WORLD TRADE  
ORGANIZATION  WT/TPR/M/184 
12 September 2007 
 (07-3811) 
Trade Policy Review Body 
27 and 29 June 2007   
 
  
TRADE POLICY REVIEW 
 
INDONESIA 
 
Minutes of Meeting
 
 
Chairperson:  H.E. Mr. Vesa Himanen (Finland) 
  
  Page 
 
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3 
II. OPENING STATEMENT BY THE REPRESENTATIVE OF INDONESIA 4 
III. STATEMENT BY THE DISCUSSANT 7 
IV. STATEMENTS BY MEMBERS 9 V. REPLIES BY THE REPRESENTATI VE OF INDONESIA AND ADDITIONAL 
COMMENTS 20 
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 25 
 
     
 
    
 
    
 
  
Note:   Advance written questions by WTO Me mbers and the replies provided by Indonesia are 
reproduced in document WT/TPR/M/184/Ad d.1 and will be available online at 
http://www.wto.org/english/tr atop_e/tpr_e/tp_rep_e.htm.  WT/TPR/M/184 
 Page 3 
 
 
  I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 
1. The fifth Trade Policy Review of Indonesia was held on 27 and 29 June 2007.  The 
Chairperson (H.E. Mr. Vesa Himanen) welc omed the Indonesian delegation, led by 
Mr. Herry Soetanto (Director General for Interna tional Trade Cooperation, Ministry of Trade) and 
H.E. Mr. Gusmardi Bustami, and the discussant H.E. Dr. Mia Horn Af Rantzien (Sweden).  As usual, 
the discussant would speak in her personal capacity and not as a representative of her country.  In 
accordance with the established proce dures, the discussant had made available, in advance, outlines of 
the main issues she intended to raise (document WT/TPR/D/160). 
2. The Chairperson recalled the purpose of the Trad e Policy Reviews and the main elements of 
the procedures of the meeting.  The report by I ndonesia was contained in document WT/TPR/G/184 
and that of the WTO Secretariat in WT/TPR/S/184.   As indicated in WT/TPR/6/Rev.1, the Member 
under review should provide written answers, by the beginning of the review meeting, to questions 
submitted at least two weeks before the meeting.  Questions posed subsequently should be answered, 
to the extent possible, before the start of the second session of the meeting.  Questions left 
unanswered at the end of the second session should be  answered in writing no later than one month 
after the meeting.  Questions by the following de legations had been submitted in writing at least 
two weeks in advance of the meeting and had be en transmitted to the delegation of Indonesia:  
New Zealand;  Switzerland;  Colombia;  the Sepa rate Customs Territory of Taiwan, Penghu, Kinmen 
and Matsu (Chinese Taipei);  Japan;  the European  Communities;  Hong Kong, China;  Australia;  
Canada;  and Brazil.  Copies of these questions a nd of the answers provided by the delegation of 
Indonesia were available in the meeting room.  The Republic of Korea;  the United States;  Turkey;  
Pakistan;  Argentina;  and China had submitted writt en questions after the two-week deadline.  These 
had also been transmitted to the delegation of Indonesia and copies, along with the answers provided 
by the delegation of Indonesia, were available in the meeting room.  All advance questions, as well as 
the responses received from the delegation of Indo nesia, are reproduced in WT/TPR/M/184/Add.1. 
3. The Chairperson recognized that both reports noted that Indonesia's economic growth during 
the review period (2003-07) had averaged over 5%  annually while macroec onomic vulnerabilities had 
been declining.  Fiscal consolidation had been th e hallmark of economic policy with the narrowing of 
the fiscal deficit, the reduction in public debt, an d the improvement in the overall external position.  
Both reports underlined Indonesia's unilateral trade liberalization efforts incl uding the lowering of the 
applied MFN tariff rate to around 9% and the reduction in the number of tariff lines subject to import 
restrictions.  The reports also gave details of trade-related sectoral de velopments and reforms, 
particularly in agriculture, forestry and financial services. 
4. The Government was aiming to achieve annual ec onomic growth of betw een 6% and 7% over 
the short term, through implementation of a compre hensive reform agenda.  The report by Indonesia 
acknowledged that, to achieve this goal, a number of  challenges needed to be addressed.  The major 
internal challenges were in implementing its refo rm programme – including tax and labour market 
reform – to bring much needed improvements in  the areas of health and social programmes, 
education, and physical infrastructure and to deliv er those improvements across its diverse regions.  
However, as the Secretariat report noted, the tax to GDP ratio of 12% might be insufficient to meet all 
of Indonesia's developmental and social needs.  Bu t the Secretariat report did go on to say that if 
implementation of the reform agenda continued in a timely manner, some of the main obstacles to 
private investment and labour market flexibility could be removed, thus contributing to an 
acceleration in growth and helping to reverse the rising trend in unemployment. 
5. Externally, the Government report pointed out that the constraints facing Indonesia included 
improved and secure access to foreign markets an d increased competition, issues that were best 
addressed in the multilateral framework of the WTO.   The Chairperson agreed wholeheartedly and 
added that the multilateral system could also be used to further lock in any unilateral reforms, thereby 
facilitating inflows of foreign direct investment. WT/TPR/M/184 
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  II. OPENING STATEMENT BY THE RE PRESENTATIVE OF INDONESIA 
6. The representative of Indonesia
 said his statement would consis t of five points:  an overview 
of the Indonesian economy;  political and institu tional changes;  trade and sectoral policies;  
international trade relations;  and the prospects and challenges ahead. 
7. The Indonesian economy had undergone very considerable changes over the last ten years, 
after the Asian financial crisis, which had had a particularly severe impact in the country.  The 
reforms had affected the political, economic and in stitutional environment – a process that had been 
complex in a country of some 225 million people, with  some 300 regional dialects, spread over nearly 
2 million square kilometers across an archipelago of thousands of islands.  Th e reforms had also taken 
place against a backdrop of a series of natural disast ers of unparalleled magnitude.  Yet, despite these 
problems, the country had been able to move  forward with its overall Agenda for National 
Development and had started to see some positive results.  Nevertheless, there were important 
challenges ahead, which the Government of Indonesia was facing up to meet. 
8. As a result of the Government's wide-rangi ng reforms and specific economic measures, and 
an improved external environment, Indonesia had achieved 5.5% overall economic growth in 2006, 
while inflation had fallen to 6.6%.  Per capita  national income had reached around US$1,600.  
Economic growth was expected to reach 6.3% and 6.8% in 2007 and 2008, respectively.  Non-oil and 
gas exports had grown at nearly 20% in 2006, and th e target was 14.5% in 2007.  As debt had been 
reduced substantially and reserves had increased, the turnaround of the economy meant that Indonesia 
had been able to pay increasing atten tion to addressing social issues.   
9. On the political and institutional sphere, the ch anges had not been brought about by economic 
policies alone, the reforms undertaken being central .  Indonesia had undergone important democratic 
changes in the last ten years – most recently mani fest in the direct election of President Susilo 
Bambang Yudhoyono and Vice-President Yusuf Kalla.  In an important administrative change, the 
Government had continued the pro cess of devolution of authority an d responsibilities to the regions, 
with a view to increasing the sense of ownership and allowing the regions to determine their own 
priorities based on the framework of national objectives.  
10. To improve transparency and efficiency, the G overnment had made serious efforts to tackle 
corruption, including in tax administration, cust oms, and public procurement.  Its advances in 
protecting intellectual property rights had been recognized internationally. 
11. Among the Government's key objectives was improving the competitiveness of the 
Indonesian economy, which it had addressed through re visions in policy and administration affecting 
taxation, tariffs, and investment.  The recent Inv estment Law addressed the main problems faced by 
investors starting businesses in Indonesia, including authorizing a one-door integrated service at the central and regional levels.  This was intended to  simplify and speed up formalities under a Capital 
Investment Coordinating Board, whose main func tion was to eliminate obstacles to investment, 
increase certainty and strengthen the role of th e investor within the framework of national 
development policies.   
12. With respect to trade and sectoral policies,  the Government was pursuing a policy of 
progressive integration with the global economy a nd in particular within the fast-growing ASEAN 
region.  It was reducing and harmonizing tariffs  in line with the ASEAN Tariff Harmonization 
Programme;  the overall, import-wei ghted, applied MFN rate was a moderate 8.3% in 2006, while the 
duty collected/import value ratio – similar to the we ighted average of applied MFN and preferential 
rates – was a mere 2.2% in 2006, an indica tion of the openness of the Indonesian economy.   WT/TPR/M/184 
 Page 5 
 
 
  13. Indonesia had also been progressively eliminating non-tariff measures, so that the economy 
would be more responsive to international price movements and develop in line with its dynamic 
comparative advantage.  Remaining measur es were consistent with WTO provisions. 
14. Specific sectoral policies were intended to co mplement the broader efforts to improve the 
framework for a competitiveness environment.  First,  since most Indonesians lived in rural areas, 
agriculture had great importance for many Indonesian people.  The sector had started to benefit from a 
revitalization programme providing support for infr astructure, financial services, research and 
development, and institutional reform.  Second, the fisheries sector provided employment, food 
sources, poverty alleviation, and de velopment, especially for the outer islands.  In this respect, the 
Fisheries Law 31/2004 had been a milestone in fish eries management and development.  Ministerial 
Decree KEP.34/MEN/2006 addressed conservation of th e environment and fish stocks, as well as 
issues of illegal fishing and the revitalization of the fisheries processing industry.  Third, in the 
forestry sector, a broad forest-management programme was being put in place, in coordination with mining-industry policy, to support forestry and wild life conservation, as well as forest or near-forest 
dwellers.  The Government was also planning a tax to be paid by mining and logging companies to 
compensate for environmental damage and finance a re-afforestation programme, to be implemented 
by local communities.  The Government of I ndonesia appreciated the cooperation of neighbouring 
countries, the United States and European countries in combating the import of illegal logs from 
Indonesia.  Fourth, regarding oil, gas, and minera ls, Indonesia had important reserves of fossil fuels, 
but it was still a net importer of crude oil, so that  the recent increases in oil prices had mainly had a 
negative effect on trade and inflation.  On the ot her hand, Indonesia was the world's leading exporter 
of liquefied natural gas, and the country had potential for further development in hydro-electric and 
geothermal energy (as well as coal), and other "gr een" sources of energy such as bio-fuels, solar 
power, etc.  Recent increases in oil prices, if maintained, made exploitation of these alternative 
sources of energy more viable, as well as being attractive from an environmental perspective.  As noted in the previous Review, the oil and gas sect or had been liberalized under enabling legislation 
passed in 2001, and a number of foreign firms had entered the oil and gas market for exploration, 
production, and retailing.  Along with logging, mini ng had become an environmental issue that was 
now being subject to greater scrutiny, and new regu lations were being promulgated to address this 
issue.  
15. Fifth, industrial policy mainly used market-type  instruments to accelerate the development of 
the sector, such as fostering cluster groups and the pr omotion of participation in global value chains.  
Industrial policy was also oriented towards the de velopment of Indonesia's regions, including through 
the provisions of infrastructure, and was intended to offset market failures.  Industrial policy sought to 
deepen and diversify industrial production in the face of stiff international competition and a fast-
changing business environment.   
16. Sixth, the services sector was important for a modern economy in its own right as well as 
through inter-sectoral linkages for the country’s e fforts to improve competitiveness in traditional and 
non-traditional exports. Indonesia was making particular  efforts to improve the efficiency of trade-
related services such as finance, telecommunications, and transport, which were also critical for a  
geographically diverse country.   
17. In relation to international cooperation, Indon esia's trade was principally governed by its 
membership of the WTO.  Howe ver, Indonesia was a member of, and actively involved in, ASEAN, 
APEC, ASEM, south-south cooperation such as the Organization of Islamic Conference, and 
UNCTAD, as well as bilateral economic relationships .  Indonesia took the view that its plurilateral 
and bilateral relationships were  consistent with its multilate ral obligations under GATT 1994, 
including the Enabling Clause, and the GATS.  The founders of the GATT system had envisioned 
deeper regional relations within the multilateral fr amework, and, for Indonesia, integration with 
neighbouring countries in the South-East Asia regi on had been an important factor in the greater WT/TPR/M/184 
Page 6  
 
