RESTRICTED  
  
WT/TPR/G/278  
6 March 2013  
(13-1139)  Page: 1/15  
Trade Policy Review Body  Original: English  
 
TRADE POLICY REVIEW 
REPORT BY 
INDONESIA  
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the 
Marrakesh Agreement Establishing the World Tr ade Organization), the policy statement by 
Indonesia is attached. 
 
 
Note: This report is subject to restricted circulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Indonesia. WT/TPR/G/278 • Indonesia 
 
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  CONTENTS 
1   INTROD UCTION  .......................................................................................................... 3  
2   ECONOMIC AND TRADE ENVIRONMENT ....................................................................... 3  
2.1   Main economic an d policy development......................................................................... 3  
2.2   Financ ial sector ........................................................................................................ . 6 
2.3   Trade and investment ................................................................................................ 7  
2.4   Effort for green growth ............................................................................................... 8  
3   INTERNATIONAL TRADE RELATIONS ........................................................................... 9  
3.1   Multilateral trade cooper ation ...................................................................................... 9  
3.1.1   Indonesia in Doha Development Agenda (DDA) ........................................................... 9  
3.1.2   Indonesia active participat ion in DDA issues  negotiation ............................................... 9  
3.1.2.1   Agriculture ......................................................................................................... . 9 
3.1.2.2   Non Agriculture Market Access (NAMA) .................................................................... 9  
3.1.2.3   Services ............................................................................................................ . 9 
3.1.2.4   Trade facilitation ................................................................................................. 10 
3.1.2.5   Trade and environment ........................................................................................ 10 
3.1.2.6   Aid for trade ....................................................................................................... 10 
3.1.2.7   Trade-related Aspect of Intellectual Property Rights (TRIPS) ...................................... 10 
3.2   Regional and bilateral cooperation ............................................................................... 10 
3.2.1   Regional  cooper ation .............................................................................................. 10 
3.2.2   Bilatera l cooper ation .............................................................................................. 11 
4   TRADE AND RELATED PO LICIES DEVELOPMENT ........................................................ 11  
4.1   Trade development and policy .................................................................................... 11 
4.2   Investment  development ........................................................................................... 12 
4.3   Sectoral policies .......................................................................................................  13 
4.3.1   Agriculture ............................................................................................................ 13 
4.3.2   Fisheries ............................................................................................................... 13 
4.3.3   Fo restry  .............................................................................................................. . 13 
4.3.4   Manuf acturi ng ....................................................................................................... 14 
5   FUTURE POLICI ES DIRECTIONS ................................................................................ 14  
 WT/TPR/G/278 • Indonesia 
 
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1  INTRODUCTION 
1.1.  Indonesia is Asia’s fifth largest economy, the fourth most populous nation in the world and 
endowed with abundant natural resources. Strong  macroeconomic performance can be attributed 
to successful policy management and to the substantial reforms undertaken since the Asian crisis 
that strengthened the macroeconomic framework and liberalized the international trade regime. 
Considerable investments in network industries have boosted potential output, and further improvements are expected with the gradual implementation of the Master Plan for the 
Acceleration and Expansion of Indonesia’s Economic Growth. 
1.2.  Indonesian economy was continuously improving during 2010, bolstered by solid domestic 
demand and favourable external condition. The global economic recovery that began gaining traction during the first half of 2009 progressed further during 2010, underpinned by vigorous 
growth in emerging market nations. This upward  trend was accompanied by sustained increases in 
global commodity prices that have increased inflationary pressure, particularly in emerging market economies. In advanced economies, however, economic growth is relatively limited, accompanied 
by low inflationary pressure. This condition prompted emerging markets to start monetary 
tightening by implementing macro prudential policies and raising policy rates. In contrast, advanced countries have generally opted for maintaining a loose monetary stance by holding 
interest rates down, while some countries have even injected their economies with substantial 
amount of liquidity (quantitative easing). The di fference in the crisis responses between emerging 
market countries and the developed world spurre d massive capital inflows to emerging market 
economies, including Indonesia. 
1.3.  Indonesia also plays a much bigger role in  the global economy. Currently, it ranks 17th as 
the world’s largest economy. Indonesia will continue its significant involvement in many regional and global forums, e.g. WTO, ASEAN, APEC, G-20 and other bilateral activities. In 2013, Indonesia 
will be a host country for APEC Summit Meeting (October 2013) and WTO Ministerial Conference IX 
(December 2013) in Bali. Indonesia had successfully  overcome the 2008’s global economic crisis, 
which was highly praised by international economic agencies. While other countries experienced 
their debt rating being down-graded, Indonesi a on the contrary improved its debt rating 
significantly. 
2  ECONOMIC AND TRADE ENVIRONMENT 2.1  Main economic and policy development 
2.1.  The near-term global economic outlook is fragile and emerging economies, including 
Indonesia, again face the risk of a potential crisis that is not of their making. The growth outlook for Indonesia’s major trading partners (MTP), at 3.3% in 2012, remains relatively weak as 
increased Euro zone uncertainty adds to the ongo ing drags on global growth from budget cutting 
and deleveraging in developed economies, and capacity constraints in some developing economies. Recent international financial market turbulence looks set to continue in the near-term 
and, while this baseline scenario remains the mo st likely outcome, capital flows to emerging 
economies and sentiment are likely to remain volatile. Further enhancing crisis preparedness is therefore a policy priority for economies such as Indonesia but, at the same time, it is important to push ahead with reforms and investments which can support medium-term growth in what is likely 
to be a weaker global economic environment. 
2.2.  In 2011, the Indonesian economy showed ex cellent performance in the midst of the global 
economic slowdown, Europe debt crisis, climate change and natural disasters on a global level, as 
well as political tensions in the Middle East and North Africa. Indonesia's economy grew by 6.5 in 
2011, the highest in the period 2007-2011, and it wa s the highest growth rate since the economic 
crisis in 1997/1998. Economic growth in 2011 was ma inly supported by domestic resiliency in the 
form of increased investment, a stable purchasing  power, and the growth of exports of goods and 
services. From the expenditure side, economic gr owth in 2011 was primarily driven by investment 
in the form of Gross Fixed Capital Formation as well as exports of goods and services that grew respectively by 8.8% and 13.6%. Purchasing power was maintained, people’s consumption and 
government consumption grew respectively by 4. 7 and 3.2%. From the field of business side, the 
economic growth of 6.5% was mainly sourced from non-oil manufacturing sector, agriculture and WT/TPR/G/278 • Indonesia 
 
