conditions, signs of improvement in the Indonesia’s
economy began to emerge in 1999.  The Indonesia’s GDP in 1999 and 2000 grew by 0.8% and 4.9%respectively, but declined to 3.4% in 2001 in line with unstable domestic political and worsened
global condition.  In 2002, efforts to exit from the economic crisis yielded favorable results, although
progress has not been as rapid as expected. GDP growth in 2002 was quite moderate at 3.7%,
supported by stable monetary conditions as indicated by the appreciation of the rupiah, declining
inflation  from 12.55% in 2001 to 10.03% in 2002 which allowed significant interest rate reductions.WT/TPR/G/117 Trade Policy Review
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7. During the early period of the crisis, tight monetary policy was undertaken to stabilize over-
depreciated exchange rates at the cost of high interest rates and sharp drop in growth.  In line with
improved socio-political conditions and progress in economic restructuring, the exchange rates were
gradually stabilized with less volatility starting early 2002.  Interest rates were lowered significantly
from 38,44% in 1998 to 12.51% in 1999 and increase to 14.53% in 2000 to 17.62% in 2001.The
interest rates since the beginning of 2002 continue to decline and reach to 12.99% at the end of 2002.On average in 2002, the exchange rate appreciated by 10.14% accompanied by lower volatility
causing the rupiah to be the best performing currency in Asia for 2002.
8. The manufacturing and trade sectors together, as an engine of growth, have a significant
contribution to the development of national economy and tended to increase every year before the
crisis.  In 1997, the contribution of manufacturing sector to GDP recorded for 24.3%, but declined to21.5% in 1998.  Due to the slightly recovery of the Indonesian economy in 1999, its contribution
increased to 22.8% but again slightly declined to 22.1% in 2000 and to 21.9% in 2001.  In 2002 the
manufacturing sector has contributed for 21,48%.  Meanwhile the trade sector including hotels and
restaurant contributed for 16,08%.
9. In 1998, the current account reverted to surplus US$4.1 billion due to large increase of trade
balance surplus for US$18.4 billion but the services account remained in deficit for US$14.3 billion.
While, in 1999 the current account surplus increased to US$5.8 billion because the increase surplus of
trade balance for US$20.6 billion, but services account remained in deficit for US$14.9 billion.
Moreover, deficit in the services account still continued to increase in 2000 to US$17.1 billion, but
declined to US$15.8 billion in 2001.  Unlike service account, the surplus in the trade balance and the
current account increased in 2000 to US$25 billion and to US$8.0 billion, respectively.  However, the
surplus of trade balance in 2001 declined to US$22.7 billion and the current account recorded asurplus of  US$6.9 billion. During 2002, the current account surplus increased to US$7.3 billion while
the trade balance surplus rose to US$23.1 billion.
b. Export Performance
10. For the period of 1998-2001, export performance had registered a big fluctuation, i.e., from
US$48.8 billion in 1998, to US$48.7 in 1999, to US$62,1 billion in 2000, and to US$56,3 billion in2001.  The robust exports in 2000 was stemmed from increased oil-gas as well as non-oil-gas exports.
It is the highest record of export value in the history of Indonesian foreign trade performance.  In
2002, total exports increased slightly to US$57 billion.  Manufacturing products remained the
dominant component of the total non-oil/gas products.
11. During the same period, the composition of non-oil & gas export changed significantly.  In
1998, total export of non oil & gas was US$40.9 billion, consisted of manufacturing exports
(US$34.6 billion), agricultural (U S$3.6 billion) and mining exports (US$2.7 billion).  This
composition was not significantly different from 1999 in which the manufacturing sector contributed
more than 80% and the rests were agricultural and mining exports.  However, non-oil and gas exports
in 2000 accounted for US$47.8 billion, an increase of 22.8% from the previous year.  Manufacturingexports witnessed the sharpest increase of 26.0% or its export value amounted to US$42.0 billion, and
mining sector increased by 15.4% or its export reac hed US$3.0 billion, while in contrast agricultural
sector exports dropped 6.6% so that its export only reached US$2.7 billion.  In 2001 non-oil and gas
export product again declined by 8.5% to US$43,7 billion, while in 2002 it increased slightly to
US$44,9 billion.
12. The increase of oil price from US$24.4 per barrel in January 2000 to US$30 per barrel at the
beginning of May 2000 impacted to exports performance as well as import performance.  In addition,Indonesia WT/TPR/G/117
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the  increase of oil price not only effected to the increase of oil & gas exports value, but also to
increase of oil & gas imports because Indonesia is also a net importer for oil & gas products.
13. In 1999 total value of Indonesia’s imports decreased to US$24.0 billion compared to the
previous reported of US$27.3 billion in 1998 mainly due to a decrease in non-oil & gas imports.
Therefore, the decline of total import value had contributed to the decrease of import of capital goods
and raw materials/auxiliary goods, which accounted for 47.4% and 10.6% respectively, but theimports of consumption goods still increased 17% in 1999.  Though, in line with the sharp increase of
export in 2000, imports also increased to US$40.4 billion, but it declined to US$34.7 billion in 2001
and virtually unchanged to US$34.8 billion in 2002.  The declining trend in imports in 2001 and 2002
was mainly contributed by declining trend in non-oil-gas imports as investment climate worsened.
c. Investment Performance
14. Economic crisis has also impacted to obtain foreign investment as well as domestic
investment. In fact, the decrease of domestic inve stment rate was not higher than the slow down of
foreign direct investment. After registering domestic investment approval of Rp 58 trillion in 1998, it
fell to Rp 53.1 trillion in 1999. Even though, the amount of domestic investment approval in 2000 was
still lower than that of 1997, it rose relatively by 77% compared to the previous year toRp 92.4 trillion, but it decreased to Rp 58.8 trillion in 2001.  Throughout the year 2002, the value of
domestic investment approval fell sharply by 57% to Rp 25.2 trillion.  Similarly, foreign investment
approvals dropped by 35.3% from US $ 15.1 billion in 2001 to US $ 9.7 billion in 2002.
15. The average of foreign direct investment (FDI) based on approved projects during the period
of 1994-1997 was US$30 billion.  Unfortunately, in 1998 and 1999 it dropped sharply to only
US$13.5 billion and US$10.8 billion respectively before bouncing back to US$15.4 billion in 2000,
and decreased to US$15.1 billion in 2001.  In 2002, it has dropped by 35,3 % to US$9.7 billion.
16. With regard to FDI approval by sectors for the period of 1998-2001, secondary sectors
remained the first rank, followed by tertiary sector and primary sector.  The total value of investment
in the secondary sector covering manufacturing had experienced a drastic increase in 2000 to
US$10.7 billion or increased more than 80% compared with the previous year.  Since the unstable
conditions in early 2001, the total investment in the secondary and tertiary sectors dropped toUS$5.1 billion and US$ 3.4 billion respectively except the primary sector.