  peace, stability, and prosperity of the region.  In  this sense, Indonesia considered that its regional 
agreements were a positive contribution for longer term multilateral liberalization. 
18. Indonesia had been an active participant in th e Doha Round negotiations.  It was seeking a 
more balanced outcome, consistent  with the development objectives that were central to the Doha 
Declaration.  The Government principal concerns  were to obtain improved access for Indonesia's key 
agricultural and manufactured exports, while obtaini ng guarantees for its most sensitive sectors and 
some flexibility to develop its industrial sector.  Indonesia, which was the coordinator of G-33, 
believed that the negotiations pointed towards a gr eater understanding of its key concerns.  Indonesia 
stood ready to make balanced commitments in line w ith the Doha Declaration, July Framework, and 
Hong Kong Ministerial Declarati on and its own development needs and capabilities.  It urged WTO 
Members to make the necessary political choices that would allow a speedy conclusion to the 
negotiations.  
19. The economic outlook for Indonesia had improved mainly as a result of the reforms 
undertaken in recent years  and a healthy external  environment.  However, the Government was 
conscious of the need to continue to build on th ese reforms to further lift economic growth and to 
increase employment opportunities.  It was not just a matter of economic development but of social 
justice that the Government of Indonesia needed to  deliver real progress to its people in the areas of 
health and social programmes, education, and physi cal infrastructure across th e diverse regions of the 
country.  The Government was conscious of the need  to foster a national dialogue to build a common 
sense of purpose within the new democratic frame work, but the acid test would be how well it 
delivered in its commitments to the people . 
20. Despite its improved economic indicators, Ind onesia needed additional capital resources to 
carry forward its social and economic programmes.  The new Investment Law would help in this 
respect, but there was also a need , especially in the poorer regions, to develop the administrative 
capacity to carry out reforms, even where funding had been provided.  As part of its development 
strategy, the Government was fully aware of the need  to modernize and develop the real sector of the 
economy, revitalizing agriculture a nd industry, and building an efficient services sector.  Here, the 
new Investment Law was intended to have an important role. 
21. External trade too could play an important role in development, complementing domestic 
policies.  As indicated in the Government Report, Indonesia was moving carefully but progressively toward even greater opening up of the economy, co nsistent with its capabilities.  Much depended on 
economic conditions in world markets affecting comm odity prices and the flow of earnings needed to 
develop and modernize the economy. 
22. Indonesia faced some constraints in securi ng improved access to overseas markets for its 
main exports due to intense competition.  Indonesia c onsidered that this could best be achieved in the 
multilateral framework of the WTO.  It would contin ue to work closely with other WTO Members to 
achieve a speedy and successful conclusion to the Doha negotiations, taking into account the 
development dimensions as mandated in the Doha  Declaration, July 2004 Framework, and Hong 
Kong Ministerial Declaration.  Indonesia also l ooked forward to the continued deepening of its 
integration in the Asia Pacific region, which was c onsistent with the WTO and promised to  become a 
strong supporter to its multilateral process.    WT/TPR/M/184 
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  III. STATEMENT BY THE DISCUSSANT 
23. The discussant  (H.E. Dr. Mia Horn Af Rantzien) noted that her comments would fall under 
three headings:  the economic environment, trade and trade-related policies, and sectoral policies. 
24. Indonesia had experienced stable and moderate growth performance since its previous Trade 
Policy Review in 2003.  Real GDP growth had risen steadily, from 4.4% in 2002 to 5.5% in 2006, 
reaching its highest level in nine years, while macr oeconomic vulnerabilities had been declining.  This 
had been achieved at a time when Indonesia had been hit by a series of very serious natural disasters  
The fiscal deficit had narrowed to  around 1% of GDP and public de bt declined to 39% of GDP in 
2006, nearly 20 percentage points over three years,  sovereign creditworthiness had improved and the 
overall external position had continue d to strengthen.  As in much of South-East Asia, strong 
domestic demand had driven growth over the last fe w years.  However, challenges remained:  since 
the crisis, growth had not been high enough to create sufficient job opportunities, reduce 
unemployment, and cut poverty levels.  Indonesia's challenge was to distribute the increase in growth 
and new employment opportunities more evenly across its diverse regions. 
25. Exports were worth an estimated US$85.7 billion in 2005 with a 19% increase in that year;  
and, had reached record levels in 2006, passi ng US$100 billion.  Oil and gas accounting for under 
20%, reflecting the diversification of Indonesian ex ports since the 1980s.  Merchandise exports share 
of GDP had increased slightly since 2002, from 29. 6% to 30,6%, whereas imports had increased from 
17.8% to 22.7%.  The share of manufactured exports had decreased to 46.9% in 2005, from 54.1% in 2002.  The impressive increases in exports in 2005 a nd 2006 had been attributable mainly to rising 
prices rather than volume, indicating that Indone sia faced needs to improve its competitiveness.  
Indonesia's major trading partners were increasi ngly Asian countries, which accounted for over two 
thirds of exports and imports. 
26. Indonesia had continued to remove government-bas ed constraints to trade, investment, and 
production and streamlined procedures at the border.  The goal of customs reform was to reduce the 
time and cost of clearing customs, and to lim it smuggling and customs fraud.  The tariff  had remained 
Indonesia's main trade policy instrument, albeit a relatively small source of tax revenue, accounting 
for a little over 4% of the total.  The average app lied MFN tariff was 9.5%  in 2006, down from 9.9% 
in 2004 when Indonesia adopted a new tariff classification for MFN (non-ASEAN) tariffs.  Over 93% of tariff lines were bound, which lent a high degree of predictability to the tariff.  However, at 37.5%, 
the simple average of final bound MFN rates la rgely exceeded the average applied MFN rate, 
providing the authorities with considerable scope to increase applied tariffs within bindings, although 
by and large this had not occurred. 
27. Indonesia had continued to reduce the number of ta riff lines, currently 141, subject to import 
restrictions.  Bans for sanitary and other reasons had affected imports of chicken parts, rice, and salt.  
Government procurement remained an important in strument of industrial policy.  Indonesia  had 
remained a relatively active user of anti-dumping meas ures, mainly against imports of base metals and 
chemicals from the region;  in 2003, a safegua rds committee has been es tablished, following the 
enactment of safeguards legislation in 2002.  Expor t licensing, prohibitions and restrictions had been 
maintained largely to promote higher-value-added dow nstream industries.  State involvement in the 
economy included exclusive import rights to domestic  producers of certain sensitive items, such as 
rice, cloves, and alcoholic beverages. 
28. The Government had formulated and was im plementing a comprehensive reform agenda, 
comprising many activities that could be labelled Aid for Trade, to strengthen public institutions, 
improve the business and investment climate, and boos t infrastructure in order to increase investment  
and accelerate growth, exports, and employments opportunities. 
29. Support for production and trade had been provide d through financial assistance for R&D and 
regional tax incentives.  Through the Industrial Re vitalization Programme, the Government had also WT/TPR/M/184 
Page 8  
 