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  trade, hotels, and restaurants as well as transport and communication sectors grew respectively 
by 6.8%, 3%, 9.2% and 10.7%.  
2.3.  The improved performance of non-oil industri es became the driver of economic growth from 
the production side. In the whole year of 2011,  non-oil manufacturing grew by 6.8% and was 
primarily driven by base metals, iron and steel ; food, beverages, and tobacco; textiles, leather 
goods, and footwear; cement and mining, as well  as transportation vehicle, machinery, and 
equipment. The improvement of this non-oil manuf acturing industry will generate optimism of 
resurgent of industrial sector as a driver of the economy, after non-oil manufacturing industry 
slowdown since 2006.  
2.4.  The momentum of economic growth and stabil ity also boost economic growth quality. This is 
reflected by reduced levels of poverty and unem ployment. In 2011, the number of poor people 
decreased to 30.0 million people (12.5 %) or decreased from 37.2 million people in 2007 (16.6%). 
The number of unemployed has fallen to 7.7 million  people, or decreased from 10.0 million people 
in 2007. Human resource development achievement was also improved, indicated by the human 
development index (HDI) and various human resources indicators in the Millennium Development 
Goals (MDGs). HDI increased by 0.572 to 0.617. In  2012, strived a better quality of growth, with 
the implementation of various programs for the poor with a wider distribution. 
2.5.  Indonesia’s GDP growth remained a solid 6.3% year-on-years in the three quarters of 2012, 
down slightly from an average of 6.5% in 2011. Seasonally-adjusted growth overall came down off 
the highs of the final quarter of 2011 but consum ption growth held up well. The Government of 
Indonesia targeted that the economic growth 2012 is 6.5% in 2012. This will be supported by a 
maintained economic stability and strengthened domestic economy. From the expenditure side, 
investment, private consumption, and government expenditure will be a key driver of economic growth and estimated to grow by 10.9%; 4.9%; and 6.8% respectively. Exports of goods and 
services will grow at the lower rate, due to the global economic slowdown. From the production 
side, economic growth will be driven by manufacturi ng industry targeted at the rate of 6.1% along 
with the improvement of investment climate; wher eas agricultural sector grew 3.5%, mining and 
quarrying sector grew 2%, and tertiary sectors, i.e. electricity, gas and water supply; construction; 
trade, hotels and restaurants; transport and communications; finance, real estate, business services; and services increased respectively by 6.2%; 7%; 8.9%; 11.2%; 6.3%; and 6.2%. 
2.6.  Indonesia has stipulated the acceleration and expansion of economic development to support 
its transformation into a developed country by 2025. MP3EI embodies the transformation of the 
national economy with the orientation based on strong economic growth, inclusive, and sustainable quality. MP3EI Implementation is expe cted to become an engine of economic growth 
and job creation, as well as encourage equitable development in the region throughout the 
country. Within the next 15 years, it will develop industrial clusters, both to improve the linkages between upstream and downstream industries, and between growth centres with the buffer zones. 
Leading industries in various regions will be built to strengthen the domestic economy structure. In 
In order to realize the vision as a developed and prosperous nation by 2025, Indonesia is determined to accelerate the economic transf ormation. Therefore, Indonesia prepared The 
Masterplan for Acceleration and Expansion of Indonesia Economic Development (MP3EI) that put 
forward not business as usual approach, involving all stakeholders and focused on tangible and 
measurable priorities. However, MP3EI is an integral part of the existing national development planning system. 
2.7.  The Masterplan for the Acceleration and Expansion of Economic Development of Indonesia 
(MP3EI) provides the building blocks to transform Indonesia into one of the 10 major economies in 
the world by 2025. To achieve this, real econom ic growth must reach 7-9% per year, on an 
ongoing basis. WT/TPR/G/278 • Indonesia 
 