III. PROGRESS ON ECONOMIC POLICIES REFORMS
a. Letter of Intents (LOI)
17. The government has extended its agreement to an economic reform program under the
supervision of the International Monetary Fund on February 2000 in order to maintain internationalconfidence up to the end 2003.  The presence of IMF was vital in securing government budget
sustainability with its support to reschedule foreign loans payments from Paris Club .
18. Letter of intent contains a set of reform targets by which the IMF measures Indonesia’s
progress in restructuring the economy.  The first IMF program was signed in November 1997 under a
Stand By Arrangement (SBA) facility.  This wa s subsequently changed into an Extended Fund
Facility (EFF) in August 1998 and eventually in to a new EFF in February 2000 in line with the
deepening  and broadening nature of the crisis.  By the end of 2002, Indonesia had received total loan
commitments of US$15.1 billion from the IMF, of which US$13.2 billion had been disbursed and
US$4.4 billion had been repaid.  Consequently, at the end of 2002 Indonesia’s outstanding loans fromWT/TPR/G/117 Trade Policy Review
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the IMF totaled US$8.9 billion.  The new EFF commitment is scheduled to end on
December 31, 2003.
b. Monetary
19. At the onset of the crisis in 1998 monetary policy was tight and aimed at stabilizing the
overly-depreciated exchange rates.  In implementing monetary policy, Bank Indonesia, the central
bank, uses base money as its operational target to meet the real needs of the economy.  To achievebase money target, monetary policy was aimed at reducing banks’ excess liquidity in order to defend
the rupiah from foreign exchange speculations.  As a re sult, interest rates rose sharply in the first three
quarter of 1998.  In line with improved socio-political conditions and a more stabilized stronger
rupiah exchange rates, the interest rates were able to be gradually lowered since the beginning of 2002
and reached its lower record throughout the year 2002.  The current SBI rate has reached 12.99% atend of 2002 as compared to 17.62% at the end of 2001.
20. To enhance the central bank’s credibility, the new central banking Law No. 23, 1999 was
enacted that gives Bank Indonesia a full autonomy to formulate and implementing monetary policy in
order to achieve the stability of the rupiah value.  The new law provides considerable scope for
independence in achieving the price stability objective.  Under this new legislation, Bank Indonesia isno longer allowed to extend credit to the government.  There are three Bank Indonesia’s  major
functions given by this new legislation, i.e. to formulate and implement monetary policy; to regulate
and safeguard the payment and financial system, and to regulate and supervise the banking system.
21. In implementing monetary policy, monetary in strument known as "Open Market Operation"
is undertaken by using the auction of Bank Indonesia’s Certificates (SBIs) to absorb excess liquidity.
This instrument is also supported by foreign exchange intervention and sterilization.  These
instruments are used in a cautious way so that price stability could be achieved in support of theongoing economic recovery.
22. The strategy is also accompanied by some measures to anticipate over fluctuation of rupiah
exchange rate.  To this end, sterilized operation in  foreign currency market was undertaken to absorb
the expansion of rupiah government spending funded by foreign loans.  In addition, direct and indirect
bank supervision with respect to foreign exchange transactions by non-residents were undertaken.Moreover, various steps have been made to eliminate segmentation of the foreign exchange market in
order to realize a more liquid and efficient market.
c. Taxation
23. During the last two decades Government has b een principally reformed its taxed three times,
(1983, 1994, and the last was in 2000, which was valid in January 1, 2001).  The later reform wasmeant to increase the role of tax as a source of government revenue for funding the development and
government administration.
The main points to be adjusted within the Law of Taxation 2000 are:
a. Extending the subject and object of income tax in certain case, and exception or
exemption tax in other case.
b. Changing of structure of general tariff of valid income tax which different from
private and company tax
c. Changing of structure of tariff in the area on luxury taxIndonesia WT/TPR/G/117
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d. Applying the final income tax limited to the objects of certain income tax out of the
income from activity, such as saving interest, deposits), and
e. Facilitation limited to the area of taxation regulated generally for all tax payer.
Implementation Regulation on Law of Taxation 2000 consists of:
a. Government Regulation No.146, 2000 on the kinds of Taxation on Goods and
Services, which are exempted from taxation in detail.
b. Government Regulation No. 12 year of 2001 concerning import and or delivery of
Strategic Taxable Goods Which Are Exempted From VAT which has been amended
by The Government Regulation No. 43 year of 2002.  Those facilities are granted to
support the national development and investment".
c. Decree of Minister of Finance No.50/ KMK.04/2000 on revoking Decree of Minister
of Finance No. 548/KMK.04/1997 on 0% VAT facility for Certain Exporters
Manufacturers (PET).
d. Law No. 6 year of 1983 concerning Genera l Provisions and Tax Procedures which
has been amended several times lastly by Law No. 16 year 2000, stated that for
taxpayer with certain criteria determined by the Ministerial of Finance can receiverefund at the latest of three months for Income Tax and a month for VAT since the
Application is submitted".
e. The Decree of Minister of Finan ce No. 570//KMK.04/2000 concerning Goods
Classified as Luxury Goods Other Than Automobiles which has already been
amended several times lastly by the Decree of Minister of Finance Number
39/KMK.03/2003.
f. Decree of Minister of Finance N o. 155/KMK.03/2001 concerning Exemption of
Import or Delivering Certain and Strategic Taxed Goods which has already been
amended by the Decree of Minister of Finance No. 363/KMK.03/2002”.
g. Decree of Minister of Finance No.552/ KMK.04/2000 on Limitation of VAT for small
manufacturers, taxed goods amounted maxi mum of Rp 360 million per year and
taxed services amounted maximum of Rp 180 million per year.
h. The Decree of Minister of Finance No. 569/KMK.04/2000 concerning Automobiles
Subject to Sales Tax on Luxury Goods which has already been amended lastly by The
Decree of Minister of Finance Number 140/KMK.03/ 2002.
Based on Law No.34/2000, government has defined kinds  of regional tax and retribution as a source
of local government income, which are:
a. Province Tax include Tax on automotive and water transportation; Tax on the
changing ownership for automotive and water transportation; Tax on gasoline for
automotive; Tax on digging-up and benefiting land and surface water;
b. Kabupaten Tax covers Tax on Hotel; Tax on Restaurant; Tax on Entertainment; Tax
on Advertisement; Tax on Streetlights; Tax on digging-up and benefiting forC category; Tax on Parking.WT/TPR/G/117 Trade Policy Review
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24. To encourage national economy and attract foreign investor, currently the government
provides economic stimulus in customs and taxation.  In customs the government regulated to
accelerate restitution process on import tax and widens the priority channel for goods outside
electronic goods and vehicles.  While in taxation the government provides tax relief covering :
- Delay the imposition of VAT (PPN) for several goods and services covering toll road
services, industrial electricity and household electricity with 2.200 – 6.600 watt,materials for animal feed, animal feed and capital goods.
