Ministry of Trade Republic of Indonesia

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Ministry of Trade Republic of Indonesia
Update on Trade and Investment Policy
H.E . Dr . Mari E. Pangestu Minister of
TradeRepublic of Indonesia
Update on Indonesian Economic Reform Jakarta,
December 18th, 2006
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Proposed New Investment Law

• New Investment Law
• Submitted to Parliament in March 2006
• Final stage of discussion on going in Parliament,
  even during recess
• Finalization phase expected when Parliament
  resumes session on January 8th 2007
• The Law is expected to provide conducive
  environment for investment in Indonesia
• Equal treatment between foreign and domestic
  investors
• Clear definition of sectors closed/open with
  condition
• Streamlining of procedures for investment
• Protection from nationalization and expropriation

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IMPROVING INVESTMENT CLIMATE(Proposed New
Investment Law) - Contd

• Will be accompanied by implementing regulations
  and fiscal incentive package
• - Fiscal incentive package will be given
  to new investors for selected sectors (e.g.
  Pioneer sectors) and regions investment
  allowance (6 years, 30), carry forward losses 10
  years and accelerated depreciation (PP148 and
  revised Tax Law)
• - Others
• sectors closed/open with conditions (criteria
  national interest health, moral, national
  security, environment)
• streamlined procedures for investment
• integrated investment services
• clear division of authority and responsibility
  between central and regional government.

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Tariff and Trade Measures

• The government announced a medium term tariff
  harmonization program. The program, announced in
  February 2006, aims at moving toward a low and
  uniform tariff rate and specifies a tariff
  reduction schedule between 2005 and 2010.
• According to the schedule, 94 percent of all
  tariff lines would have rates at or below 10
  percent. The remaining 6 percent of tariff lines
  (sensitive sectors) would have their rates
  reduced to 10 percent by 2020.
• There are very few non tariff measures, confined
  mostly to agriculture products

Distribution of Tariff Lines by Tariff Band
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Tariff and Trade Measures cntd.

• Improvements in trade facilitation measures
• National and ASEAN Single Window (one stop
  service for processing of import and export
  documents/procedures)
• Batam Pilot Project, 2007 Tanjung Priok
• 25 government agencies (collection of documents,
  standardization)
• Transparency of standards

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The Ministry of Trades business regulation and
licensing efforts

• Ministry of Trade (MoT) is actively improving
  Indonesias business regulation and licensing
  system. Reforms in this area are supporting the
  improvement of the investment climate by
  providing more certainty and reducing the
  high-cost economy.
• The MoT implemented reforms to the business
  regulation and licensing system in two tranches
  December 2005 and March 2006.
• These reforms simplified the licensing
  procedures, reduced the maximum number of days to
  be granted a licence and, where possible, reduce
  the administration fee for a licence. The reforms
  also clarified the responsibility on some
  licensing arrangements between the regional and
  central governments. These reforms were for
  licences covering franchisors, distributors and
  trade businesses.
• These licensing reforms are the first step of
  many. We will continue to review and reverse
  relevant regulations in line with improving the
  competitiveness of the Indonesian economy.
• This streamlining and simplification will support
  an important policy objective of the Government.
  That is, to reduce the time it takes to establish
  a business from 150 days to around 30 days. We
  are under no illusion that this 30 day objective
  will take time to achieve. MoT will be working
  with the Minister of Justice and Human Rights,
  which is responsible for part of the business
  licensing process, in moving towards this
  objective.

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Special economic Zones islands of excellence
and best practices

• The Government has recently announced plans to
  develop seven new special economic zones. These
  will be located in certain geographical areas to
  create hubs of economic development. The
  Government is focusing on specific areas or
  islands of excellence because it is easier to
  remove supply-side constraints from small
  geographical areas than the whole economy.
• Efficient regulation and licensing will be a
  crucial part of these new special economic zones.
  Each zone will have a single zone authority which
  will provide best practices in terms of services
  to investors. This will involve the streamlined
  provision of necessary licenses and permits from
  the central and local governments to operate in
  the zones, provide services to resolve problems
  and provide an efficient supporting
  administrative services in various areas such as
  customs, import and export procedures.
• The Government is currently working on a criteria
  to identify viable areas for these zones. Some of
  the issues under discussion in developing the
  criteria are areas which already have supporting
  infrastructure, a cluster of supporting
  industries and access to inputs of production
  such as skilled labor.
• The Governments initiative to improve business
  regulation and licensing is like a two pronged
  approach. First, to improve business regulation
  and licensing across the whole country such as
  those initiatives outlined in the Investment
  Policy Package. Second, providing best practices
  in investment services to business in special
  economic zones.