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Table 2.1 Macro-economic indicators 
Source: BPS Statistic Indonesia and National Planning Agency. 
2.8.  The development of MP3EI can be accomplished if the government and business sector 
embrace a new way of thinking in doing business. Everyone must take a collective approach 
toward improving and utilizing the country’s resour ces, strategic position, and manpower, in order 
to propel its citizens forward. The stakeholders , the central government, local governments, state 
owned enterprises, and private sector must work to gether productively. The private sector will be 
given a major and important role in economic development, particularly in investments to increase 
job opportunities. The government will not only be a regulator, it will also be a facilitator, and 
catalyst to support this growth. With regard to regulations, the government will amend or remove 
(debottlenecking) regulations that inhibit the implementation of investments. As a facilitator and 
catalyst, the government will provide incentives, both fiscal and non fiscal. 
2.9.  Implementation of MP3EI will include 8 main  programs which consist of 22 (twenty two) main 
economic activities. The implementation strate gy of MP3EI will integrate 3 main elements: 
 developing the regional economic potential in 6 (six) Indonesia Economic Corridors: Sumatra 
Economic Corridor, Java Economic Corridor, Kalimantan Economic Corridor, Sulawesi Economic Corridor, Bali – Nusa Tenggara Econ omic Corridor, and Papua – Kepulauan Maluku 
Economic Corridor; 
 strengthening national connectivity locally and internationally; and 
 strengthening human resource capacity and national science & technology to support the 
development of main programs in every economic corridor.   2007 2008 2009 2010  2011  2012 2013 
Target Target 
ECONOMIC GROWTH (%) 6.3 6.0 4.6 6.2 6.5 6.5 6.8-7.2 
Expenditure side        
 Private consumption 5.0 5.3 4.9 4.7 4.7 4.9 4.8-5.2 
 Government consumption 3.9 10.4 15.7 0.3 3.2 6.8 6.7-7.1 
 Gross fixed capital formation 9.3 11.9 3.3 8.5 8.8 10.9 11.9-12.3 
 Export of goods and services  8.5 9.5 -9.7 15.3 13.6 9.9 11.7-12.1 
 Import of goods and services 9.1 10.0 -15.0 17.3 13.3 11.4 13.5-13.9 
Production side        
 Agriculture 3.5 4.8 4.0 3 3 3.5 3.7-4.1 
 Mining 1.9 0.7 4.5 3.6 1.4 2 2.8-3.2 
 Manufacturing industry 4.7 3.7 2.2 4.7 6.2 6.1 6.5-6.9 
Oil and gas manufacturing -0.1 -0.3 -1.5 0.6 -0.9   
Non-oil and gas manufacturing 5.2 4.0 2.6 5.1 6.8   
 Electricity, gas,  and water supply 10.3 10.9 14.3 5.3 4.8 6.2 6.6-7.0 
 Construction 8.5 7.6 7.1 7 6.7 7 7.5-7.9 
 Trade, hotel, and restaurants 8.9 6.9 1.3 8.7 9.2 8.9 8.9-9.3 
 Transport and communication 14.0 16.6 15.8 13.4 10.7 11.2 12.1-12.5 
 Finance, real estate, business services 8.0 8.2 5.2 5.7 6.8 6.3 6.1-6.5 
 Services 6.4 6.2 6.4 6 6.7 6.2 6.0-6.4 
INFLATION RATE (%)    7 3.8 6.8 4.5-5.5 
OPEN UNEMPLOYMENT (%)    7.1 6.6 6.4 - 6.6 6.0-6.4 
POVERTY (%) 16.58 15.42 14.15 13.3 12.5 10.5-11.5 9.5-10.5 WT/TPR/G/278 • Indonesia 
 
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  2.10.  Business enterprises (private sector compan ies, state and regional owned companies) have 
an important role in economic development, particularly in generating investments and the creation of employment opportunities. The government, on the other hand, is responsible for creating conducive macro-economic conditions for the acceleration and expansion of investments. 
Therefore, national development policies must be  supported by the full commitments of both the 
government and business enterprises, in the form of: 
 encouraging businesses to support and increase investment and to boost economic growth 
and the creation of employment opportunities; 
 business enterprises must undertake innovative measures to develop technology and 
production methods in order to triumph in today`s global competitiveness; 
 the government will provide equal and fair opportunities for all businesses; 
 the government is supported by a bureaucracy that serves the needs of businesses; 
 the government is creating conducive macro-economic, political, legal and social 
environment to support business activities; and 
 the government provides social basic protection and services. 
2.11.  Taking into account external and internal environment, the economy is targeted to grow at 
6.8% in 2013; with the open unemployment drops to the range of 6% to 6.4% of the workforce 
and the number of poor people decreases to the range of 9.5% to 10.5% in 2013. 
2.2  Financial sector 2.12.  Budget policy must begin with the structuring of a credible and sustainable State Budget 
(APBN), with provisions to accelerate economic gr owth in order to create equitable and sustainable 
development. Essential elements include: 
 prioritizing the allocation of the State Budget for the development of infrastructure, improve 
basic public services and provide social security for the poor; 
 allocating government loans to finance investment activities instead of to finance routine 
expenditure. The rate of return on government investment should be higher than the cost of debt; 
 infrastructure will be developed in partnership with the private sector; 
 subsidy will be used as an instrument of social protection by switching the subsidy objective 
from subsidy for goods into direct subsidy for the poor. To facilitate the implementation of direct subsidy, the proposed national “Sin gle Identity Number“ must be implemented 
immediately; 
 the revenues and royalties from non-renewable natural resources extraction should not be 
treated and expanded as current revenue but rath er some portion to be kept for the benefit 
of future generations; 
 the return from processing renewable natural resources will be invested to enhance the 
quality of human capital and technology; 
 expanding access to education and basic health service facilities; and 
 improve quality of public services for the society and businesses. 
2.13.  Taxes and import duties are one of the instruments of economic policy to support the 
acceleration and expansion of national economic  development. Therefore reform is considered 
necessary, and can be carried out using the following tax approach: WT/TPR/G/278 • Indonesia 
 