- Cancel the imposition of Luxury Tax (PPn and BM) for 23 types of goods covering
packed tea product and electronics (cellular telephone, wireless modem, wireless
telephone, videophone, TV up to 21 inch, washing machine maximum up to 6 kg
capacity, refrigerator  up to 180 liters capacity,  air condition up to 1 PK, VCR, VCD,and DVD recorder with sales price up to Rp 1 million,. Sound Rotater/Sound
Reproduction and Recording Sound, answering phone machine. Magnetic Ribbon
Recorder with Sound Reproduction Camera with sales price up to Rp 500 thousands,
hair and hand drier, Video Game, Children toys, Household Electrical Appliances,
Microphone, Headphone, Earphone, Amplifier, Dining and kitchen utensils,grooming accessories, optical accessories (prism lens mirror and other optic elements,
double as well as simple telescope, and other telescopic optic).
- Reduce PPn BM for electronic equipment from 20% to 10% (drawing
recorder/reproduction and radio cassette with  sale price above Rp 1 million, film roll
and camera with sale price above Rp 500 thousand, washing machine above 6-10 kg
capacity, Others Video Recording Camera and Air Conditioner above 1 PK to 2 PK)
from and 30% and 20% to 10% covering TV above 21 inch to 43 inch, and from 50%and 40% to 20% covering TV above 43 inch.
d. Privatization
25. Deregulation via privatization is another impor tant means to improve the local competition
environment.  There are currently 156 State Enterprises in Indonesia, with numerous subsidiaries.
Privatization program is one of the country’s key economic reform programs essential to help revivethe confidence of investors and donors in the ailing economy.
e. Integrated Economic Development Zone (KAPET)
26. In the effort of spreading the development and its result,  the government has determined some
areas as a center of economic growth to accelerat e the economic growth, the so-called "KAPET".  It
will be function as the mover of development in the surrounding area.
27. KAPET is an area with certain border with the condition of economic  potential to grow fast,
and/or having a potential sector to move the economic development in the surrounding area, and
require a huge amount of investment fund for the development..  The government has established 14
areas, which are determined as a KAPET in the territory of Indonesia.
The manufacturers who are doing business within th e KAPET will have such kinds of facilities as
follows:
a. Income Tax:
1. Up to 30% (thirty percent) investment allowance".
2. Accelerated depreciation and amortization
3. Extended loss carried forward but shall not exceed 10 yearsIndonesia WT/TPR/G/117
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4. 10% tax on dividends referred to in Article 76, unless the tax rate under the
relevant tax  treaty is lower.
b. VAT and luxurious tax payable shall not be withheld to manufacturer in bonded area
(PDKB) within KAPET in respect of :
1. Importation of capital goods and tools which will solely be used in bonded
area and which are connected directly with the process of production ofPDKB.
2. Importation of goods and material to be processed in bonded area.
3. Entry or supply of taxable goods fr om other Indonesia customs area (DPIL)
to bonded area to be processed.
4. Transfer of finished product from a bonded area to other bonded area.5. Transfer of goods and raw material from a bonded area to other bonded area
for a subcontract.
6. Transfer or supply back of taxable goods as a result of a subcontract from
taxable persons in other customs area (DPIL) or other PDKB to taxable
persons of origin in bonded area.
7. Hiring machinery and plant tools for the purpose of a subcontract from
PDKB to manufacturer in  DPIL, or other PDKB, and the transfer back to the
PDKB of origin.
In addition, shall not be withheld, VAT and luxu rious tax payable on capital goods or tools for
development/construction/expansion of bonded area and office equipment imported by a company
doing business as a bonded area estate, as long as the items are used by the company itself.
f. Decentralization Policy
28. As part of the government efforts to decentralize the national government to the province and
district, it was stipulated a new law, the so-called "Law No. 22 of 1999".  The Law provides a more
authority to the regional government.  It is said that to anticipate the challenges facing by Indonesia
(such as global competition), it was needed to vitalize the regional government by providing a more
supremacy through the shifting of a certain authority which was previously hold by the centralgovernment.
29. However, the transitional shifting of authority to the regional government has so far emanated
a negative impact in some parts of the regions because the local government tends to increase the
local revenue through stipulating new regulation such as tax, retribution, and other levies that burden
the business communities.
g. Energy
30. The government set out a reform plan in electricity sector aimed to provide an improved
foundation for the future, development of Indonesia’s power industry.  A key milestone on the Power
Sector Restructuring Program  was the pr omulgation of the New Electricity Law on
September 23, 2002.  The Law is a national mandate and legitimating support from the Parliament forthe Government to pursue the electricity deregulation.  Deregulation is now conducted with reference
to the new Law.  The new Law allows an electricity industry for certain areas to be based on market
competition rather than state monopoly.  The industry will be restructured to allow fair competition in
power generation and retail.  However private participation in the form of independent Power
producers (IPPs) will be continued in areas where competition not yet implemented.WT/TPR/G/117 Trade Policy Review
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31. Oil and gas revenues making up over 25 percent of the total government revenues generate a
significant contribution to the government revenues for the last four years from 1999 to 2002.  With
the Law No. 25/2000 concerning the National De velopment Program (PROPENAS), the government
of Indonesia will phase out subsidies for oil and gas by 2004.  The implementation of this policy will
consequently increase the retail prices of oil and gas.  This policy is also applied to electricity.  When
the government took a measure of reducing the subsidies in 2000, the prices of oil, gas and electricityincreased by approximately 20 – 30%.
h. Manpower
32. In enhancing the harmonization of industrial relations, the government has continuously
reformed its legislations/regulations concerning with labor forces’ problems, such as the settlement of
the Ministerial Decree of Manpower No. 150/2000 through tripartite in the regional and nationallevel. In order to accommodate the changes of manpower problems and to enhance the development
of industrial relation, the government along with House of People Representative have accomplished
one law i.e. manpower development and protect ion law in 2003 which is commonly known as
Manpower Law (UUK).  While the other bill is still under discussion with the House of People
Representative i.e. Industrial Relation Dispute Settlement bill.  The objectives are, among others, toincrease the role of manpower institution in a company, improvement of working conditions,
manpower prosperity, health secure and  working safety.  In order to increase the quality of labor
force and to anticipate trade liberalization on services, the government, i.e. Ministry of Manpower and
Transmigration, Ministry of Trade and Industry and Ministry of National Education along with the
Chamber of Commerce are setting up the National Professional Certification Board. The board aims
to develop training standardization and certification.
IV. TRADE POLICY AND TRADE RELATED POLICY DEVELOPMENTS
a. Trade Policy
33. To achieve a successful economic recovery as well as to cope with the global competition,
there is no better alternative approach except to  increase the national competitiveness.  The
government of Indonesia has, therefore reformulated its economic policy including the industrial and
trade policies.  The current industrial and trade policies concentrate on the industrial revitalization anddevelopment, anticipating the flaring up of smugg ling through the introducing of the Special Importer
Identification Number, export development, empowering SMEs, increase counter-trade bilaterally,
and facilitating the establishment of Indonesia Recovery Fund.