  used different measures to promote international competitiveness, such as the promotion of cluster 
groups and value-chain alliances.  The discussant w as interested in hearing about any results from 
these measures.  Indonesia's competition policy framework  had been put into effect;  most cases dealt 
with up to 2006 appeared to relate to collusion on te nders relating to Government contracts.  Waste in 
government procurement (through corruption and ineffi ciency) was estimated to be as high as 2% of 
GDP.  Indonesia had sought to strengthen intellect ual property rights protection by expanding its 
international commitments and improving its le gal framework to combat IPR violations. 
30. As regards sectors, labour-intensive agriculture , accounting for 44% of employment, but only 
14% of GDP, had maintained its dominant role  in the economy, preserving Indonesia's position as a 
major producer of several commodities.  The Medi um-Term Development Plan 2004-09 identified a 
number of constraints to growth in the agricultu re sector:  inadequate incentives to invest in 
production increases, low level of technology transf er for processing, resulting in low productivity, as 
well as poor access to markets and services.  The G overnment had initiated a plan to revitalize 
agriculture in order to increase growth and the well- being of farmers.  She was interested in receiving 
indications on whether the trend was changing.  The import situation for rice  was complicated:  
mostly due to shortages as a result of the ban on rice imports, the price of rice has surged 30% above international prices in 2005/06 and has been, accordi ng to observers, the main factor in increasing the 
poverty headcount in 2006.  She asked about future plans on this important issue. 
31. In forestry, regulatory controls and export restrictions had not been sufficient to address the 
sector's problems, including over-exploitation and illeg al logging.  The Govern ment had stepped up 
efforts to combat illegal logging and was curren tly exploring how neighbour ing countries and other 
importers of these logs could help address a lternative measures to stop the illegal trade.  
32. Indonesia's vast range of mineral resources had enabled the mining sector to make an 
important contribution to exports, 8% in 2005.  Manufacturing had once been the most dynamic sector 
in the economy but job losses had been significant in several labour-intensive industries.  However, 
Indonesia had been able to expand its share in the world textiles market to face the new situation in 
2008, when temporary safeguard quotas against Chin a ended.  Observers believed an extensive 
modernization programme was needed.  She asked about the Government's plans on this issue. 
33. Indonesia had taken major steps to liberalize certain key services;  in financial services and 
telecommunications, liberalization had seemingly surpassed its GATS commitments.  Financial 
services reforms (e.g. prudential rules, institu tional) had been focused on bank rehabilitation 
following the crisis.  Liberalization of telecommuni cations had led to further privatization, and 
increased regulatory transparency, and had enhanced  strategic alliances with foreign investors. 
Tourism continued to be an important service sector but had suffered due to travellers' fears of natural 
disasters and terrorist attacks.  
34. As she had a special interest in Aid for Tr ade, the discussant noted the Indonesian Trade 
Minister's comments in a recent speech:  "... so that trade leads to development, it must be inherently 
related to increased productivity and competitiven ess, which requires a comprehensive policy on 
infrastructure support, human resource development,  education, technology, fair competition, an 
inclusive policy for SMEs, a way to raise productiv ity of subsistence farmers and so on".  The 
Government had shown clear resolve to carry out major reforms in many areas to make trade a tool 
for development.  She was interested in lear ning more on whether the Indonesian Government 
planned  to make use of the recommendations and th e framework recommended by the Task Force on 
AfT, and if there had been any discussions with, a nd response from Indonesia's partners in the field of 
development.  As noted in the report of Indonesia, the important challenge for the near future was the 
implementation of the impressive reform programme , including the development of administrative 
capacity to carry out the reforms, as well as f unding.  The discussant would welcome any comments 
on how the Government planned to tackle these tw o fundamental issues in support of the reform 
programme.  WT/TPR/M/184 
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  IV. STATEMENTS BY MEMBERS 
35. Members welcomed the Indonesian delegati on and thanked the Government and the 
Secretariat for their reports, and the discussant for her comments and questions. 
36. The representative of ASEAN  noted that Indonesia, one of ASEAN's important trading 
partners, had, despite experiencing major exogenous shocks and natural disasters in the last few years, 
managed to make steady economic progress and this was reflected in its average annual GDP growth 
of 5.2% since its last Trade Policy Review in 2003.  ASEAN member countries, substantial trade and investment partners with Indonesia, were satisfied  with Indonesia's continuous recovery efforts since 
its last Review.  Further policy reforms had been apparent, notably the reform in the 
telecommunications sector, which had brought about increased private sector and foreign 
participation. 
37. On specific aspects of Indonesia's trade polic ies and measures, they welcomed Indonesia's 
continued efforts to increase the pace of its ec onomic development and through the removal of 
government-based constraints to trade, investment, and production, and streamlining procedures at the 
border.  Indonesia's applied MFN tariff had dec lined from 9.9% in 2004 to 9.5% in 2006, and over 
99% of all applied rates were ad valorem , thereby making its regime transparent;  93% of lines were 
bound, and since its last Review, Indonesia's simple average bound tariff rate had declined to 37.5%.  
ASEAN applauded Indonesia for strengthening IP R protection by expanding its international 
commitments and improving its legal framework to combat IPR violations.  ASEAN also welcomed 
the Presidential decree of 2006 that had enabled th e establishment of a National Task Force for IPR 
Violation Prevention. 
38. Indonesia, a strong supporter of the multilateral trading system, had been actively 
participating in all areas of the DDA negotiations.  As a member of the Cairns Group, G20 groupings, 
and the G33, Indonesia was at the forefront in agricultural negotiations.  Ambassador Gusmardi 
Bustami of Indonesia, leader and Chair of the G33 Group, had tirelessly focused on ensuring that 
further agricultural liberalization took into account the development needs and concerns of developing 
country members.   
39. The representative of New Zealand
 highlighted that since 2003, bilateral trade had increased 
on average 22% per year, and Indonesia was now New Zealand's 12th largest trading partner.  He 
noted Indonesia's considerable efforts since the last Review to increase the pace of its economic 
development and the transparency of its trade polic ies.  The task for Indonesia in modernizing and 
opening its economy in the era of reformasi had not been easy;  he recognized its spirit of openness.  
Indonesia was a trading nation and New Zealand shared  its emphasis on ensuring that a strong, rules-
based multilateral trading system, as embodied by the WT O, stood at the heart of international trade.  
Indonesia had an important role, as a leading member of the G33, in the current negotiations. 
40. Agriculture played an important role in Indon esia's society and economy;  however while the 
sector employed 44% of the population, its share of GDP had declined in recent years, to 13% in 
2006.  New Zealand was interested in learning about Indonesia's strategy for developing its 
agricultural sector, and how it saw a conclusion to th e round contributing to that strategy, including 
through assisting Indonesian farmers to reach new international markets.  Based on New Zealand's 
own experience, he recognized that by opening markets and specializing in products a country 
produced most efficiently, it could best achieve that  goal.  In that respect, New Zealand encouraged 
Indonesia to consider its emphasis on food security mo re through the prism of livelihood security than 
self-sufficiency.   
41. It was encouraging that Indonesia's average app lied MFN tariff had declined to 9.5% in 2006 
and over 75% of tariff rates were currently in the range of zero to 10%.  While for the most part WT/TPR/M/184 
Page 10  
 