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 tax rates and import duties should be adjusted due to the economic cycle; 
 increase the number of actual Tax Payers; 
 coordination amongst authorized institutions must be carried out to ensure that all citizens 
who gain income above non-taxable income level pays tax according to applicable law; 
 taxes levied on the tax object in Indonesia and not levied on the tax subject in Indonesia 
(change in concept from National into Domestic or from the concept of GNP to GDP); 
 taxation aimed at the final consumer, repl acing the system of value added tax (VAT); 
 all taxation schemes are evaluated so that there is no ambiguity in interpretation leading to 
clarity on what is taxable and not taxable; 
 in order to improve competitiveness and efforts to reduce tax evasion, efforts should be 
made to benchmark the tax rate with neighbouring countries; 
 avoidance of double taxation; 
 to avoid double counting all tax exemption or tax relief will no longer be regarded as a tax 
levied to the state. 
2.14.  Monetary and financial stability in Indonesia continues to be maintained in the midst of 
continued impact of the global crisis. Through an effective implementation monetary and macro prudential policy mix, Indonesia is able mitigate  credit risks and prevent capital outflows without 
having to raise interest rates. In the last ei ght years, the Indonesian economy grew around 
6.1-6.2% per year, one of the highest in the world. 
2.15.  While growth can be maintained at a high level, the inflation rate in recent years has in fact 
shown a downward trend towards the medium-term target of 4%. Likewise, the rupiah in the past 
three years have also been moving in line with  the fundamental conditions. The achievement of 
low inflation and stable exchange rate has created a conductive climate which supports the resilience of the banking industry. Such resilience in turn serves as a shock absorber for the 
economy. This is supported by adequate capital strength to absorb various risks, as well as 
effective regulation and supervision. 
2.16.  With improved resiliency, the banking indust ry's intermediation role is on the right track. 
This is reflected in the relatively strong growth of productive loans, while keeping the 
non-performing at a low level. These positive developments provide greater room for greater economic expansion in Indonesia. 
2.17.  Macro prudential policy is needed to br idge the gap between macroeconomic policy with 
regulations towards institutions and financial markets which are micro prudential policy. In 
November 2011, Indonesia established the Financial Services Authority (Otoritas Jasa Keuangan, OJK) through Law No. 21 of 2011. The establishment of an independent body overseeing the 
financial sector had been mandated in a 2004 amendment to the law on Indonesia’s central bank. 
Thus, the FSA will be intended to become the regulatory and supervisory agency for all financial services institutions, which include banks, securities companies, insurance companies, pension 
funds, and multi-finance companies. Meanwhile, Ba nk Indonesia will focus to conduct monetary 
and macro prudential policy. To smoothen the process of the OJK in assuming its new roles, transition stages are established with the purpose of transferring functions, duties and authorities 
in regulation and supervision of the financial service sector to OJK. 
2.3  Trade and investment 
2.18.  Indonesia’s economic policies are on a firm footing. So are its measures to attract foreign 
investment. Indonesia was released Investment Law No. 25 year 2007. This updated investment 
law redefines “capital investment” as all investments, whether by domestic or foreign investors, for 
the first time offering equal treatment to all inve stors. There is no longer a limit of 30 years on WT/TPR/G/278 • Indonesia 
 
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  foreign investment permits, and gone is the provision in Law No. 1/1967 for there to be 
divestment. Additionally, the new law allows for the unimpeded reparation of capital.  
2.19.  Indonesia Investment Coordinating Board (BKPM) has launched a one-door integrated 
service (PTSP) and an electronic automation platform for investment licenses and non-licensing 
services (NSWi) to not only reduce the number of procedures and amount of documentation 
needed to invest in Indonesia, but also to bypass the need to physically come to our offices to apply for certain services. The new system has re vamped internal processes and rectified human 
resource constraints to increase the speed and improve the quality of investor services. The 
system was first launched in January 2010 in the Free Trade Zone and Free Port of Batam.  
2.20.  Based on Presidential Decree No. 27/2009 and as part of its 100-day program, BKPM is 
implementing a one-stop-service system (PTSP), to  cut bureaucratic red tape and allow investors 
to process business licenses faster. Its goal is to streamline and consolidate the number of steps 
and places an investor must go for business permit issuances. The program requires the consent of some 16 ministries relevant to the investment approval process, to delegate its authority to 
BKPM in granting licensing and non-licensing services. As of 5 February 2009, all relevant 
ministries have signed off on the various decrees necessary, and BKPM is moving forward with the implementation process at both the central and regional level. 
2.21.  In order to facilitate PTSP even further, the National Single Window for Investment (NSWi) 
was created. NSWi is an electronic platform for investments that enables investors to apply for license and non-license services online. The ability to fully automate the investment license process would significantly enhance the efficiency of licensing services. The system was first 
launched in January 2010 in the Free Trade Zone and Free Port of Batam. 
2.22.  All the improvements that have been and continue to be applied have placed Indonesia as 
#1 country for entrepreneurship in the recent 2011 BBC survey. It has also managed to jump 
10 places to 44th from a total of 139 ranked countries in the World Economic Forum’s Global 
Competitiveness Report in 2011. Moreover, Indonesia has also been listed as one of the top 10 most attractive destinations for FDI in UNCTAD’s World Investment Prospects Survey in 2010. 
2.4  Effort for green growth 
2.23.  Indonesia is in the process of conducting te chnical is in the process of conducting technical 
studies needed to inform The Low Carbon Development Strategy (Emission Reduction Opportunities and Policies: Manufacturing Sector). The Low Carbon study/development options will 
prove that sound environmental management, redu ction of emissions, economic efficiency and 
growth are compatible goals, important to the sustainability of Indonesia’s development path. 
2.24.  Indonesia is also seeking to reform econom ic and fiscal policy is also seeking to reform 
economic and fiscal policy to meet green economy objective. A range of government-led studies is 
underway in Indonesia that looks at options to reduce emissions: 
 provide domestic enabling conditions supported by innovative financing mechanisms as well 
as policy reforms (fiscal/pricing policy, standards, education and training); 
 create public and private partnership and including green investment funding mechanisms; 
 green investment at the core of the stimulus packages include green investment in regular 
government budget investment in regular government budget; and 
 provide global enabling conditions (trade, IPRs, ODA, TT and environmental agreements). WT/TPR/G/278 • Indonesia 
 