The main objectives of revitalization and development program are as follows:
a. Returning and increasing the performance of export oriented industries and high local
content industries,
b. Maintaining and increasing investment,
c. Maintaining and creating job opportunities for employment,
d. Increasing foreign exchange revenues, and
e. Empowering SMEs as supporting industries.
34. The industrial revitalization program is focused on textile and textile product, electronics,
footwear, wood processing, and pulp & paper industries.  While, industrial development programIndonesia WT/TPR/G/117
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consists of seven groups of industry having high potential in absorbing labor forces and foreign
exchange earnings, covering leather and leather product, fish processing, crude palm oil, fertilizer and
agricultural machinery and equipment, food product, software, jewelry and handicraft industries.
Furthermore, to strengthen the industrial revitalization and development programs, it is required to
develop supporting industry covering automotive, electronics, and machinery components industries.
While the strategies to anticipate the flaring up of smuggling are as follows:
a. Using Special Importer Identification Number, the so-called "NPIK" for rice, corn,
soybean, sugar, textile and textile product, electronics and its components, and toy.
This program has been implemented starting as from May 6, 2002.
b. Conducting re-registration program for importers,
c. Implementing import and local product standardization,d. Controlling enforcement and market monitoring,
e. Implementing certificate of origin for imported products.
b. Tariffs
35. In recent year there has been much progress in deregulating international trade policy in
Indonesia. Tariff, import licensing and export restraints have been substantially reduced exposinglocal business to more international competition in both import and export markets.
36. In giving assurance to the businesses as well as commitment to the AFTA, GATT/WTO and
APEC, the government has comprehensively stipulated a policy concerning on import duty
restructuring in the form of tariff reduction schedule (Ministerial Decree of Finance
No. 378/KMK.01/1996), namely:
a. Import tariff of < 20% in 1995 would gradually be reduced up to maximum of 5% in
2000
b. Import tariff  of > 20% in 1995 will gradually be reduced up to maximum of 10% in
2003, with an intermediate target of 20% in 1998
c. Products excluded from the import tariff reduction schedule are follows:
- A certain agriculture product, which is regulated separately as committed in
GATT/WTO.
- Some automotive products will be regulated separately.
- Chemical products, plastic goods, and metal, which is regulated separately
and will be gradually reduced up to maximum of 10% in 2003.
- Import tariff of alcohol and beverages contained of alcohol not to be reduced.
37. A serial policy on import tariff reduction affected a great changing in the structure of import
tariff.  The average rate of import tariff was 9,34% in 1998, 8,64% in 1999, and 7,27% in 2000, so as
the composition of import tariff rate changed. In 1998 the composition of tariff rate of 0 -10% covered
5.214 tariff lines or 72,30% of the total tariff  (7.212 tariff lines), 15 – 20% for 1.784 tariff lines
(24,74%), 25 – 30% for 133 tariff line (1,84%) and > 30% of import tariff rate include 81 tariff lines
(1,12%).  In 2000 the composition of import tariff rate, however changed into 6.062 tariff linesWT/TPR/G/117 Trade Policy Review
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(83,12%) for import tariff of 0 – 10% out of total tariff lines of 7.293, 15 – 20% for 1.114 tariff lines
(15,27%), 25 – 30% for 38 tariff lines (0,52%), and  > 30% for 74 tariff lines (1,01%).  However, to
accommodate HS amendment 2002 based on the WCO recommendation, Indonesia has issued a newtariff classification as stipulated in the Minist er of Finance’s Decree No. 96/KMK.01/2003 which is
effective on May 1, 2003. The new decree is not intended to change the tariff rates but it will change
the total tariff lines from 7,212 to 7,540 comprising 6,285 tariff lines (83.35%) for import tariff 0%-10%, 1,128 tariff lines (15.06%) for 15%-20%, 38 tariff lines (0,51%) for 25%-30%, 74 tariff lines
(0.99%) for >30% and 15 tariff lines (0,2%) in specific rupiah.
38. With respect to export taxes, Indonesia still ma intain export taxes for palm oil products (CPO
and its derivative), but it reduced considerably the scope and tax rates (level, dispersion) which are
now ad valorem  only and calculated on the basis of a formula containing a minimum/benchmark
export price or export check price (HPE).
c. Non Tariffs
39. Since the last review of Indonesian TPR in 1998, the government has pro-actively eliminated
or abolished some trade barriers, such among others as:
- Elimination of restriction on import license of dairy products (7 tariff lines) of
Approved Importer (IT) switched to General Importer (IU), and cloves (2 tariff lines)
under the regulation of BPPC to IU;
- Releasing the restriction import of 4 tariff lines for rice from BULOG into IU
- Releasing the importation of automotive on 47 tariff lines which could only be
imported by a General Importer (IU), Registered Importer/Sole Agent (AT);  and
- Releasing the importation of sugar and rice on 11 tariff lines (7 tariff lines for sugar
and 4 tariff lines for rice), which could only be imported by Producer Importer.
40. The Minister of Industry and Trade issued the decree No. 732/MPP/Kep/10/2002 on
procedures for importing textile in which importing textile can be done only by producer importer.  It
purposed to prevent the distribution of illegally imported textile on the Indonesian market, which
causes unfair trade and inflicts losses on the locally produced textile, and in order to maintain a
conducive business climate.
d. Trade Defense
41. The government of Indonesia has adopted policies in the form of Anti Dumping and
Safeguard in order to respond to unfair competition from imports.  These policies are implemented
consistent with the WTO Agreements which are stipulated under Government Regulation Number 34
year of 1996 concerning Anti Dumping Duties and Countervailing Duties and Presidential DecreeNumber 84 year of 2002 dated December 16, 2002 concerning the Safeguard of the Domestic
Industry Against a Surge in the Import of Goods .
As far as Anti Dumping Measures are concerned, the Government of Indonesia has investigated on
20 cases.  However, the Government of Indonesia has imposed Anti Dumping Duties only on 7 Cases,
namely Hot Rolled Coil/Plate, Wire Rod, Ampicillin and Amoxyline, Tin Plate, H and I Sections,Ferro Mangan and Silicon Mangan, and Sorbitol.
To date, Safeguard Measure has not been imposed by the Government of Indonesia.
42. In view of defending Indonesia’s export interests in foreign markets, the Government of
Indonesia i.e. the Ministry of Industry and Trade has taken serious steps to respond to allegations of
dumping raised by foreign governments against Indonesian exports.Indonesia WT/TPR/G/117
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e. Agriculture
43. The agricultural sector’s contribution to the economy during the period of 1998-2001
recorded for 18.1% in 1998 to 19.6% to 17.0% in 2000 and to 16.4 % in 2001.  Since IMF structural
adjustment policy (LOI of September 1998), the Gove rnment agreed to phase out all import licensing
procedures that could not be justified for health, safety, environmental or security reasons.  For rice
sub-sector has been reformed as follows :
- BULOG  and private traders are treated equally for imports ever since BULOG
import monopoly on rice, sugar, wheat and wheat flour was abolished in
September 1998;
- Tariff import for rice was set at 0%  (AV) in the period September 1998 to
December 1999.  Specific tariff of Rp 430/kg has been applied since January 2000 topresent time.  The level of tariff was equivalent to 25% of AV monthly average for
3 (three) years period from January 2000 to December 2002.