  Indonesia's tariff regime was transp arent, its structure remained co mplex;  New Zealand encouraged 
Indonesia to look at ways it might improve its tari ff policy to reduce uncertainty.  New Zealand had 
also experienced the impact of non-tariff barriers in Indonesia, particularly for exports of primary and 
processed food products.  New Zealand encourag ed steps to promote greater inter-agency 
coordination on trade policy in Indonesia, particularly where primary responsibility was outside the 
Ministry of Trade (such as forestry, fisheries, a nd agriculture).  At the same time, New Zealand was 
working to promote greater linkages between its  respective regulators to enhance understanding on 
both sides. 
42. New Zealand welcomed recent legislation aimed at improving the investment environment 
but noted the existence of trade barriers in many  services sectors.  The Indonesian Government had 
reported that services made  the largest sectoral  contribution to Indon esia's GDP (around 40%). 
Further relaxation of market access impediments, particularly in mode 3 services, would benefit 
Indonesian consumers and contribute to the Governme nt's aims of stimulating foreign investment 
flows.  There was a growing bilateral trading re lationship and potential to develop it further.  
43. The representative of Switzerland
 stated that since its previous Review in June 2003, 
Indonesia had made steady economic progress with average annual GDP growth of 5.2% despite 
major exogenous shocks and natural disasters.  Th is illustrated the work of the Government in 
reforming macroeconomic conditions, even if th is growth had not been high enough to reduce 
unemployment and cut poverty levels.  The potential of the Indonesian economy remained strong;  
during the last four years, foreign trade had in creased by 70%, exceeding US$160 billion in 2006. 
44. The bilateral trade relationship, however, had not developed as hoped.  During the previous 
year, Swiss exports to Indonesia had decreased by 0.3% while Indonesian exports had fallen by 3.8%, 
thereby reducing bilateral trade to SF 477 m illion (from 484 million in 2005).  Indonesia was 
nevertheless an important location for direct invest ment:  some 75 joint ventures and subsidiaries of 
Swiss companies were operating in the archipel ago, including in engineering and industrial 
equipment, chemicals and pharmaceuticals, and financial services, and employed roughly 
60,000 people. 
45. During the review period, Indonesia had begun to follow a triple-track strategy of 
international trade negotiations:  mu ltilateral, regional and, for the firs t time, bilateral.  Beside the 
ongoing negotiations for a free-trade agreement with Ja pan, a joint study group  had recently conclude 
its work with a positive recommendation fo r an FTA between EFTA and Indonesia 
46. He welcomed the resolve of the Indonesian G overnment to carry out major reforms to boost 
the competitiveness of the economy.  Most observe rs seemed to agree that  the Policy Package for 
Improvement of the Investment Climate should allo w Indonesia to take advantage of the multilateral 
system, improving investor confidence, and facilitate  foreign investment. However, he was concerned 
about the application of the new investment law,  adopted in March 2007.  His delegation requested 
clarifications related particularly to the transparen cy of the new investment "negative list";  he was 
concerned that this might  not reduce the number of  sectors closed for foreign investment but merely 
constitute a more formal compilation of existing pr actices of exclusion, which had until now been 
applied informally. 
47. Recent measures did not yet appear to have ha d a real impact on inbound FDI, which, ten 
years after the Asian financial crisis, remained lo w.  The wide political a nd economic reforms decided 
by the Indonesian Government in 2006 (general i nvestment policies, customs tax, labour policy, and 
SME policy) could be an important contribution to  Indonesia's competitiveness.  But other issues also 
needed to be tackled, such as corruption and arb itrary or abusive tax enforcement, which required 
more detailed information about the ongoing m easures in these areas.  Switzerland appreciated 
Indonesia's constructive role in the Doha Round, especially as leader of the G33.  WT/TPR/M/184 
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  48. The representative of Colombia  highlighted the important progress made by Indonesia in the 
recent period despite the serious natural disasters.   There had been a substantial turnaround in 
economic growth, with annual rates of above 5% in the past three years, the reduction of about 
20 percentage points in public debt, and the narro wing of the fiscal deficit.  He was concerned, 
however, by the instability of prices. He highlighted  the recent package of measures promoted by the 
Government to foster private investment, which, inter alia,  envisaged  the simplification and 
acceleration of procedures to establish companies, th e reform  of regulations, and customs reform.  
Sound foundations had been created for sustai nable economic growth, which might lead to 
appropriate social policies and effective reductions  in the high unemployment and poverty levels.  
49. While 99% of  applied tariffs were ad valorem,  which provided transparency, non-tariff 
measures, such as import licensing for sugar and textiles and clothing, appeared to limit authorized 
import volumes.  He asked how the check prices worked, which could be applied as minimum prices, possibly contravening the WTO Customs Valuation Agreement. 
50. The representative of Chinese Taipei
 said Indonesia was a huge market for all manner of 
goods and services, and was blessed with abundant human and natural resources.  Within ASEAN, 
Indonesia was the largest FDI destination for Chinese Ta ipei  investors across a wide range of sectors.  
There had been a slight drop in investment in Indonesia over the past ten years, and there was 
potential for substantial improvements.  About 1, 000 Chinese Taipei businesses were operating in 
Indonesia. He suggested that some reforms might be  usefully undertaken by Indonesia such as a new 
labour law, and further deregulation and opening of the energy sector.  
51. The representative of Japan  noted that Indonesia had suffered the most from the Asian 
financial crisis.  In recent years, however, it had been growing steadily, pulled along by domestic 
demand, a favourable international economic environm ent, and the right mix of pro-growth, pro-job, 
and pro-poor policies.  The Secretariat paper suggested that the increase in unemployment remained a problem, but in a country consisting of 10,000 is lands, it took time to translate overall economic 
growth into nationwide job creation.  This was esp ecially the case when every year there were 2 to 
2.5 million new labour-market entrants.  Improve ment in the legal framework for IPRs was 
appreciated as was the strengthening of the anti- corruption framework.  FDI remained a motor for 
development and, in this regard, he welcomed th e new investment law, which stipulated that FDI 
restrictions would be based on a negative list.  In or der to enhance transparency  and predictability, he 
requested the Indonesian Government to elaborate on any such restrictions that might be under consideration, including their content and their rationale. 
52. Indonesia had been contributing to the DDA as  the coordinator of G33 and an important 
member of the G20.  Japan appreciated the recen t lowering of tariffs of digital still-image video 
cameras.  Japan was concerned that reportedly, under the draft bill on minerals and coal, there would  
be new requirements for mining companies to engage in refining.  As a large importer of minerals 
from Indonesia, Japan hoped that the new law w ould not create an additional burden on existing 
mining companies. Indonesia had stated that th e bill was still under discussion in Parliament and 
Japan requested Indonesia to elaborate on this new policy. 
53. The Governments of Indonesia and Japan had agr eed on the main elements of an EPA in 2006 
and Japan looked forward to entering into a ne w period in bilateral relations with Indonesia. 
54. Seeking to improve the preparation of TPR meetings, he suggested to the Chair that the 
Secretariat and Government reports should be ava ilable six weeks before the session, Members should 
submit questions three weeks before the TPR, and that the written responses should be made in 
writing one week before the review meeting. WT/TPR/M/184 
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  55. The representative of the European Community
 noted that the EC was Indonesia's second 
largest trading partner and the main destination fo r its exports of manufactured goods (oil and gas 
excluded).  The bilateral trading relationship took place under the WTO umbrella, and the joint 
priority remained the successful completion of the Doha Development Agenda Complementary to this 
however, the EC aimed to reinforce the clo se economic ties through negotiating a free trade 
agreement.  The EC was pleased to note Indonesia's sustained economic recovery since the previous 
TPR in 2003, despite significant exogenous sh ocks.  Macroeconomic indicators showed a 
considerable economic upturn, thanks in part to  successful fiscal consolidation and a tightened 
monetary policy aimed at controlling inflation.  However, this economic progress had not yet been 
accompanied by any increase in the employment rate s or  reduction in poverty levels, which remained 
major challenges for Indonesia.   
56. Another challenge for Indonesia was its poor inv estment climate.  Recent investments had not 
matched the level of economic recovery, almost certainly because important barriers remained and 
needed to be removed if Indonesia was to reach th e pre-crisis investment levels.  Indonesia's newly 
adopted Capital Investment Law could provide a so lid basis for improving the investment climate if 
implemented transparently, but the EC was concerned by indications that the FDI negative list would 
be more restrictive for such sectors as mariti me transport, telecommunications and satellite 
communications, construction, express delivery and frei ght forwarding.  Such restrictions ran counter 
to the Government's stated objective of attracting foreign investment.  Indonesia had stated in its 
report that the economic reform programme was aime d at sustainable development and the alleviation 
of poverty, and he encouraged Indonesia to reflect on how trade policy could best contribute to 
sustainable development and a successful labour mark et reform.  The EC called on Indonesia to 
ensure the proper implementation of core ILO conven tions and to take meaningful steps to prevent 
child  and forced labour, which remained serious problems in Indonesia.  
57. On measures directly affecting imports, cu stoms reform was high on the Government's 
agenda and measures to streamline border procedures were expected to enter into effect in 2007. 
Indonesia had been an increasingly active and cons tructive participant in the Trade Facilitation 
negotiations in the DDA. The Indonesian aut horities should ensure that port facilities and 
infrastructure did not hinder the smooth movement of  goods. In addition, he ur ged Indonesia to ensure 
the compatibility of its customs valuation pract ices and import licensing procedures with its 
commitments under the WTO.  On sanitary and ph ytosanitary measures, Indonesia should establish 
fair, non-discriminatory and transparent rules, fully aligned with international standards and 
guidelines. For example, Indonesia's BSE import policy should be consistent with the new 
international recommendations adopted by the OIE on  trade in beef and beef products.  The current 
import ban on beef and beef produc ts from EC countries was an unjustified measure that was clearly 
inconsistent with Indonesia's oblig ations under the SPS Agreement.  
58. Notwithstanding reform and liberalization in some sectors, significant trade barriers remained 
in many services sectors, including foreign equity caps.  The EC had noticed a certain back-tracking 
on the level of liberalization, not only in the sector s mentioned previously in relation to the Capital 
Investment Law, but also in banking and advertis ing.  He therefore urged Indonesia to address the 
enduring obstacles to trade in services and pursue a progressive, transparent and genuine liberalization 
of key services sectors.  Joint efforts and flexibility  of all WTO Members, including Indonesia, were 
needed to achieve the satisfactory conclusion of the DDA before the end of the year.  A constructive, 
more offensive, and significantly broadened approa ch by Indonesia in the negotiations would by a 
central element for success. 
59. The representative of Hong Kong, China  said that total bilateral trade had increased at an 
annual average of 9% during 2002-06.  Since 20 03, Indonesia had made steady economic progress 
with average annual GDP growth of 5.2%.  The fis cal deficit had narrowed to 1% of GDP in 2006.  
Continued prudent economic policies and trade lib eralizing reforms would contribute further to  WT/TPR/M/184 
 Page 13 
 
 
  Indonesia's economic growth.  In particular, as servi ces had been the largest contributor to Indonesia's 
GDP in recent years, continued effort to liberali ze trade in services would be beneficial for further 
economic growth and sustainable de velopment.  Her delegation appreciated Indonesia's initiatives and 
determination to undertake compre hensive economic reforms to impr ove the investment climate and 
foster economic growth, particularly in te lecommunications and financial services.   
60. Indonesia was establishing an extensive transpor t infrastructure, which was essential for its 
economic and social development.  Developing key infrastructure would provide a solid foundation 
for the growth of the whole economy and, given I ndonesia's size and island geography, an efficient 
maritime transport and logistics sector would play an important role in advancing Indonesia's growth 
in all sectors, as well as enhancing its trade.  Sh e encouraged Indonesia to pursue further market 
reform in these sectors and improve its offer in maritime transport services and logistics-related 
services.  She appreciated that Indonesia had bound over 93% of its tariff lines, and the average applied rate had been reduced from 9.9% in 2004 to  9.5% in 2006.  However, products like alcoholic 
beverages and cars were subject to tariffs of over 60% .  In addition, there was in general a gap of 28% 
between applied and bound rates, wh ich could undermine the predictab ility of the tariff regime.  She 
looked forward to improvements in these areas.  
61. The representative of Australia
 acknowledged Indonesia's constr uctive role in the Cairns 
Group and as Chair of the G33.  Australia was also closely engaged with Indonesia in the context of 
the negotiations for an ASEAN-Australia-New Zeala nd Free Trade Agreement.  There was a mutually 
productive and beneficial trading relationship between Indonesia and Australia:  two-way trade in 
goods and services expanded by 17.3% in 2006, to reach $A 10.4 billion.  The Australian Trade 
Minister had visited Indonesia for an annual Trade Ministers' Meeting, the discussions focusing on the 
progress under the Australia Indonesia Trade and Inv estment Framework, signed in September 2005.  
Key features of the Framework's Action Agenda incl uded trade and investment facilitation, trade and 
investment promotion, policy dialogue, capacity bui lding, and SME networking.  The Framework's 
Experts Group, comprising representatives from bus iness, academia, and policy think-tanks had met 
earlier and provided a number of recommendations to  Ministers on ways to broaden the commercial 
relationship.  These included a recommendation that  Australia and Indonesia undertake a feasibility 
study for a bilateral free-trade agreement.   
62. Indonesia had made commendable progress in cons olidating democratic and political reforms 
and had generated strong macroec onomic performance in recent years.  The Indonesian Government  
had released three well-targeted policy reform p ackages in 2006 covering infrastructure, investment, 
and the finance sector, and held its second Infrastru cture Conference in November 2006.  Australia 
was concerned, nonetheless, that protectionist se ntiments remained in some sectors, including 
agriculture, services, energy, and resources.   
63. The representative of Canada  noted that in 2006, two-way merchandise trade between Canada 
and Indonesia was up 13% from the year before:  Canadian exports to Indonesia rose from 
US$572 million in 2005 to US$703 million;  and im ports from Indonesia remained strong at 
US$835 million.  Canadian direct investment to Indonesia totalled US$2.7 billion in 2006, placing 
Indonesia as one of Canada’s twenty most important  destinations for direct investment abroad.  
However, Canadian companies had indicated to the Government  that they found Indonesian 
regulatory requirements to be complex a nd government approval processes slow. 
64. She congratulated Indonesia on its significant levels of economic growth in the face of 
adversity and catastrophe.  Indonesia was to be commended for its ambitious reform programme, 
aimed at improving economic growth, increasing em ployment, and reducing poverty.  Measures to 
improve the investment climate would  help sustai n high rates of growth into the future.  The new 
Investment Law was a positive step toward improving Indonesia's investment climate.  Furthermore, 
Canada was pleased to be participating in a joint study group with Indonesia to explore the potential WT/TPR/M/184 
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  for negotiating a foreign investment promotion and protection agreement (FIPA) that would serve as a 
further confidence building measure to encourage Canadian investment into Indonesia.  Indonesia 
should be applauded for its decision to take a vari ety of measures to address and reduce corruption.  
Corrupt practices had a negative effect on Indonesia' s business climate, particularly when regulatory 
and judicial activities were impaired as a result.  
65. Canada commended Indonesia on its achievements since its last Review in 2003, such as the 
reduction of public debt.  In just three years Indone sia managed to reduce its public debt by nearly 
20%.  However, despite recent macroeconomic stab ility and steady economic growth, the continuing 
high unemployment threatened to mitigate the otherwi se impressive gains.  Moreover, Indonesia still 
had a large number of people who lived in poverty.   Indonesia needed to address these problems;  
actions such as the removal of the ban on rice imports should help.  Canada strongly encouraged 
Indonesia to improve its tariff regime in order to  improve growth.  She commended Indonesia for its 
efforts on customs reform as well as those to redu ce constraints on trade and investment.  Canada 
commended Indonesia on its support of the Doha Round and of the WTO in general.  Indonesia was a 
strong supporter of the WTO process, and accorded  at least most-favoured nation treatment to all 
Members.   
66. The representative of Brazi
l congratulated Indonesia for its overall economic performance, 
especially for its steady rate of economic growth at an average of 5.2% per annum since 2003. Brazilian-Indonesian trade had been growing at re markable speed:  two-way exchanges increased by 
100% between 2002 and 2006, to reach US$1.11 billi on.  Brazil's exports to Indonesia included iron 
ore and the soy complex, while imports were made up mostly of textiles and cocoa.  Indonesia shared 
with Brazil, and with other developing country Me mbers, a similar view of the importance of the 
multilateral trading system, paying close attention to  the development component of the Doha Round, 
enabling the two countries to work together in pa rtnership in the G-20, the Cairns Group, and the 
G-33.  Brazil appreciated Indonesia's energy policy, which encouraged progressive deployment of renewable energy sources, such as biofuels. 
67. Brazil took the Doha Declaration on TRIPS a nd Public Health seriously, especially its 
assertion that intellectual property rules should not prevent countries from protecting public health.  
He asked the Indonesian delegation to further elaborate its views on the implementation of 
paragraph 6 of the Declaration.  With regard to the introduction, a mandatory disclosure of origin 
requirement in the TRIPS Agreement (a propo sal in the Doha Round co-sponsored by over 
50 developing countries), he asked Indonesia to in form the WTO whether it had identified cases of 
misappropriation of its biodiversity through patenting ac tivities, locally or in other countries.  He also 
sought Indonesia's views on access and benefit-shar ing regarding patents on pharmaceutical products 
and processes based on the use of viral material. 
68. The representative of the Republic of Korea
 noted that Korea and Indonesia had expanded 
and deepened their trade and investment relations over the years.  Bilateral trade volume had steadily 
increased, reaching US$13.7 billion in 2006.  Korea was Indonesia's fifth largest trading partner, 
while Indonesia was Korea's ninth largest.  Invest ment ties had also grown closer, with Indonesia 
being Korea's third largest FDI destination in 2006.  Through the Korea-ASEAN FTA which went 
into effect in 2006, Korea hoped that both countri es would continue to strengthen their bilateral 
economic partnership and a pplauded Indonesia's leadership in pr omoting regional trade liberalization 
through APEC and ASEAN.   
69. Korea welcomed the steady growth of Indonesi a's real GDP during the period under review 
and recognized that the Government had implemen ted comprehensive political and economic reform 
programmes to develop a more efficient, open,  and competitive economy.  However, despite 
Indonesia's efforts to introduce a new investment la w, Korea considered that there was room for 
improvement in its investment climate, in particul ar in the field of labour market rigidity.  Korea  WT/TPR/M/184 
 Page 15 
 