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3  INTERNATIONAL TRADE RELATIONS 
3.1  Multilateral trade cooperation 3.1.1  Indonesia in Doha Development Agenda (DDA) 3.1.  Indonesia struggles to improve market acce ss in the multilateral forum through cooperation 
and international negotiations in the WTO forum and the Non-WTO. Indonesia makes the most of 
the existence of the multilateral trading system within the framework of the WTO since 1995. As 
an advance developing country, Indonesia has been enjoying many benefits for its membership on 
WTO. 
3.2.  Since the DDA was launched in 2001, developing countries including Indonesia are more 
active and play a substantial role in the multilateral negotiation round. The multilateral trading system is the most fair and beneficial trading system to the developing countries. This has made 
the first priority for Indonesia in the area of international trade cooperation. 
3.3.  The General Council, on 11 December 2012, agreed that the 9th WTO Ministerial Conference 
in Bali, Indonesia will take place on 3-6 Decemb er 2013. Bali is expected to be targeted for 
completion of negotiation DDA. 
3.4.  Trade Facilitation Issues expected to be the "early harvest" with an intensive approach to 
other developing countries that have a position in line with Indonesia such as India, Brazil, 
Singapore and South Korea as well as the LDC Package and the balancing negotiation between 
Agriculture issue and non-Agriculture Market Access (NAMA). 
3.1.2  Indonesia active participation in DDA issues negotiation 3.1.2.1  Agriculture  
3.5.  Indonesia shares actively in Agriculture negotiation and joins in Chairns Group, G20 and G33. 
Together with other countries that are Members of  G33, Indonesia proposed Special Product (SP) 
and Special Safeguard Measures (SSM). The proposal was based on the interest which are not only 
the interests of Indonesia but also the interest of other countries. The interests are poverty 
reduction, food security, rural development and economic growth. 
3.1.2.2  Non Agriculture Market Access (NAMA) 
3.6.  Indonesia's position in NAMA negotiations is  to strive for the opening of market access for 
industrial products which not cause a negative impact in terms of offensive and defensive interests. Indonesia also has shown pro-active role  negotiation, especially in the discussion of the 
issue of tariff cuts. This role is acknowledge d by members where Indonesia actively seeks the 
agreement on tariff reduction formula.  
3.7.  Indonesia is considered by members as one of the proponents of targets that may facilitate 
the achievement of critical mass in sectorial initiatives. Despite seeing the sectorial initiative is 
non-mandatory, Indonesia positively respond to the request states proponent to undertake the 
discussion of specific sectors. In addition, In donesia promotes the transparency in technical 
regulations and encourages members to reduce non-tariff barriers. 
3.1.2.3  Services 
3.8.  Indonesia feels that the Doha Round should further the important gains achieved with the 
conclusion of the  of the GATS and that the Doha Mandate on progressive liberalization as established on 15 April 2005 and at the 2008 Signa lling Conference should be the focus of 
Members' efforts in the on-going services negotiations. In this context Indonesia feels that 
developed countries need to further open markets for services exports of developing countries, while the process of opening markets in developing countries needs to consider the level of 
development and readiness for liberalization in these countries. In the request-offer process, 
Indonesia has yet to officially file a request to any of its negotiating partners. However, Indonesia feels it has an obligation to try and obtain from its negotiating partners commitments that meet WT/TPR/G/278 • Indonesia 
 
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  the demands of developing counties in the contex t of modes of supply of export interest to 
developing countries, particularly Mode 4. 
3.1.2.4  Trade facilitation 3.9.  Indonesia has been actively engaged and participated in Negotiation Group on Trade 
Facilitation (NGTF) in support of the conclusion of  this issue. In general, Draft Proposed Text of 
NGTF was adopted from Revised Kyoto Convention of World Customs Organization (WCO) in which Indonesia has already implemented through Indonesia's National Law. Indonesia is fully concern 
on Special & Differential Treatment (S&DT) for Developing and Least Developing Countries (LDCs), 
in particular with the issues of capacity building, technical assistance and transitional period to implement this agreement. 
3.10.  Indonesia is of the view that Trade Facili tation is one of important issues that could be 
considered as deliverables outcome in the IX WTO Ministerial Conference Bali next December. 
Indonesia asks Members to enhance the negotiation process and willingness to conclude the issue.   
3.1.2.5  Trade and environment 
3.11.  Ministry of Environmental cooperates with  Ministry of finance have “the exception of 
customs duty for equipment and materials that is used to prevent pollution” program through Finance Ministerial Decree number 101/PMK 04/2007. A few equipments that get the exception of 
import duty, such as: aerator, belt press, ch emical pump, pH control, decanter, air blower, 
biological, and screen. Those are categorized as a liquid pollutant control. Other equipments are: electrostatic precipitator, continuous electromagnetic. Those are categorized as air pollutants control. This mechanism is imposed on MFN basis.  
3.1.2.6  Aid for trade 
3.12.  Indonesia is fully supporting LDCs to get aid for trade to encourage their integration into the 
world trading system and to minimize constraint on international trade. As a middle income 
country, Indonesia participates in aid for trade both as recipient and donor. Indonesia has already 
given aid for trade to a few of LDCs through South-South Cooperation mechanism in terms of technical assistance. 
3.1.2.7  Trade-related Aspect of In tellectual Property Rights (TRIPS) 
3.13.  Indonesia is a co-sponsor of document TN/C/W/52 which proposes draft modalities for 
TRIPS negotiation. Indonesia believes that TRIPS- CBD issue, together with GI-Register and GI-
Extension, should be discussed in parallel as part of single undertaking. 
3.14.  Indonesia supports the amendment of Arti cle 29 of the TRIPS Agreement to incorporate 
mandatory disclosure requirement in patent application. Disclosure requirement will prevent 
misappropriation of Genetic Resources and associated Traditional Knowledge and will ensure Prior 
Informed Consent and Access Benefit Sharing. 
3.2  Regional and bilateral cooperation  3.2.1  Regional cooperation 
3.15.  Indonesia increases its contributiion on th e regional cooperation. Not only does Indonesia 
give attention to the development of ASEAN, but Indonesia also pays attention to the East Asia Summit and the Group of 20 (G20). 
3.16.  ASEAN signed Free Trade Agreement (FTA) with 3 (three) trading partner countries.  ASEAN 
– Japan FTA was signed in 2008, ASEAN – Australia & New Zealand FTA was signed in 2009 and 
ASEAN – India was signed in 2009. 
3.17.  On the occasion of the 21st ASEAN Summit and Related Summits, the Heads of 
State/Government of the Member States of ASEAN and ASEAN’s free trade agreement (FTA) WT/TPR/G/278 • Indonesia 
 