- To manage uncontrolled import of rice due to smuggling under invoice etc, The GOI
give import license (NPIK) to selected private importers who  meet the criteria set by
the GOI (Ministry of Industry and Trade)
- Domestic support for rice is mainly provided in the form of market price support to
maintain floor price.  This policy has been used since 1970.
- BULOG set the criteria and announce to the public for rice procurement.  BULOG
buys paddy or rice from traders and farmers using first come, first come first serve
method;
- Move from general price subsidy (rice price stabilization policy to targeted food
subsidy under OPK (special market operation) as emergency program from August1998 to December 2001.  Since January 2002 the program has been changed to
RASKIN (rice for the poor) as social protection program.
44. Most processed food imports must be registered with the Department of health and may
require certificates referring to the degree of radiation, standards on Islamic purity  ("halal"), food
additives, food safety, and alcoholic content.  In the case of the chicken legs, Indonesia’s Ministry ofAgriculture had banned imports of US chicken legs on the grounds that they were not produced in
accordance with Islamic practices.  Although still under review, the Government may decide to
rescind the import ban, and will protect the domestic market by raising tariffs on chicken legs.
f. Competition Policy
45. In recent years there has been much progress in deregulating international trade policy in
Indonesia. Import tariffs, licensing and export restraints have been substantially reduced that
eventually expected to provide competitive envi ronment for local firms in both import and export
markets.
46. Law No. 5/1999 concerning the prohibition of monopolistic practices and unfair business
competition was introduced in 1999.  The objectives of the law are to safeguard the public interestsand to increase the national economic efficiency as one of the efforts to increase the people’s welfare;
to establish a conducive business environment ensuring equal opportunities for big, medium, and
small businesses; to prevent monopolistic practices and other unfair business competition; and to
create efficiency in business sector.  The law covers a wide spectrum of anti-competitive behavior,
ranging from the prohibited business activities an d agreements to abuse of the dominant position,
including those related to Merger and Acquisition (M&A) practices.  While all other rules related to
the prohibited business practices have been provided by the law and have become to be effective sinceWT/TPR/G/117 Trade Policy Review
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the third quarter of 2000, the technical implementation rules for the M&A will be in the separate
provision and now in the process of completion.
47. Following the law, by the Presidential Decree No. 75/1999 Komisi Pengawas Persaingan
Usaha (KPPU-Commission for The Supervision of Busi ness Competition) an independent regulatory
agency, was established to supervise anti-competitive business practices and to provide policy
recommendations to the government concerning competition-related policy issues.  The KPPUcurrently consists of ten commissioners whose appointments have been made through the Presidential
Decree No. 162/M/2000 after the approval of the Parliament for a five-year term of office and a
chance of reappointment for one additional term. During the 3
rd year of its establishment, KPPU has
investigated not less than 60 cases, and has contributed to the government policy reforms in various
sectors.
g. Consumer Policy
48. On 20 April 1999 it was stipulated Law No. 8 of 1999 on Consumer Protection consistent
with the United Nation Guidelines.  The Law and supporting institutions reflect a mix of concerns for
consumer welfare;  inequity in transactions involving consumers and consumer safety.  The Law
prohibits a wide range of conduct by entrepreneurs, and obligated to give compensation for thedamage taint/or losses the consumers suffer as a result of using or consuming the goods and or
services produced or traded by the entrepreneurs.  The law based on principles of balance between
consumers and entrepreneurs.  Under this law, an importer of goods bears responsibility if the goods
are not imported by an agent or representative of the foreign producer.  Under the law No. 23 of 1992
on Health, imported food products are required to obtain a registration number (ML) from
Supervision of Drug and Food Agency (Badan Pengawasan Obat dan Makanan) before distributed in
domestic market.
h. Government Procurement
49. In early February 2000, the government stipulated a new regulation concerning government
procurement through the Presidential Decree of the Republic of Indonesia No. 18/2000 as a Guidance
for Government Procurement on Goods/Services, which separates from the Presidential
Decree No. 17/2000 arranging for budget system. The Presidential Decree No. 18/2000 is imposed forprocurement of goods/services funded by State/Natio nal Budget, Provincial Budget, Regional/District
Budget, Bank Indonesia, Pertamina, National/Regional State Owned Enterprises in which funded by
State/Regional Budget partly or wholly.  As fo r information, the Decree was composed based on some
references such as Government Procurement Agreement (GPA – WTO), UNCITRAL Model Law,
Non Binding Principles of APEC Government Procurement, etc.
i. Standardization
50. In order to meet the international rules, the National Standard  Agency (BSN) has developed a
guidance of standard formulation "Indonesian National Standard – SNI" based on a consensus, while
in adopting a standard mechanism it should also be in line with ISO Guide-21.
51. Through the Government Regulation No. 102/2000 concerning National Standard, the role of
standardization in the national economy has developed.  However, facing the international economic
challenges headed to trade liberalization, the role of standardization in the national level is still needed
to improve and should also be supported by other related ministries, industrialist, consumer and
scientist.Indonesia WT/TPR/G/117
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52. Realizing the significant role of standard and conformity assessment in economic activities,
so as the national standard programs are directed to be development trade business both in the
national and international levels, to increase consumer protection, business players, labor forces and
other societies.  National standard should be a part of business and industrial societies in improving
the quality of goods/services and the smoothness of goods/services acceptance in global market as
well as strengthening the industrial structure in utilizing the national natural resources existing in
Indonesia.
j. Banking Policy
53. During 1998/1999 banking policy was aimed at rest oring the confidence of national banking
industry and rehabilitating the banking system to ensu re that it won’t reoccur in the future.  For that
reason, two major strategies were undertaken in restructuring the banking system, first, through recap
programs and temporary blanket guarantee scheme, which eventually reflected in the large burden of
the fiscal budget, second, through strengthening the banking system including improving banking
infrastructure, refining regulations and enhancing bank supervision, as well as strengthening thequality of bank management (good corporate governance).  In general, continuing policies adopted in
the past years remained focused on efforts to maintain the bank rehabilitation program and thebanking system resilience program.
54. As a result, the banking performance has improved significantly.  This was evidenced by
ongoing recovery of the intermediation function, such as growing mobilized funds and credit
extensions.  Improvements were also recorded in growing banks’ capital and banks capital adequacy
ratio (CAR), improved banks’ non-performing loans ratio, banks’ profitability as well as credit
quality.