 
  agreed with the Secretariat, that Indonesia should take advantage of the multilateral system to further 
lock-in unilateral reforms to boost investor confidence and facilitate  foreign investment.  Regarding 
Indonesia's trade policy and regime, Korea was genera lly satisfied with its overall openness to trade.  
However, Korea had some concern about the lack of  transparency in tax administration and customs 
clearance procedures.  Korean exporters had e xpressed concerns about delays and the lack of 
transparency in Indonesia's VAT refunding procedure,  delays in its customs procedures, and a general 
lack of transparency on the part of the customs authorities.   
70. The representative of the United States  said the United States-Indonesia trade relationship  
enjoyed US$16.5 billion in two-way goods trade in 2006 and the most recent data showed that total 
bilateral trade in services totalled US$1.6 billion,  and U.S. foreign direct investment (FDI) in 
Indonesia was US$9.9 billion.  Indonesia and the Un ited States had made a commitment to strengthen 
further the bilateral relationship through the Trad e and Investment Framework Agreement, signed in 
1996, focusing on expanding trade in agriculture and non-agricultural goods  (including textiles), 
investment, and services.   
71. Since the 1997-98 financial crisis, Indonesia had successfully made its transition to a 
democratic government, which had strengthened its capacity to rebuild its economy on the basis of 
sound fiscal and monetary policies.  As it pursued a campaign of economic reform in recent years, 
Indonesia had had to contend with a number of ch allenges, including acts of terrorism, devastating 
earthquakes and a tragic tsunami.  The United States  had assembled a package of additional benefits 
under its  Generalized System of Preferences, to talling just under US$200 million, intended to provide 
enhanced trading opportunities as a way of boosting revenue to fuel recovery.   
72. In March 2007, Indonesia passed a new Inv estment Law aimed at reducing obstacles to 
investment, but implementation questions remained .  Specifically, Indonesia was preparing a list of 
restricted sectors, the uncertainty of the scope of  that list was amplifying investors' concerns.  He 
urged Indonesia to implement the new Investment Law in a manner that would attract investors and 
create opportunities for them to do business easily.  In order to eliminate another source of uncertainty 
for traders and investors, he urged Indonesia to bind all of its tariff lines, and to reduce the gap 
between its applied and bound rates.   
73. The U.S. commended Indonesia for passing its new Customs Law in October 2006, which  
aimed to reduce red tape for importers and expor ters, and increased penalties for smuggling.  The 
United States was, nonetheless, troubled that custom s valuation remained seemingly arbitrary, and 
urged Indonesia to work with interested parties to  develop a system that met Indonesia's legitimate 
interests and was consistent with the WTO rules on customs valuation.  Similarly, the United States 
requested that Indonesia bring its sanitary and phyto sanitary regime into line with the International 
Plant Protection Convention Guidelines for Pest Risk Assessment as a way to promote trade in 
agricultural goods. 
74. He hoped that Indonesia would become an a dvocate in the Doha Round for more outward-
looking negotiating positions, which would better ser ve Indonesia's interests.  Indonesia's exports, 
which  rose in 2006 by 19%,  were  heavily fo cused on manufactured goods, but agricultural exports 
had grown nearly 40% between 2004 and 2007;  servi ces exports were also important.  Indonesia had 
a major stake in achieving an ambitious result in  the NAMA negotiations.  Indonesia's exports were 
still heavily concentrated on Singapore, Japan, the EC , and the United States' markets.  A result that 
included new market access could allow Indonesia to di versify its export markets, particularly in new 
emerging markets.  As a growing exporter of agricultural products, Indonesia should recognize the 
importance of achieving "substantial improvements in  market access" in the agricultural negotiations, 
as called for in the Doha mandate.  As leader of the G-33 and an active member of the Cairns Group 
and the G-20, Indonesia was well-placed to contribut e to finding balance between market access and 
having regard for rural development, food security, and livelihood security.  He urged Indonesia to WT/TPR/M/184 
Page 16  
 
  table substantial offers on a range of infrastructure services that could support its recovery and further 
economic development, i.e. financial services, energy services, express delivery, distribution, and telecommunications services. 
75. The representative of Turkey
 said that despite financial crises and natural disasters, he was 
encouraged with Indonesia's steady economic progr ess since the last Review in 2003.  he also 
appreciated that the Government had started a co mprehensive reform programme to further improve 
the economic environment in Indonesia.  The re forms were aimed at improving the investment 
climate and the financial sector, and Turkey hoped th at they would soon help in meeting  Indonesia's 
development needs and addressing the key concerns, such as unemployment.  
76. Indonesia was an active participant in internationa l trade at different levels.  Trade relations 
were governed by WTO rules and also a "multi-track st rategy".  Accordingly, besides its active role in 
the Doha Development Agenda, as a member of the G-20 , G-33, and the Cairns Group, Indonesia 
was actively engaging in regional initiatives such as ASEAN, APEC,  ASEM, Developing-8 and the Organization of Islamic Conference.  He also noted the intensified level of engagement in bilateral 
trade agreements in recent years. 
77. Within the agriculture negotiations of the Doha Development Round, as members of the 
G-33, Turkey and Indonesia shared the same con cerns in the area of market access for developing 
countries.  As agriculture was still an indispen sable economic activity for a large share of the 
population, further liberalization in agricultural tr ade was a sensitive issue.   Turkey and Indonesia 
shared a keen interest in the c oncepts of "special products" and th e "special safeguard mechanism".  
Turkey appreciated Indonesia's efforts to increase the pace of its economic development through the 
reduction of barriers to trade.  In this regard, he  noted the recent customs reform, the reduction in the 
number of tariff lines subject to import restricti ons, and efforts to strengthen the protection of 
intellectual property rights. 
78. The representative of Pakistan
 noted that since its last TPR, Indonesia had continued its 
economic and political reform process.  Growth, coup led with a substantial fall in inflation in 2006, 
was impressive.  In addition, the Government was to be commended for keeping the overall deficit to 
less than 1% of GDP, relatively strong growth in international reserves, dismantling state monopolies, 
as well as many other far-reaching reforms.  Indonesia was Pakistan's second largest trading partner in 
the ASEAN region.  Bilateral trade grew from US$330 million in 2002-03 to US$816 million during 
2005-06.  Nevertheless, there was more potential, gi ven the market size and complementarity of the 
two economies.  In order to further strengthen co mmercial relations, the two governments signed the 
"Comprehensive Economic Partne rship Agreement" (CEPA) in November 2005, under which both 
sides engaged to conclude a preferential trade agreement in near future. 
79. Pakistan and Indonesia had similar positions in  many Doha Round negotiating areas.  Both 
sought reforms in agriculture trade through membersh ip of G-20, G-33, and the Cairns Group. Both 
also had commonalities in promotion of trade in areas outside the purview of WTO, such as D-8, 
GSTP and OIC-TPS.  His delegation, however, had c oncerns about protectionist policies in certain 
areas, including an unprecedented increase in import duty on  citrus fruit for the last four years.  The average MFN tariff on textiles and clothing had dropped to 10% but since 2002, only certain 
companies that had facilities for using imported fabric were allowed licences to import fabrics.  This was contrary to Indonesia's WTO commitments and n eeded to be re-examined.  Also, there was a gap 
of 90% between some applied and bound rates.  On  rice, the tariff was rather high and normal trade 
was often restricted.  
80. The representative of Argentina
 noted that the Indonesian economy grew by 6% in the first 
three months of 2007.  The main elements that gene rated this growth were exports, investments, and 
increased consumption.  As to unemployment, th e sustained growth in the past three quarters  WT/TPR/M/184 
 Page 17 
 