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partners – Australia, China, India, Japan, Korea and New Zealand signed a joint declaration on the 
launch of Negotiations for Regional Comprehensive Economic Partnership (RCEP). 
3.18.  The objective of launching RCEP negotiat ions is to achieve a modern, comprehensive, 
high-quality and mutually beneficial economic  partnership agreement among the ASEAN Member 
States and ASEAN’s FTA Partners. RCEP will cover trade in goods, trade in services, investment, 
economic and technical cooperation, intellectual property, competition, dispute settlement and other issues. Furthermore, ASEAN is still in the process of negotiation with United States of 
America under ASEAN-US Trade and Investment Framework Agreement (TIFA). Indonesia is also 
active in negotiation under Asia-European Meeting (ASEM). 
3.19.  Indonesia is also active to participate negotiations in Asia-Pacific Economic Cooperation 
(APEC), D-8, Organization of the Islamic Cooperation (OIC) and International Commodity 
Organization such as Association of Natural Rubber Producing Countries (ANRPC), Asian and Pacific 
Coconut Community (APCC), International Pepper  Community (IPC), International Tripartite 
Rubber Council (ITRC) International Coffee Or ganization (ICO), and International Cocoa 
Organization (ICCO). 
3.2.2  Bilateral cooperation  3.20.  Indonesia has implemented a bilateral ag reement with Japan (IJ-EPA) for an economic 
partnership that was signed on August 2007. In a ddition, Indonesia is also  still in process of 
negotiation of Bilateral Economic Cooperation with several countries such as Iceland, Liechtenstein, Switzerland and Norway under Indonesia-EFTA Comprehensive Economic Partnership Agreement (IE-CEPA); India; Pakistan; and Iran. 
3.21.  Indonesia also establishes joint group discussion for Bilateral Economic Cooperation with 
several countries such as Chile, Turkey, Tunisi a, Egypt, United States, European Community, 
Australia and Republic of Korea. 
4  TRADE AND RELATED POLICIES DEVELOPMENT 
4.1  Trade development and policy Export 
4.1.  Pressure on Indonesia's exports began in 2009. In the period of January-September 2009, oil 
and gas exports declined 51% due to declining oi l and gas prices in the international market. 
Meanwhile, non-oil exports decreased by 18.3% in January-September of 2009 because of declining world demand as a result of the global economic crisis. Heaviest pressure occurs in the 
export of industrial products reached 25.5% dec line compared with the value of exports in the 
same period in 2008 due to the decrease in, both price and volume non-oil export. 
4.2.  In line with the recovery of global econ omic contraction, export of goods in 2010 has 
increased sharply. In 2010, exports of goods re corded US$157.8 billion, or growth of 35% 
compared with 2009, both in the export of oil and gas and non-oil exports. Oil and gas exports 
increase by 47.4% compared with US$19.0 billion  in 2009. Meanwhile, total non-oil exports in 
2010 expanded to US$129.7 billion, or 33.1% growth compared with the performance in 2009. 
4.3.  During the last ten years, Indonesia’s export has continued increase, except for 2009. Strong 
growth of export was stimulated by strong demand from new emerging Asia countries such as China and India, as well as substantial demand from Japan and United States and ASEAN 
countries. For the same period, imports grew by 19.6% per year and reached its peaks in 2008 
(73.5%). The highest import growth in 2008 is explained primarily by strong demand for imports of raw materials and capital goods used in production for exports and the domestic market. Also, 
as the changed on the import recorded system which included the bounded zone. 
4.4.  Trade development focuses on 3 (three) goals which are Increasing export of non-oil 
products; Strengthening domestic market; and Managing the availability of main/basic products 
and strengthening national distribution channel.  WT/TPR/G/278 • Indonesia 
 