55. Efforts to strengthen banking system resilien ce were made through improvement in banking
infrastructure such as the expansion of sharia banks and BPRs, implementation of fit and proper test
to bank owners and executive officers, directors of compliance, and enhancement of bank regulations.
56. Since the crisis, number of banks has been streamlined  to 141 existing banks at the end of
2002, comprising  5 state owned banks, 4 formerly taken over banks, 3 recapitalized banks,
69 category "A" banks, 24 joint banks, 10 foreign banks and 26 regional development banks (BPDs).
k. Non-Bank Financing Sector
57. There are 6  sub-sectors of non-bank financial sectors under the control of Ministry of
Finance, i.e., capital market, insurance, pension-fund, services financing, accountant, auditing, book-
keeping, and appraisal services.
58. In the capital market sub-sector, there is an open access to the market with no prohibition and
obstacle for the foreign agency to offer their stock in Indonesia.  For consumption abroad, the limit to
buy stock by foreign investor through capital market has been cancelled.  Local and foreign investor
could have the whole stock of the company that offer public bidding for all stock and its composite
stock unit.
59. According to the Ministry of Finance Decree No.:  90/KMK.010/2001 concerning Foreign
Ownership of Securities companies, the share of Securities Company operating as a joint-venture can
be owned by :
- Foreign legal entity that operates in financial sector other than securities activity up to
a maximum of 85% of the paid-in capital (article 2 item 1).WT/TPR/G/117 Trade Policy Review
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- Foreign legal entity that operates in securities activity that had have license or under
supervising of capital market regulator in their own country up to a maximum of 99%
of the paid-in capital (article 2 item 2).
- In the event that national or joint-venture Securities Company makes a Public
Offering of its shares, the share of that Securities Company can be owned by foreign
investor or domestic investor up to 100% of paid-in capital (article 3 item1).
- According to Government Regulation No. 45 Year 1995 concerning Capital Market
Organization articles 33, there is a different treatment of minimum requirement of
paid-in capital between national and joint venture securities company that operate as
a broker dealer, or investment manager or in both activities.  Different treatment also
applies to a securities company holding all three licenses (Underwriter, Broker-dealer, and Investment Manager).
60. In insurance sector, the existing law regulates that the coverage of insurance objects should be
done carefully by considering the capability of local insurance and re-insurance firm, which mean that
insurance object in Indonesia shall only be covered by the insurance company which has obtained
Business License from the Ministry of Finance, unless:
- No insurance company in Indonesia, either individuality or as a group, shall have the
capacity to cover the risk of insurance object;  or
- No insurance company shall be willing to cover the insurance object;  or
- The owner of the insurance object concerned isn’t Indonesian citizen or Indonesia
legal entity.
61. Sub-sector insurance is relatively liberal in market access.  Commercial presence could be
done in the form of Joint-Venture Company.  According to the Government Regulation No. 73
year 1992, the foreign ownership firstly in the joint- venture company shall no exceed 80% of the total
capital of the company and might be raised more than 80% by keeping the amount of share owned by
Indonesian.
62. In national treatment, there is no capital difference between local and joint venture insurance
company. According to the Government Regula tion No. 63 year 1999, to increase the company
capacity, the required capital for new established insurance and re-insurance company has been
raised.
63. In the financing service, market access and national treatment for leasing company, credit
card, and consumer financing have been too open.  For factoring, no government commitment in
market accesses, except for international transaction.  In the consumption abroad, leasing, factoring,credit card, and consumer financing are very open too, because of no prohibition for foreigner to use
their service in Indonesia.
64. There isn’t any government commitment in the other three sub-sectors, which are sub-sector
of accounting, auditing, and bookkeeping, sub-sector  of appraisal service, and sub-sector of pension
fund.
l. Transportation
65. The policy in transportation under the control of Department of Transportation consists of the
land, sea, and air transportation. Government policies concerning with trade divided into those three
groups.  The sub-sector for land transportation are taxi-cab, city bus passenger, inter city or province,Indonesia WT/TPR/G/117
Page 19
ferry, train and passenger, cruise passengers, and rental service, are closed for foreigners as mention
in the existing regulation. In the regulation, land  service provider is allowed for State Owned
Company, Regional State Owned, Cooperative in transportation, national private company, and
individuals.
66. Maritime transport services consists of international shipping for passenger and cargo,
domestic shipping for passenger and cargo, access to and use of port facilities and auxiliary services(such as:  stevedoring/handling of cargo and freight forwarding).  Foreigners can participate in
international shipping in a joint venture with Indone sia partners involving up to 95% equity (officially
committed in WTO, 51% equity).  Foreign investment in inter-island shipping services (domestic
shipping) is prohibited according to sabotage princi ple, where the privilege or right of navigating and
trading along the cost between two or more ports within the national territory only to vessels that areduly plying Indonesian flag and operated by Indonesi an shipping company.  However in case of lack
of Indonesian vessels capacity, for certain commodities and certain routes, the government could
selectively permit the use of foreign vessels in Indonesian water territory for certain period.
There are no entry barriers for foreign vessels in Indonesian ports which are opened for international
trade, provided they meet international safety, operation and crew standard.Port services are provided on reasonable and non discriminating terms and conditions, such as
pilotage, towing, tug assistance, anchorage and wharf access, and emergency repair facilities.
Foreign shipping company which is operating international services to and from Indonesia port must,
however, appoint an Indonesian shipping compan y as an agent (as regulated in Government
Regulation No. : 82/1999 and Minister of Communication Decree No.:  33/2001).
Indonesia is a member of International Maritime Organization (IMO).
Based on the Government regulation No.:  82/1999, the auxiliary services such as:  stevedoring andfreight forwarding activities is done by Indonesian company.  Measures, However, have been taken to
allow greater foreign participation.
67. Based on the Government Regulation No.:  69/2001, ports are classified into the public ports
(for public use) and special (industrial) ports that support industries such as manufacturing, forestry,
fishing, mining and tourism.They are approximately 725 public ports, 111 are managed by four state-owned port operators/PT
Pelabuhan Indonesia or Pe lindo I, II, III and IV.
Based on the Minister of Communication’s Decree No.:  53/2002, ports are categorized into
International Hub Ports (2), International Ports ( 18), National Ports (244), Regional Ports (133), and
Local Ports (321). While the special (industrial) ports = 565 locations.The Government divested in 2001 51% of PT. Pelindo II’s equity in PT. Jakarta International
Container Terminal to Hutchinson, which operates terminal at Tanjung Priok ports in Jakarta. It is
also divested 48% of PT. Pelindo II’s equity in UPTK Kodja to Ocean Terminal Peti Kemas (OPT) in
Jakarta. It also sold 49% of shares of PT. Pelindo III in Tanjung Perak port Surabaya to peninsular
oriental navigation.
A foreign investor can participate in certain por t activities, such as:  extending port capacity,
construction and management but only as a joint venture with local partner to establish Indonesia
legal entity in joint operations with PT. Pelindo.