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Indonesias Multi track strategy in
International Trade Negotiations

• Multilateral World Trade Organization, Doha
  Development Agenda
• Regional
• ASEAN Economic Community goods, services
  (partial), investment (partial), mutual
  recognition agreements, customs procedures and
  ASEAN Single Window by 2008
• ASEAN China Free Trade Agreement (ACFTA) goods,
  and beginning in services
• ASEAN Korea FTA (AKFTA) goods
• ASEAN India FTA (still in negotiations)
• ASEAN Japan FTA (still in negotiations)
• ASEAN Australia New Zealand FTA (AANZFTA) (still
  in negotiations)
• Bilateral
• Indonesia Japan Economic Partnership Agreement
  (IJEPA) - agreement in principle on major elements

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Indonesia Japan Economic Partnership Agreement

• First comprehensive agreement for Indonesia
  goods, services, movement of natural persons,
  IPR, investment, government procurement,
  competition policy, energy and mineral resources,
  and most importantly cooperation (capacity
  building), and
• Negotiations since mid 2005, end of November 2006
  agreement in principle on major elements.
• Remaining process necessitates finalization of
  details and passing of law/regulation. Target
  implement EPA before end of 2007.
• Main objectives
• Indonesia increased market access and
  investment, movement of natural persons,
  complementary capacity building
• Japan legal certainty, energy cooperation

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Indonesia Japan Economic Partnership Agreement

• Main highlights and expectations
• Goods Japan offers 90 fast track (tariff to
  zero) upon implementation, rest 3-10 years and
  capacity building (e.g. standards, technology)
  for agriculture, forestry, fishery, and
  manufactured products (e.g. processed foods,
  supporting industries). Important for labor
  intensive sectors such as textiles and textile
  products with average tariff now of
  6.7.Indonesia offers 30 fast track upon
  implementation rest over 3-15 years.
• Investment and improvement of business
  environment
• investment climate improvement through
• Strategic Investment Action Plan (since 2005) 118
  actions in major areas (tax, customs, labor,
  competitiveness) and 10 priority actions mostly
  completed or in progress (bilateral forum but
  outcomes are for all)
• will be continued under EPA with permanent sub
  committee focusing on investment climate and
  promoting business confidence (government and
  business sector from both countries)
• Expectation Investment in supporting industries
  (mold and dye), agriculture and aquaculture,
  infrastructure, energy related.
• Movement of natural persons heath care (nurses,
  caregivers), hotel and tourist industries, more
  internship and technical training

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Indonesia Japan Economic Partnership Agreement

• Main highlights and expectations
• COOPERATION most important component to ensure
  optimal benefits of EPA for Indonesia
• Focused on the priority sectors and areas (e.g.
  standards, worker training, energy conservation)
• Permanent sub committees to ensure effectiveness
  and sustainability

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High Level Public/Private Sector Joint Forum on
Investment (JFI)/Strategic Investment Action
Plan (SIAP)

• Consist of Plenary Meeting and Committee/ WG
  Meetings.
• Members Governments and Business from both
  countries
• Working jointly to accelerate the implementation
  of the SIAP which composed of 118 concrete
  actions/measures
• WGs covers
• Tax
• Customs,
• Labor,
• Infrastructure and
• Competitiveness/SMEs

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The High Level(contd)
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Progress of SIAP
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Indonesias Multitrack strategy in International
Trade Negotiations

• Multilateral World Trade Organization, Doha
  Development Agenda
• Regional
• ASEAN Economic Community goods, services
  (partial), investment (partial), mutual
  recognition agreements, customs procedures and
  ASEAN Single Window by 2008
• ASEAN China Free Trade Agreement (ACFTA) goods,
  and beginning in services
• ASEAN Korea FTA (AKFTA) goods
• ASEAN India FTA (still in negotiations)
• ASEAN Japan FTA (still in negotiations)
• ASEAN Australia New Zealand FTA (AANZFTA) (still
  in negotiations)
• Bilateral
• Indonesia Japan Economic Partnership Agreement
  (IJEPA) - agreement in principle on major elements

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Thank You