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  4.5.  To achieve that goals, Indonesia have se veral strategies such as Management and other 
related support; Improvement of tools and infrastructure of human resources; Monitoring and improvement of human resources accountability; R & D on trade issues and trade information system; Development of domestic trade and  trade defence leading to best practice management 
on national distribution, free flow of goods and services, certainty on business and competitiveness 
of domestic product; Development of foreign trade leading to competitiveness of non-oil and gas export and market diversification, and well management both export and import; Development of 
international trade through improvement on trad e diplomacy both goods and services and trade 
defence; and Export development through mark et diversification of  exported products. 
Table 4.1 Performance of Indonesian exports 
Value of Exports 
(USD thousands) 2009 2010 2011 2012 
Jan-Nov 
Total Export 116,500.0 157,779.1 203,616.7 174,763.1 
Oil and gas 19,018.3 28,039.6 41,593.2 34,003.0 
Non-oil and Gas 97,491.7 129,739.5 162,023.5 140,760.1 
Agriculture 4,352.7 5,001.9 5,169.1 5,161.0 
      Manufacturing 73,435.9 98,015.1 122,189.2 107,048.1 
      Mining and other 19,703.1 26,722.5 34,665.2 28,551.0 
Growth of exports (%)     
Total export -14.98 35.38 29.05 -6.25 
Oil and gas -34.71 47.50 48.34 -10.50 
Non-oil and gas -9.66 33.02 24.88 -5.17 
Agriculture -4.83 14.90 3.34 10.05 
Manufacturing -16.93 33.47 24.66 -4.64 
Mining and other 31.93 35.34 29.72 -9.29 
Source: BPS-Statistic Indonesia. 
4.2  Investment development 4.6.  There are several policies to support the improving investment in Indonesia 
(competitiveness) which are fiscal incentives such as Income tax reduction for investment in 
particular sectors and/or particular region (tax  allowances),Tax Holiday and Tariff redemption in 
importing machine, raw material for particular industries for new investment and expansion; and non fiscal incentives such as integrated one stop services in investment sector (PTSP) and 
electronic investment licensing and information service system/SPIPISE). 
4.7.  Negative Investment List (NIL) enacted based on the Presidential Regulation No. 36 year 
2010 regarding the list of business fields closed to investment and business fields open, with 
conditions, to investment. 
4.8.  The NIL improves the clarity of regulations and business field related to investment, increase 
the attractiveness of investment in Indonesia, and new attachment format so that will be more easily known and understood by investors/stakeholders. 
4.9.  63. The realization of domestic and fore ign investment in non-oil and gas sectors has 
increased during the last five years. The domestic investment increased by Rp 34.9 trillion in 2007 to Rp 76 trillion in 2011, rose 117.8%. This also applies to the foreign investment which rose 
76.5% (Chart 4.1).  
4.10.  Policies such as clear regulation for domestic and foreign investment, streamlining the 
business process in Indonesia, and land law have been launched to improve investment climate 
and to provide certainty for business activities in Indonesia. Although investment competitiveness 
in Indonesia is not really as good as the other ASEAN member countries, the investment in Indonesia has been growing continuously. That of global financial crisis in 2012, Indonesia’s investment is able to maintain its performance. The realization of domestic and foreign WT/TPR/G/278 • Indonesia 
 
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investments increased respectively by 26.4% and 27.2% in the period of January-September 2012 
compared to the same period in 2011.  
Chart 4.1 Realization of domestic and fore ign investment in non-oil and gas sectors 
0510152025
01020304050607080
2007 2008 2009 2010 2011 Jan-Sept
2011Jan-Sept
2012Rp trillion
Domestic investment
Foreign investmentUS$ billion26.4%
27.2%
 
Source: Board of Investment Coordination. 
4.3  Sectoral policies 
4.3.1  Agriculture 
4.11.  Strategic agricultural development goals in 2012 are achieving sustainable self-sufficiency 
and self-sufficiency, rising food diversification, increasing added value, competitiveness and 
exports, increasing farmers welfare. 
4.12.  Prospective commodities Indonesia in the in ternational market are palm oil, rubber, cocoa, 
coconut, coffee, mango, mangos teens, bark, ornamental plants and medicinal plant. 
4.13.  To improve the quality and competitivene ss (value added to support competitiveness) of 
Agricultural Product in the International market, several things that have been and are being 
carried out are promotion and advocacy in various countries, improved handling level on farm and off farm, implementation of Good Agricultural Practices (GAP), Good Handling Practices (GHP), 
Standard Operating Procedures (SOP); and certification. 
4.3.2  Fisheries 4.14.  The legal basis for Indonesia Fisheries regulated in Fisheries Act No. 45 Year 2009. Related 
to the issue of illegal, unreported, and unregulated fishing (IUU fishing). Indonesia has strong 
commitment to prevent, reduce and combat activities IUU fishing.  
4.15.  Indonesia has the term of requirement trade to Europe Union namely Certification Catch 
Fish that stipulated in the Marine and Fisheries Minister Decree No. 13 year 2012; Indonesia also 
has endorsed a Regional Plan of Action (RPOA) in  order to pursue responsible fisheries, including 
combat against IUU Fishing. 
4.16.  For investment in the fishing industry, stipulated in the joint investment policy, Marine and 
Fisheries Minister Decree No. 49 year 2011. 
4.3.3  Forestry 4.17.  Indonesia has more than 17,000 islands, with 181,157 million ha land area, consist of 
130.68 million ha forestland. The function of forest area is as conservation forest (26.8 million ha), 
protection forest (28.8 million ha), production forest (32.6 million ha), limited production forest 
(24.4 million ha) and convertible production forest (17.9 million ha). WT/TPR/G/278 • Indonesia 
 