68. For the air transportation, which consists of air transportation (commercial) and General Sale
Agents (GSA), is also open for the foreign investor. Based on Government Regulation (PP ) No.40 –
1996 chapter 16 (2) and chapter 27 (2), stated that this activity could be done by private and state
owned company for legal company and cooperative.  Furthermore, the air transportation from and into
abroad could be done based on bilateral or multilateral agreement.  The company has to station itsWT/TPR/G/117 Trade Policy Review
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representative in Indonesia for administration business (operational, management office, finance,
technical aircraft, and handling as supervisor).
m. Tourism
69. Tourism has always been strategic to Indonesian development.  Its contribution to the foreign
exchange earnings is significant, considered one of the best three biggest contributors in the past
fifteen years.  In 2001, tourism,  has contributed USD 5.75 billion by receiving more than 5.15 millioninternational visitors, whilst the income from the domestic visitors reached an equivalent of
USD 7.7 billion. Those conditions made tourism become the number two foreign exchange earner of
Indonesia. Tourism contributed 9.27% of its income to the national production of goods and services,
and 17.44% of the Gross Domestic Product (GDP).  In terms of value added, tourism contributed
9.38% to GDP and creates 7.7 million jobs, equal to 8.11% of the national employment.
70. Unfortunately, the Indonesia tourism has to face a gloomy condition due to the tragedy on
Bali bombing.  In the aftermath of the Bali tragedy, Indonesian government has set a recovery action
plan that is based on four stages namely rescue, rehabilitation, normalization and expansion.  The aim
of this recovery program is to restore confidence  in the international and domestic markets towards
Indonesia, principally Bali, as an interesting and pleasant destination.  The recovery program spreadover four main aspects of tourism development; firstly, security; secondly, social; thirdly, product
development; and finally, marketing.
At the rescuer stage until the end 2002, programs are being made to restore the international market’s
confidence toward Bali as safe and enjoyable destination through security system improvements and
humanitarian actions based on well prepared public relations activities, such as setting-up media
Centers, conducting image recovery programs, international cooperation, road-shows, active
participation in Travel Marts, and inviting international journalists and travel writers in Fam Trips.Promotion of domestic tourism is also one important activity that is being done during this stage.
During the rehabilitation stage, most of the programs and activities that took place in the first stage
are still in the continuation.  However, more promotion activities being introduced during this period
by participating in events and trade shows.  Other im portant activities that will be the highlight of this
stage are product and service quality improvement and developing schemes of incentives on fiscal andnon-fiscal policies.  The rehabilitation stage lasts for six month to the mid of 2003.
At the second half of 2003, the normalization programs started to a realization.  Programs such as
implementing more Fam Trips to the main and potential markets players, conducting an active
bilateral, regional and multilateral cooperation, organizing events, and setting-up a world scale media
campaign, as well improving service standard are the vital elements of the stage.
By the end of 2003, the government of Indonesia hopes that the tourism in Indonesia is come to the
normal situation and ready to expand.
n. Investment
71. The most significant investment deregulation policy to date is the June 1994 investment
deregulation policy which substantially diluted, if not altogether lifted the mandatory divestment rulewhich had been a key principle of Indonesia’s foreign investment policy since 1974.  The approval of
100% foreign ownership under the June 1994 investment deregulation package and the lifting of the
mandatory divestment rule to minority ownership reflected a dramatic reversal of Indonesia’s foreign
investment policy.  It made Indonesia’s foreign investment policy more liberals than that of the other
East Asian countries.Indonesia WT/TPR/G/117
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72. Realizing that new FDI inflows were needed  for Indonesia’s economic recovery, the new
administration took several steps to address longstanding complaints of foreign investor, by making
further simplifications in the investment licensing procedures.  Other measures included the granting
of authority to Indonesia’s embassies to approve applications for new FDI in Indonesia, and the
possibility for foreign investors to fully own Indonesian holding companies.
73. Various deregulation measures are taken by the Indonesian government after the demise of
the New Order regime more open than before the crisis.  Similarly, the number of sectors closed to
FDI has been steadily reduced until at present only a small number of activities are still closed to FDI.
In view of the steep depreciation of the rupiah, in vestment in export-oriented activities would also be
profitable in view of the fact that these activities have become highly competitive.
74. A comprehensive investment policy is called for. A new investment law for Indonesia has
been in preparation for a number of years.  A draft law is currently being reviewed within government
circles before it will be presented to the parliament.
o. Communication and Information Sector
75. Indonesia has succeeded to prepare a development policy framework in the field of
Information Technology, the so called the Nationa l Information Technology Framework that consists
of five objectives to be achieved,  namely:
- The achievement of E-Government for Good Governance by 2005,
- The achievement of E-Business to support SMEs by 2005,
- The achievement of IT basis for the society by 2010,
- The achievement of IT for education by 2010,
- The achievement of E-Democracy by 2010.
76. In facilitating the development of information technology, the government has stipulated
several policies, i.e.:
- Giving an opportunity for private sector to develop telecommunication activity as
arranging in the Law No. 36/1999 on telecommunication.
- Tax exemption on luxury-sale tax for computer kits,
- PT. Telkom provide sharing for the Internet Shop development.
p. Intellectual property right
77. In order to comply with the TRIPs obligation under WTO, Indonesia has amended its IPR
Laws,  inter alia:
a. The Law No. 14 of 2001 on Patent (which re places the Patent Law No. 6 of  1989 as 
amended in 1997)The Law No. 15 of 2001 on Marks (which replaces the Marks Law of 1992 as
amended in 1997)
The Law No. 19 of 2002 on Copyrights (whi ch replaces the Copyrights Law No. 12
of 1997 regarding the amendment of Law No. 6 of 1982 on Copyrights as amended
by Law No. 7 of 1987)
b The Plant Variety Protection Act  No. 29 of 2000; the Trade Secret Act No. 30 of
2000; the Industrial Design Act 31 of 2000; and the Layout-Designs of IntegratedWT/TPR/G/117 Trade Policy Review
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Circuits Act No. 32 of 2000. All of them are effectively enforced on
20 December 2000.
c. In the relation to the provision on "Special Requirements Related to Border measure"
as stipulated part 111, section 4, of the TRIPs Agreement, a special chapter has added
to the Custom Law No. 10 of 1995, article 54-64 chapter X of the Law consist of
export and import goods resulted from  violations against IPR.
78. Moreover, Indonesia has also ratified five international conventions in intellectual property
rights covering:
a. Paris Convention for the Protection of Industrial Property and Convention
Establishing the World Intellectual Property Organization (Presidential Decree of the
Republic of Indonesia No. 15/1997 on the Changing of Presidential DecreeNo. 24/1979).
b. Patent Cooperation Treaty (PCT) and Regulation under the PCT (Presidential Decree
of the Republic of Indonesia No. 16/1997).
c. Trademark Law Treaty (Presidential Decree of the Republic of Indonesia
No. 17/1997).
d. Berne Convention for the Protection of Literacy and Artistic Works (Presidential
Decree of the Republic of Indonesia No. 18/1998).
e. WIPO Copyright Treaty (Presidential Decree No. 19/1997).