 
  facilitated the absorption of labour:  between 2005 an d 2007, 300,000 workers had been absorbed into 
the labour force.  In agricultural trade, he cite d health issues regarding dairy products and bovine 
meat.  Regarding the tariff structure for agricultu ral products, he referred to the Secretariat and 
Government reports, with respect to Indonesia not implementing tariff quotas, and noted that non- ad 
valorem  tariffs were limited to a few products.  He commended Indonesia as a successful agricultural 
exporting country;  Indonesia appeared  to have recovered its position as a rice exporter and remained 
a leading exporter of palm oil. 
81. The representative of China  noted that Indonesia had made steady economic progress since its 
previous Review in 2003, with an average annua l GDP growth of 5.2% despite major exogenous 
shocks and natural disasters.  Indonesia had continue d systematic efforts to increase the pace of its 
economic development, including by  reducing constraints to trade, investment, and production, and 
streamlining procedures at the border.  A compre hensive economic reform programme had been put 
into operation.  China and Indonesia enjoyed a sound economic and trade relationship.  As a key 
ASEAN member, Indonesia played an important  role in China-ASEAN economic and trade 
cooperation.  Indonesia was China's fourth largest tr ading partner in South East Asia.  In 2005, China 
and Indonesia signed a package of agreements aime d at establishing a broad "strategic partnership" 
and increasing bilateral trade by 40% over the foll owing three years.  According to Chinese customs 
statistics, bilateral trade reached US$19 billion in 2006 , an increase of 13.5% over the previous year.   
82. Indonesia was a key player in the multilateral tr ading system.  As the coordinator of G33, 
Indonesia played an important and constructive role  in pursuing the development dimension of the 
Doha Round negotiations.  Since the launch of the round, G33 had submitted several proposals on 
issues such as SPS and SSM, focusing on securing the development objectives outlined in the Doha 
mandate, which reflected the common aspiration of th e developing Members, particular those with 
millions of very poor farmers.  
83. The representative of the Dominican Republic  underscored Indonesia's macroeconomic 
achievements in spite of various natural disaster s (the Tsunami, earthquakes, and floods.  Wide-
ranging economic reforms had been carried out with a view to achieving sustainable development and 
poverty reduction.  The new Investment Law,  approved in March 2007, paved the way for a 
significant increase in foreign direct investment, because of its effects on improving on investment 
climate.  She also noted the tariff reform, as well as the new regulations for the financial sector.  With 
regard to institutional reform, she commended th e creation of the Corruption and Eradication 
Commission, as well as the setting up of the Special Task-Force Fighting Corruption;  the creation of a special task-force on intellectual property was also important.  Indonesia's efforts towards 
compliance in intellectual property rights have led to  its removal from the USTR Priority Watch List. 
84. A significant element in improving government procurement was the Electronic Government 
Procurement System, which would make it possible to improve transparency.  There had been 
achievements in customs administration, as the tim eframe for customs clearance had been reduced 
significantly.  The Government had made important  efforts in reducing customs duties:  in 2006 the 
average applied MFN tariff rate was of 9.5%, and 75% of tariff lines were between 0 and 10%.  The 
programme  "Rice for the Poor", financed by state funds, had allowed rice to reach 10.8 million 
homes, as assistance to maintain food security for the poor.  Another important initiative was the 
creation of cluster groups for the manufacturing sector, which meant that resources were distributed and competency and technology between companies al so transferred.  Indonesia's interest in moving 
forward in the current WTO negotiating round was ev ident and she urged Indonesia to continue its 
active role in the Doha Round. 
85. The representative of Nigeria
 said that bilateral trade with Indonesia was robust.  A 
memorandum of understanding on the promotion of trade cooperation between the two countries was 
under preparation.  Indonesia was a huge export mark et for Nigeria's crude oil, green tea, coffee, WT/TPR/M/184 
Page 18  
 
  reactive dyes, sugar, and cement, while Nigeria im ported mainly military aircraft from Indonesia.  
Trade increased significantly between 2000 and 2004, from about US$5.23 billion to 
US$10.10 billion, and the volume of trade and investment flows between the two countries was expected to improve. 
86. Indonesia had recorded steady economic progress since 2002, with an annual average GDP 
growth rate of 5.2%, despite the economic shoc ks between 1997 and 2000 due to the Asian financial 
crisis, and other exogenous shoc ks and natural disasters, including terrorist attacks, the SARS 
outbreak, and the earthquakes of 2004 and 2006.  In a ddition, there had been an appreciable reduction 
in the budget deficit from 2.4% in 2001 to 1.1% in  2006 through fiscal consolidation, the projected 
deficit was of less than 1% of GDP by 2010 un der the Medium-Term Plan (2004-09), and inflation 
had fallen from 17.1% in 2005 to 6.6% in 2006 with a projection of 6% for 2007.  However, the level 
of employment had not increased.  Nigeria was also concerned by  the high and increasing level of poverty.  
87. Nigeria welcomed the Mid-Term Development Plan (2004-09) aimed at strengthening public 
policy and regulatory institutions, improving th e business investment climate, and boosting 
infrastructural development, all  with a view to raising the rate of GDP growth, and reducing poverty 
and unemployment.   Nigeria urged Indonesia to revi ew its labour laws with a view to making the 
labour market more competitive.  There was also  the need for a comprehensive review of the 
Medium-Term Plan and its implementation to enab le the authorities to identify possible areas for 
adjustment in order to achieve the desired objectives.   In addition, the financial system had to be 
strengthened to serve as an effective tool for po verty and unemployment reduction.  The authorities 
should  reconsider frequent changes to budgetary  and procurement procedures, subsidy cuts and 
delays in budgetary spending vis -à-vis  the  implications for investment and poverty reduction. 
88. The representative of Ecuador
 acknowledged Indonesia's significant economic progress since 
2003, notwithstanding serious natural disasters and other external events.  Ecuador and Indonesia 
shared a global vision with regard to the multilate ral trade system and in the Doha Round, which 
needed to produce equitable results in all sectors of  interest for developing countries.  Indonesia, 
located in one of the regions of the world with  the greatest economic growth, was an interesting 
market for Ecuador:  they had signed three international agreements  addressing economic and 
technical cooperation as well as energy and telecommunications.  These instruments established a legal framework for the development of investment between the two countries. 
89. The representative of India
 noted the strengthening of democracy in Indonesia through 
broad-based political and institutional reforms, which seemed bound to yield rich dividends by 
improving  participation of the people in political and economic decision-making.  India also noted 
Indonesia's determined pursuit of economic reform s to inject greater competitiveness into the 
economy:  the strengthening of growth, along with a moderation of inflationary pressures was a clear 
vindication of the reforms process.  Recent changes in investment policies, customs procedures, and 
IPRs administration were major steps towards improving transparency and predictability in 
international transactions, and would help build gr eater international confidence in the Indonesian 
economy. 
90. One of the major priorities of India's foreign policy was deepening its  ties with its ASEAN 
neighbours. Bilateral trade in 2006 was US$4.80 billi on, up 22% from the previous year, of which  
Indonesia's exports to India accounted for US$3.39 billion.  India was presently negotiating an FTA 
with ASEAN and separately, exploring the possi bility of a Comprehensive Economic Cooperation 
Agreement with Indonesia, which could build  on the India-ASEAN FTA.  Several Indian 
manufacturing companies had joint ventures in Indonesia:  around US$1.5 billion in investment had already entered Indonesia;  another US$1.1 billion was proposed in two coal mining companies, and  WT/TPR/M/184 
 Page 19 
 
 
  around US$1 billion in a steel plant.  In the next fe w years, Indian companies would be bringing in 
several billion dollars of investment into Indonesia.  
91. Indonesia had banned India's bovine meat products  and milk products even though India was 
a major exporter of bovine meat and exports to 64 c ountries including some in South-East Asia.  He 
hoped that Indonesia would  reconsider these bans.  Similarly, India would welcome a decision by 
Indonesia to resume imports of rice and sugar from India.  It was often difficult for Indian 
pharmaceutical products, which were so ld around the world, to enter the Indonesian market because 
of complexities in the registration process.  He urged Indonesia to consider simplifying this process so that high quality Indian generics could be sold in Indonesia.  
92. The representative of Norway
 said that economic development in Indonesia since its last 
Review had been impressive, but in the words of the Government, not sufficient to meet all its  
economic and development targets.  Unemployment was still relatively high but inflation had  been 
reduced and seemed to be heading in the right directi on.  Investments were still too low, in particular 
FDI.  The government programmes put in place to enhance economic performance required more time 
before a qualified judgement c ould be made.  The emphasis on improving the investment climate 
seemed  to be the right step and should be co mmended.  The changes to the import system, in 
particular the amendments to import procedures, were   welcome.  He was interested to know whether 
there were any suggestions for streamlining  cust oms procedures even further.  For all economic 
operators, domestic and foreign, th e ongoing reform of the judicial and civil service together with the 
active anti-corruption campaign was commendable.  As part of the European Free Trade Association, 
Norway also wanted  to engage in closer talks on trade relations with Indonesia.  Norway appreciated 
Indonesia's 'three track approach', in which the bilate ral avenue was about to be pursued and could be 
a complement to the regional and multilateral avenues.   
93. The representative of Mali  welcomed the institutional and political and economic reforms 
carried out by the Indonesian authorities to improve the economy. There was also a growing 
democracy, a strengthening of financial services a nd reforms to encourage investment.  Bilateral 
relations were  excellent;  Mali e xported to Indonesia cotton, potatoes, Arabic gum, etc. and imported, 
inter alia , green tea, textiles, vehicle equipments, fertilizers, and medicaments.  Mali recognized 
Indonesia's important role in the WTO negotiations , defending the interests of developing countries. 
94. The representative of El Salvador  observed that Indonesia had made constant economic 
progress since 2003 with an annual average GDP growth rate of 5.2%.  However, the growth had not 
been sufficient to create the employment oppor tunities necessary to reduce unemployment and 
poverty levels.  Improvements in the investment climate should be seen as a positive signal for 
investors.  Indonesia was reforming the legal and public administration systems, and had established 
an anti-corruption campaign focussed on consolidati ng the institutional framework against corruption, 
including the Anticorruption Commission, the Antic orruption Tribunal, the Special Team to Fight 
Corruption, the Police Commission and the Prosecuti on Commission.  Investigations on corruption at 
all government levels and amongst state-trading en terprises had given rise to various prosecutions 
with tangible results.  In the Doha Round negotiation s, El Salvador shared interests with Indonesia in 
the topics of special products and special agricultura l safeguards, in order to safeguard food security, 
rural development, and subsistence, which depe nded to a great extent on the agricultural sector. WT/TPR/M/184 
Page 20  
 