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  4.18.  Indonesian Timber Legality Verificati on System (SVLK) is a licensing scheme that 
guarantees export timber in accordance with the laws of Indonesia's forests through government and legal definitions that have b een approved by various parties. Indo-TLAS consists of legality 
standards, criteria, verifiers, verification method s, and evaluation norms. Indo-TLAS designed to 
be a legality verification system that is reliable, efficient and fair as a contribution in the fight 
against illegal logging. TLAS/SVLK is a cornerstone for sustainable forest management accomplishment. This certificate is our national commitment to eradicate illegal logging and illegal 
trading. 
4.3.4  Manufacturing 4.19.  According to Indonesia Economic Development Acceleration and Expansion Master Plan 
2011-2025, and The legal basis of the industry in  Indonesia is Presidential Decree No. 28/2008 on 
National Industrial Policy (KIN) to accelerate the in dustrial sector in Indonesia, the policy called  
”Acceleration of Industrialization” e.g.: encouraging participation of entrepreneurs in building the infrastructure, accelerated  of government decision making processes, reorientation of exports 
policy of raw materials and energy sources; encourage an increasing of productivity and 
competitiveness and  promoting the integration of the domestic market in Indonesia. 
4.20.  The Indonesian industrial performance in  2011 was very encouraging. The non-oil industry 
growth in 2011 was 6.8% and higher than the ec onomic growth which was 6.5%. While, the non-
oil industry growth in 2010 was only 5.1%. For th e third quarter of 2012, the industrial growth 
increased by 7.27% compared to the third quarter of 2011 (y-o-y). 
4.21.  The growth was supported by all industrial  sectors. The highest growth of 9.1% was in 
fertilizer, chemical, and rubber product and followed  by food, beverage and tobacco industry which 
was 8.1%. Meanwhile, the lowest growth by -0 .86% was in wood and forest product. The 
Industrial growth in 2011 was beyond the target of Ministry of Industry Strategic Plan for 
2010-2014 which was 6.1%. In 2012, the non-oil indust ry growth is predicted to continue growing 
higher than the Strategic Plan's target, which around 6.85%.  
4.22.  Investment in the industrial sector (manufacturing sector) increased significantly from 2007 
to 2011. Domestic investment increased from IDR 26.289 billion (2007) to IDR 39.048 billion 
(2011) or increase by 48.53%, as well as in Foreign Direct Investment (FDI) amounted USD 4697 million (2007) increased by US D 6779.5 million (2011) or by 44.34%. 
5  FUTURE POLICIES DIRECTIONS 
5.1.  The main guideline of Indonesia trade development was stated in the long term national 
development program 2005-2025 and Indonesia efforts to increase exports through foreign trade policies in the next five years aimed at improving the competitiveness of non-oil exports product 
through market diversification and increasing dive rsity and quality of product. These policies are 
stipulated in the Indonesia’s Medium-Term Development Plan (Rencana Pembangunan Jangka Menengah/RPJPM). Therefore, the strategy to increase exports during the five year- development  
particularly to encourage increased non-oil exports, during the period 2010-2014 as follows:  
 increasing attempt to exports non-oil products that seize high value added, based on natural 
resources, and has a large market demand; therefore, export product development in the future will be emphasized on the plantation base product and its derivative, fishery products 
and its derivative, processed mining product, processed food/beverage, textiles and textile 
products, machinery and electrical equipment, chemicals and chemical products, and leather 
products and footwear;  
 encourage exports of creative products and serv ices that are mainly produced by small and 
medium enterprises (SMEs);  
 encourage efforts to diversify export market to reduce the level of dependency to a specific 
export market;  
 focused efforts to expand market access, promotion, and facilitation of non-oil exports 
facilitation in Africa and Asia region;  WT/TPR/G/278 • Indonesia 
 
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 encourage utilization of various trading schem es, and international trade cooperation with 
more beneficial to national interests;  
 encourage the development of trade activities in the border areas which can be used as a 
gate for economic activity and trade with neighbouring countries; as well as  
 institutional strengthening and financing for particular foreign trade that drives the 
effectiveness of non-oil export development.  
5.2.  Based on the strategy and direction of deve lopment policy, Indonesian priorities for foreign 
trade development are focused on the following areas: (i) increasing diversification Export Market; 
(ii) improving Product Quality and diversity of exports product; and (iii) Increasing Export Facilitation.  
5.3.  In addition, to accelerate the Indonesia Ec onomic Development, Indonesia has stipulated the 
Master plan Acceleration and Expansion of In donesia Economic Development (MP3IE) 2011-2025. 
The implementation of MP3EI is expected to fu lly support and complement existing development 
planning documents produced by the government, including Long Term National Development Plan 
(RPJPN) and Medium Term National Development Pl an (RPJMN). The implementation of MP3EI will 
be coordinated by a Committee chaired by th e President of Republic of Indonesia.  
5.4.  MP3EI the 2025’s vision is achieved by focu sing on 3 main goals: (1) Increase value adding 
and expanding value chain for industrial production  processes, and increase the efficiency of the 
distribution network. In addition increase the capa bility of the industry to access and utilize natural 
resources and human resources. These increases ca n be attained by the creation of economic 
activities within regions as well as among regional centres of economic growth, (2) Encourage 
efficiency in production and improve marketing ef forts to further integrate domestic markets in 
order to push for competitiveness and strengthen the national economy, (3) To push for the strengthening of the national innovation system in  the areas of production, process, and marketing 
with a focus on the overall strengthening of sustainable global competitiveness towards an 
innovation-driven economy. 
 
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