Indonesia also member of the Hague Agreement Concerning the international Deposit of Industrial
Designs, signed by Ministry of Industry in 1986.
The future program in the field of IPR :
a. Ratification of International Convention on IPR such as :
i. WIPO Performances and Phonograms Treaty
ii. Budapest Treaty on the International recognition of Deposit of
Microorganisms for the Purpose of Patent Procedure.
b. To draft the Government Regulations concerning Optical Disc.
c. Improvement quality and quantity of law enforcement as well as the Improvement of
Public Services.
V. REGIONAL TRADE ARRANGEMENT
a. ASEAN
79. In December 1997 the ASEAN Vision 2020 was issued to commit the region towards closer
cohesion and economic integration by, among other measures, fully implementing the ASEAN FreeTrade Area and accelerating the liberalization of trade in services.  Further in 1998, the
implementation of AFTA was accelerated from 2003 to 2002 with some flexibilities for the original
six members of ASEAN targeting of 100% of the tariff lines at 0-5% duty rates by 2003.Indonesia WT/TPR/G/117
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80. Overall, Indonesia is now on track and fulfilling its commitments in AFTA.  It has transferred
all of its products into the CEPT Scheme, and 99.04% is already at duties of 0-5% in 2002 and
54.65% with nil duties.  There is no longer product in the Temporary exclusion List (TEL).
81. Indonesia has only 0.0015% of its products in the Sensitive List, involving 11 tariff lines of
unprocessed agricultural products, i.e., rice (4 tariff lines) and sugar (7 tariff lines).  Those products
will be included into CEPT scheme in 2003 and with ending tariff of 20% by 2010.  While, theGeneral Exception (GE) consists of 68 tariff lines or 0.0093% of total tariff lines, involving mainly
alcoholic beverages and weapons.  The CEPT Agreement allows the exclusion of these products from
tariff concession for moral, health and security reasons.
82. Furthermore, ASEAN signed a Framework Agreement on the ASEAN Investment Area
(AIA) in October 1998.  The AIA is aimed at esta blishing ASEAN as a competitive investment area
by 2010, with a liberal and transparent investment environment, and to contribute toward achieving
free flow of investment in the region by 2020.  The AIA covers all direct investments in the
manufacturing, agriculture, fishery, and forestry and services incidental to these sectors.  The AIA is
being implemented under three programs namely investment cooperation and facilitation; promotion
and awareness; and investment liberalization.
b. APEC
83. Indonesia commits to implement APEC’s voluntar y target of open and free trade, as well as
services and investment for developing country members by 2020, as setting in the Bogor Declaration
in 1994.  APEC economies are to achieve their targets on a voluntary and non-binding basis
("concerted unilateral liberalization") using Individual Action Plans (IAPs).  To do so, Indonesia
indicated in its 2002 IAP that, inter alia , tariff reductions would be continuously implemented in the
near future to range between 0 % and 10 % by 2003 ;  export restrictions would be further eliminated
and export taxes reduction would be scheduled.
VI. FUTURE ECONOMIC AND TRADE POLICY DIRECTIONS
84. The future direction and strategies adopted will aim at furnishing sustainable economic
growth, developing economic resilience and increasing productivity and international
competitiveness.  The private sector is expected to lead the economic growth with public sectorcontributing a supportive and facilitate environment in enhancing the business sector.
85. To anticipate the current problems as well as bearing in mind of the future challenges, the
government through the Law No. 25 of 2000 concerning the National Development Program, has
been formulated five national development priorities, namely:
- To build a democratic political system and to sustain an integrity and unity.
- To create law supremacy and good governance,
- To accelerate economic recovery and to strengthen sustainable development
foundation and just based on people economic system,
- To build people prosperity, to increase religious life quality, and cultural security,
- To increase regional development.
86. The concrete economy that will be built  the period of 2000 - 2004 is quite different from
prior to crises, namely:
- Economic development will be conducted based on people economic system in order
to achieve high, equal and just for the people prosperity.WT/TPR/G/117 Trade Policy Review
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- The development of economy should be obviously and consistently done based on
regional autonomy development and active participation of people.
- The economic development should be applied with an efficient principle supported by
human resources and technology development in order to strengthen a sustainable
development foundation and to increase the national competitiveness.
- The orientation of economic development should be headed to the economic
globalization or international economy by giving a high priority to the national
economic interest.
- The macro economic development should be managed prudently, discipline, and
responsible in facing the increase of uncertainty due to globalization process.
- The economic development should be done based on the policies formulated
transparently and responsible, either in public management, government or society. In
this connection, the government should be acted dependently and kept at a distance
from the companies and companies’ association.
- The economic development should be based on sustainable natural resource system,
environment, and social system to increase people prosperity.
87. The Law mentioned above also mandated that to accelerate the increase of global
competitiveness, it has been formulated five main strategies, i.e., export development; development of
competitive advantaged industry; strengthening market institution; tourism development; and
improvement the science and technology capability.
88. The Gotong Royong  Cabinet under the leadership of Megawati, President of the Republic of
Indonesia has set up six programs that has to be done, namely:
- Maintaining the national integrity and unity of the Unitary State of Republic of
Indonesia,
- Continuing the process of reformation and democratization in all aspects of national
existence, through clear framework, guidelines and agenda, by improving the respect
of human right,
- Normalizing the economic existence and strengthen the people economic existence
foundation,
- Enforcing law consistently, create peaceful life for the people, continue to abolish
collusion, corruption, and nepotism as well,
- Carrying out free and pro-active foreign politic, to overcome the national status, and
foreign confident including creditor institutions and investors to the Indonesiangovernment,
- Preparing a General Election of 2004 with safe, orderly, free, secret and direct.
In industry and trade, the attention will be more focused on:
- Revitalize domestic industry and financing sources;
- Strengthen foreign trade strategy and policy, mainly in connection with the effective
of ASEAN as a free trade area in 2003, and compatibility of all policies with the
WTO rules, and
- Create tight cooperation with the State Ministry of Research and Technology to link
industry with policies, activities and utilization of invention and technology
development.
89. Policy initiatives will focus on manufacturing and trade sectors that are expected to be the
major contributor of growth. The contribution of non oil and gas manufacturing to GDP, based on theIndonesia WT/TPR/G/117
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National Development Program projection, is expected to be 22.9% in 2002, 23.4% in 2003 and
24.1%  in 2004. Non oil and gas manufacturing industry growth to be 7.9% in 2002, 9.2% in 2003 and
10.0% in 2004. Meanwhile, export value of non-oil and gas products is also expected to be
US$57.4 billion, US$64.0 billion and US$72.0 billion during the same period.
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