  V. REPLIES BY THE REPRESENTATIVE OF INDONESIA AND ADDITIONAL 
COMMENTS 
95. The representative of Indonesia
 (Mr. Soetanto) appreciated Members' interest and the lively 
discussion on Indonesia's Trade Policy Review.  Th e main preoccupations of Members related to:  
(i) macroeconomic and sustainable development;  (ii)  the new investment law;  (iii) import policy, 
customs procedures, and standards;  (iv) agriculture ;  (v) intellectual property;  and (vi) policies to 
reduce poverty.   
(i) Macroeconomic and sustainable development 
96. The representative from the Central Bank of Ind onesia (Mr. Siregar) said that the Indonesian 
Government had introduced institutional and st ructural reforms as well as sound macroeconomic 
policies so as to ensure macroeconomic stability while strengthening the banking sector during the 
post-crisis period.  There were also strong indica tions that current macroeconomic fundamental and 
banking sector conditions had improved significantly  in recent years.  This had enhanced 
macroeconomic resilience and fac ilitated sustainable economic growth, which were reflected in the 
GDP growth of 5.7% and 5.5% in 2005 and 2006, a nd  almost 6% in the first quarter of 2007.  The 
inflation rate was continuing to decline, reaching 6%  at the end of May 2007 and the rupiah exchange 
rate remained stable, hovering between  Rp 8,80 0 and  9,200 per U.S. dollar during the first five 
months of 2007, compared with an average of Rp 9,167 per U.S. dollar in 2006. 
97. The favourable macroeconomic c onditions provided leeway for th e Central Bank to gradually 
reduce the BI rate or the central bank rate from 12.75%  in June 2005 to 8.5% in June 2007 in order to 
create a more conducive economic environment to  support growth.  The balance of payments 
strengthened, buoyed by strong exports and large in flows of capital that led to foreign exchange 
reserves increasing to US$50.4 billion in June 2007 from US$42.6 billion (at end December 2006) 
compared with only US$16.4 billion in March 1998.  In line with this development, the main 
vulnerability indicators had also improved significantly:  the debt to GDP ratio declined from 151.2% in 1997/98 to 34.4% in April 200 7 and the short-term debt to reserves ratio decreased from 138% to 
44%.  The Government was also committed  to financ ial sector reforms in order to build a stronger 
financial system and deepen the financial mark et.  Banking sector performance had improved, as 
reflected in a higher capital adequacy ratio of ar ound 21% in April 2007, far above the required level 
of 8%;  the LD Ratio had improved to 65.8%, while  non-performing loans eased to 6.7% (gross);  and 
Indonesia's credit expansion reached 16.6%.   
98. The Government remained committed to pursuing a prudent fiscal policy of reducing  deficits 
and lowering the Central Government foreign debt burden.  There had been remarkable progress on 
foreign public debt reduction, as reflected in the Secretariat Report.  Some important measures to 
enhance fiscal consolidation incl uded:  continued tax and custom  reforms to increase revenue;  
streamlined expenditures and preparations for me dium-term budget and treasury reforms, including 
performance and a multi-year budget;  and treasury single accounts.  Bank Indonesia had already 
introduced prudential measures related to foreign exchange transactions, aimed at minimizing the 
transaction of the rupiah for speculative purposes,  such as limiting speculative foreign exchange 
transactions, prohibition of margin transactions, pr ovision of swap hedging facilities to investors, 
dollar swap interventions, and improving regulation of the net open position.  The market intelligence 
and monitoring system of the foreign exchange market had  strengthened as the information on 
foreign exchange transaction improved.  With the above foreign exchange measures, complemented 
by the continued strengthening of macroeconom ic fundamentals and sound banking conditions, he 
believed that the Indonesian economy was less vulnera ble to external shocks.  The Government fully 
realized that the current economic growth had not  optimally absorbed the labour force and would 
make reduction of unemployment and pove rty alleviation a top priority.   WT/TPR/M/184 
 Page 21 
 
 
  (ii) The new investment law 
99. Indonesia's new investment law (Law No. 25/2007), the Government of Indonesia considered 
that direct investment played a key role in creati ng job opportunities, in developing infrastructure, and 
in increasing economic growth which ultimately would increase the welfare of the people of Indonesia.  In order to encourage investment – both local and foreign direct investment – the GOI had 
taken a number of steps to create a more favourab le investment climate by improving several key 
aspects of its investment regime.  The Governme nt had enacted the new Law No. 25/2007 concerning 
Investment, as well as Government Regulation No. 1/2007 concerning the taxing of investment in 
certain business fields or in certain areas of the country.  
100. The Government indicated its intention to revise the Investment Negative List and the 
operation of the "One-Door Integrated Investment Se rvice", with a view to providing increased legal 
certainty and simplifying procedures.  The revised negative list was  expected to be issued in 
July 2007.  It comprised a number of areas closed  for foreign investment and some areas open to 
foreign investment, subject to certain conditions.  The negative list was relatively short, comprising 
only 1% of all economic activity.  Inclusion of certain activities in the closed list was based on 
criteria, such as health, safety, defence and secu rity, environment, culture, and national interest.  
While the new proposed negative list seemed to be l onger than previous ones, it was more specific 
with more narrowly defined areas being listed.  The negative list was also intended to provide a more 
solid legal basis, as well as greater clarity, transp arency and simplicity for investors, and clearer 
guidelines for sectors in the list.  The list of activiti es that were open but subject to certain conditions 
was based on criteria such as protection of natural resources, the protection and empowerment of 
micro-, small and medium-size enterprises and c ooperatives, the supervision of production and 
distribution of goods, increased technological cap acity, domestic capital participation, and 
cooperation with enterprises appointed by the Government. 
(iii) Import policy, customs procedures, and standards 
101. Import policy was an integral part of Indonesi a's overall social and economic development 
strategy.  It was intended to help improve the e fficiency and overall growth of the economy, and in 
the longer term be based on Indonesia's comp arative advantage.  However, the pace of 
implementation needed to take account of the social  consequences of change, especially in the short-
term because of the high levels of  unemployment and poverty, particularly in some regions.  Policies 
also needed to take account of  externalities associated  with certain economic activities as well as 
important distortions on world markets.  The pace of implementation also depended on the success in 
building supply capacities and social indicators.  In  this regard, assistance from trading partners and 
donors had been greatly appreciated and would continue  to be important in the foreseeable future.  
102. There had been considerable liberalization as part of autonomous reforms and within the 
context of increased integration within the Asia-Paci fic region, so that the overall applied tariff rates 
were quite modest.  Some Members had drawn atte ntion to the gap between applied and bound rates, 
and stated that lowering the bound rates would incr ease predictability for investors.  This was 
envisaged as part of Indonesia's commitments to a successful outcome to the current negotiations, 
taking full account of the development content of th e Doha Declaration. However, the ASEAN tariff 
reform programme already provided considerable securi ty and predictability to investors in the region.  
The Government considered that the Doha S&D provisions comprised a key element that took 
account of the needs of industrializing countries such as Indonesia. 
103. He stated that there were no absolute import bans;  rather, the importation of certain items 
was subject to regulation, linked to  national security, environmental, and social and cultural questions, 
as well as the requirement to strike a balance be tween the needs of poor rural communities and the 
urban poor.  Government intervention some fore ign markets nullified Ind onesia's current cost WT/TPR/M/184 
Page 22  
 
  advantage in some areas.  Indonesi a was aware that there were concerns about customs administration 
and the Government had gone to cons iderable lengths to improve this as part of the effort to improve 
the investment climate, modernize the economy, and eliminate fraud and corruption.  Further efforts 
were under way on customs valuation, preshipment in spection, and rules of origin in the context of 
ASEAN.  
104. On standards,  Indonesia had undertaken a r estructuring of the institutional framework and 
procedures to improve transparency, impartiality, and coherence with international rules, taking 
account of the development dimension.  Indon esia was now a member of all key relevant  
international bodies  and worked constantly to improve its technical capacities.  Indonesia was 
committed to fulfilling its obligations under the WT O TBT Agreement.  The standards development 
process had been improved by allowing broader st akeholder participation through the Indonesian 
Standardization Society (MASTAN) and by using an IT-based information system called SISNI 
(Information System for Indonesian National Standards). 
105. Alignment with international standards was enc ouraged in the early stage of the standards 
development process through BSN policies to ensure  that all new or revised standards were  
harmonized with international standards.  The conformity assessment scheme was managed by KAN 
(Komite Akreditasi Nasional), signatory to some APLAC/ILAC MRAs as well as PAC/IAF MLAs.  Indonesia's commitments under the WTO TBT Agreem ent were also applied in the field of 
conformity assessment:  by using internationally agreed conformity assessment procedures, the system and its implementation could be mutually accepted among parties;  thus, the system enhanced 
the development of MRAs for testing and certifi cation among Indonesia and interested parties.  
Although recently KAN has not had mutual agreemen ts with overseas conformity assessment bodies 
(or CABs), the system was open for any CABs or accreditation bodies to enter into an MRA.  With 
regard to technical regulations, Indonesia also en couraged the implementation of its Good Regulatory 
Practices (GRP) code together with  related provisions in the WTO TBT Agreement.  Some ministries 
were revising their technical regulations issued  before 1995 so that the content of technical 
regulations, standards, and conformity assessment  procedures could be more in line with the 
provisions of the WTO TBT Agreement. 
(iv) Agriculture 
106. The Government recognized that the prot ection of intellectual property rights was 
fundamental to encourage creativity and innovati on, create economic stability, and contribute to a 
healthy investment climate.  A special task fo rce (or national team) on intellectual property was 
coordinating reports on IP-related data/activities from the national po lice, customs, the Attorney-
General's Office, the Supreme Court, and the Ministri es of Industry, Trade, and Agriculture.  In all its 
IP-related activities, the national team had focused on  strengthening the IP enforcement system, which 
had been recognized by the USTR.  Indonesia welcom ed further consideration of IPR issues in the 
current WTO negotiations, where it was actively pa rticipating in discussions on TRIPS and public 
health, protection of traditional knowledge, the relationship of the TRIPs Agreement to the 
Convention on Biodiversity, and the extension of geographical indications for products other than 
wines and spirits. 
(v) Intellectual property 
107. Members had raised a number of questions on  Indonesia's agricultural policies. Agriculture 
played an important role in the Indonesian economy, providing employment for over 38 million 
people.  He were also important linkage to poverty issues, since the majority of Indonesia's poor lived 
in rural communities and were highly dependent on  agriculture, especially food crops and animal 
husbandry.  Rice remained a sensitive commodity politically, because it was important both for the 
rural producers/consumers and urban consumers; striking the right balance had been a problem,  WT/TPR/M/184 
 Page 23 
 
 
  particularly where high levels of intervention in some foreign markets affected trade prices.  At 
present, Indonesia was addressing the issue through th e regulation of imports.  In the longer term, 
Indonesia considered  that it had ex cellent prospects as a competitiv e supplier of a range of products 
on world markets, and for this reason was an activ e participant in the agriculture negotiations. He 
looked forward to a speedy resolution of the ou tstanding issues on tariffs, domestic support, and 
export subsidies and related measure s.  In the short to medium term, however, Indonesia believed that 
there was a need to find a solution to the problems faced by poor farmers in developing countries through the Special Products (SPs) and Speci al Safeguard Mechanism (SSM) modalities. 
(vi) Policies to reduce poverty 
108. Economic conditions in Indonesia had improved in recent years as a result of the reforms and 
the external environment, and he appreciated th e comments from WTO Members in this respect.  A 
key issue was to lift economic growth sufficiently  to create jobs and address poverty, and much 
depended on the successful implementation of the Go vernment's reforms, as well as developments in 
the world economy:  it was not simply a question of passing laws, but of ensuring effective implementation.   There was a need to further m odernize and develop the productive sector, revitalize 
agriculture and industry, and to modernize the ser vices sector.  This involved further opening up of 
the economy, and the Government was confident th at the new Investment Law would help improve 
the investment climate.    
109. Higher growth was key in addressing the issue of poverty, but programmes needed to be 
better designed to address the needs of the poor.  The focus was on health and social programmes, 
education, and physical infrastructure, but it w as a challenge to deliver improvements across the 
country with its many islands.  Indonesia needed additional capital resources to carry forward these 
programmes.  In some areas there was a need, es pecially in the poorer regions, to develop the 
administrative capacity to carry out reforms, even where funding had been provided.  There was also 
a shortage of human and capital resources, wh ere Indonesia needed greater private sector 
involvement, and where foreign investment and aid could usefully assist.  New trade opportunities, in 
the region and globally under the WTO negotiations, could also make a valuable contribution to 
growth and poverty alleviation.  
110. The discussant
 said that in order to achieve annually growth rates of over 6% to create the 
jobs needed to mitigate unemployment, the Govern ment had started a comprehensive and impressive 
reform programme aimed at reviving investment.  In the view of some observers, given Indonesia's 
vast potential and natural resources, growth could exceed 6% if the reform agenda – comprising 
infrastructure, investment climate improvement, fi nancial sector reform and combating corruption – 
was implemented well enough, and if  public spending stayed at higher levels in 2007 and beyond.  
Two issues  - labour and tax reform - considered criti cal to attract further foreign investment and for 
creating jobs, had not been part of the agenda to any large extent so far.  She was interested in 
information on future plans regarding these two issu es.  According to some, Indonesia needed to raise 
its tax/GDP ratio from its current level of 12%, wh ich appeared  to be insufficient to meet its 
development needs.  
111. Members' had asked for clarity on a number of issues.  For example, on investment, and the 
need to counter investor uncertainty, she welcomed  the information that the negative list was coming 
out in July and that it would be more detailed than  previous lists.  The Indonesian intervention  had 
underlined the importance of improving efficiency but , at the same time, being aware of the need to 
spread the benefits of the reform programmes even ly throughout the country  with its  particular 
geographical situation.  On the gap between a pplied and bound tariffs, she welcomed Indonesia's 
readiness to look at this issue within the context of the ongoing Doha negotiations.  The creation of 
the special task for strengthening IPR enforcem ent was an example of Indonesia's measures to 
increase competitiveness.  On agricultu re, rice was a complex issue in a country with various interests WT/TPR/M/184 
Page 24  
 
  that needed to be balanced.  The issue of povert y had been raised indirectly in many Indonesian 
comments and was the main focus of the various refo rm programmes.  Passing laws was the first step 
but, as rightly emphasized, implementation was of cent ral significance, and she hoped that the figures 
mentioned for 2007 could be improved upon.   
112. The representative of th e European Communities
 noted 11 questions remained unanswered, 
and the EC looked forward to receiving the replies as soon as possible. 
113. The representative of Chinese Taipei  said that as Indonesia was one of Chinese Taipei's major 
investment destinations, his delegation looked forward to seeing reforms in the labour market. 
114. The representative of Japan  raised the issue of the tariff im posed on cameras with a capability 
of moving  image recording.  He understood that, at the RTA Committee meeting in October 2006, 
Indonesia confirmed it would eliminate the tariff for the cameras by January 2009.  On the other hand, 
Indonesia's written answer to Japan's questions stat ed that the applied MFN rate for that product 
would be 5% in 2009.  There seemed to be some in consistency, and he requested clarification.   
115. The representative of the United States  appreciated the statement regarding the new 
investment law but still had concerns about the po ssible scope of the list.  She appreciated that 
Indonesia planned to bind more tariffs in the DDA and hoped that it would bind all of them.  As a 
leading developing country, Indonesia was well positi oned to reap the benefits of an ambitious DDA 
outcome.  
116. The representative of New Zealand  said that the current tariff on the import of dairy products 
appeared to act purely as a tax on Indonesian consum ers.  He appreciated that Indonesia was going to 
study the situation.  Also, New Zealand had some  concerns regarding Indonesia's new meat import 
policy and in particular its compliance with the WTO principle of national treatment.  This was 
particularly in regard to certain products that New Zealand had long exported to Indonesia and that 
had been stopped by recent measures.  Beyond th e uncertainty they created, these new regulations 
placed a burden on New Zealand exporters.   
117. The representative of Canada  had one follow-up question, pr ovided in writing, concerning 
engineering services under the GATS.   
118. The representative of Indonesia  said that Indonesia would provide any responses outstanding 
within the next 30 days.    WT/TPR/M/184 
 Page 25 
 
 
  VI. CONCLUDING REMARKS BY THE CHAIRPERSON 
119. The fifth Trade Policy Review of Indonesia h as considerably improved our understanding of 
Indonesia's trade and trade-related policies since 2003 and the challenges it faces in sustaining, and 
improving, its economic growth.  I am grateful to Di rector-General Herry Soetanto and his delegation, 
the discussant, Ambassador Mia Horn Af Rantzien  of Sweden, as well as Members of the TPRB for 
contributing to the meeting's useful exchange of vi ews.  Indonesia's response to the large number of 
questions is also much appreciated. 
120. Members commended Indonesia on its impressive  economic performance, with annual GDP 
growth averaging over 5% between 2003 and 2007.  At the same time, macroeconomic vulnerabilities 
have declined, despite a daunting number of natu ral catastrophes and setbacks.  To many Members, 
fiscal consolidation appeared to be the hallmark of  economic policy with the narrowing of the fiscal 
deficit, the reduction in public debt, and the con sequent overall improvement in Indonesia's external 
position.  However, the low leve l of taxes relative to GDP appears insufficient to meet its 
developmental needs.  Members commended Indon esia's ambitious reform programme, covering 
infrastructure, investment, and the financial sector , which aims to improve economic growth, increase 
employment, and reduce poverty.   
121. Nevertheless, they noted that continued economic reforms – in particular measures to improve 
the investment climate and infrastructure investment  – are necessary to help sustain higher rates of 
growth of between 6% and 7% in the short term in order to help reverse the rising trend in 
unemployment.  Several Members noted that the recent passage of the new Investment Law constituted, in principle, a positive step in improvi ng Indonesia's investment climate for both foreign 
and domestic investors.  However, some Members al so pointed out that there remain a number of 
unresolved issues regarding the law's implementation,  notably the uncertainty for investors regarding 
the transparency and scope of the new negative list  of sectors that is under preparation.  Such 
uncertainty could hamper attainment of the Governme nt's stated objective of attracting foreign direct 
investment, which, a decade after the Asian financia l crisis, remains at a low level, implying that 
significant barriers persist.  
122. Members appreciated that Indonesia  had reduced  its average applied MFN tariff to 9.5% in 
2006;  but it was noted that products such as alc oholic beverages and cars are subject to relatively 
high tariffs of over 60%.  Indonesia, which has bound over 93% of its tariff lines, was urged by some 
Members to bind all of its tariff lines and to bring them more in line with its applied rates, thereby 
improving the predictability of its tariff regime.  
123. Members commended Indonesia for measures unde rtaken to improve governance, to the 
benefit of the business climate, and encouraged I ndonesia to continue its efforts.  They also 
commended Indonesia for its efforts to strengthen protection of intellectual property rights by 
improving its legal framework to combat viol ations as well striving to assure effective 
implementation. Some Members enquired about prog ress in labour market and tax reform.  Members 
applauded Indonesia for its efforts on customs re form and for improvements made to the import 
system.  However, specific concerns were raised, inter alia,  about arbitrary customs valuation 
procedures, lack of transparency on the part of customs authorities, discriminatory SPS measures, as 
well as restrictive import licences in the textile sector.   
124. Indonesia's active role in the multilateral tradi ng system was commended, in particular its 
leadership role as coordinator of the G-33, and also  its role as an active member of the Cairns Group 
and the G-20.  Indonesia is well placed to contri bute to the development of special products, SSMs 
and other provisions for developing countries and Members encouraged it to continue to work 
constructively to resolve outstanding issues to br ing the Doha Round to a successful conclusion. WT/TPR/M/184 
Page 26  
 
  Members also noted Indonesia's involvement in pr omoting regional trade liberalization through APEC 
and ASEAN as well as through bilateral  trade agreements.   
125. Members noted the improved performance of a number of Indonesia's services sectors, such 
as telecommunications and financial services wher e reform has been most marked.  Nonetheless, 
some noted that reforms in services have been une ven and limited in scope, and foreign investment 
restrictions remain.  They were also concerned that inadequate infrastructure, particularly in transport, 
remains a bottleneck for a country that consists of thousands of islands.   
126. This Review has been most informative a nd has afforded many useful insights into 
Indonesia's trade policies and practices and the cha llenges it faces.  I would once again like to thank 
the Indonesian delegation, the discussant, and Memb ers for contributing to an enlightening two days 
of discussions.  We look forward to receiving Indo nesia's responses to outstanding questions within 
the next month. 
__________