EU-INDONESIA BUSINESS DIALOGUE 2013

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EU-INDONESIA BUSINESS DIALOGUE 2013

Recommendations for Increased Trade and Investmentbetween Indonesia and the European Union

21st and 22nd of October 2013, Jakarta

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23 October 2013

This paper do not reflect any official governments position.

For further information please contact:

Indonesian-Benelux Chamber of Commerce (INA)Menara Jamsostek Building Tower A 20th Floor R. 2002 Jl Gatot Subroto No. 38Jakarta 12043Tel : +62 21 52902177Fax : +62 21 52902178Email : [email protected] : www.ina.or.id

British Chamber of Commerce in Indonesia (BritCham)Wisma Metropolitan I, 15th FloorJl. Jend. Sudirman Kav. 29-31Jakarta 12920Tel : +62 21 522 9453Fax : +62 21 527 9135Email : [email protected] : www.britcham.or.id

Indonesian Chamber of Commerce and Industry (KADIN Indonesia)Menara Kadin Indonesia, 24th floor Jl. H.R. Rasuna Said X-5 Kav 2-3 Jakarta 12950 Tel : +62 21 527 4503Fax : +62 21 527 4505Email : [email protected] : www.eibd-conference.com

German-Indonesian Chamber of Industry and Commerce (EKONID)Jl. H. Agus Salim No. 115Jakarta 10310Tel : +62 21 3154685Fax : +62 21 3157088Email : [email protected] Website : www.ekonid.com

Indonesian French Chamber of Commerce and Industry (IFCCI)Jl. Wijaya II No. 36, Kebayoran Baru Jakarta 12160Tel : +62 21 7397161Fax : +62 21 7397168Email : [email protected] Website : www.ifcci.com

European Business Chamber of Commerce in Indonesia (EuroCham)Wisma Metropolitan 1, 13th FloorJl. Jend Sudirman Kav. 29-31 Jakarta 12920 IndonesiaTel : +62 21 571 0085Fax : +62 21 571 2508Email : [email protected] : www.eurocham.or.id

eurocham

APINDO (Asosiasi Pengusaha Indonesia)Gd. Permata Kuningan Lt.10Jl. Kuningan Mulia Kav. 9CGuntur - SetiabudiJakarta Selatan 12980Tel : +62 21 8378 0824Fax : +62 21 8378 0823 / 8378 0746Email : [email protected] : www.apindo.or.id

TABLE OF CONTENTSIntroduction .................................................................. 3EIBD 2013 - Roundtable of Indonesian and European Businesses ..................... 5Sectors 1. Automotive ....................................................... 7 2. Food and Beverages ....................................... 29 3. Infrastructure ................................................... 43 4. Pharmaceuticals ............................................. 53 5. Textile and Footwear ....................................... 61Cross Sector Topics 1. Intellectual Property Rights ........................... 71 2. Sustainability .................................................... 81


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INTRODUCTION

Indonesia and the European Union have a strong relationship. Companies from the European Union have invested over US$ 130 billion in Indonesia and employ more than 1 million Indonesians. Indonesia is one of the European Union’s most important suppliers of a large number of essential commodities. In the last ten years, Indonesia’s exports to the European Union have doubled to US$ 22 billion.

The economies of Indonesia and the European Union are a perfect fit: the range of goods traded is largely complementary. This makes the relationship between the two economies of strategic importance to both.

At the same time though, the potential of trade and investment between Indonesia and the European Union is far from being fully utilised. European technologies in areas such as energy, transportation and agriculture are available to increase the competitiveness of the Indonesian economy, and European buyers appreciate the quality of a wide range of Indonesian products including food, garments, interior decoration and electronics.

Regulatory and social developments in the European Union and Indonesia however, may create impediments to trade and investment. The Indonesian Chamber of Commerce and Industry (KADIN Indonesia) and the joint European Chambers of Commerce in Indonesia (BritCham, Ekonid, EuroCham, IFCCI and INA) are conducting the EU-Indonesia Business Dialogue (EIBD), in order to identify these impediments and to jointly recommend solutions. These recommendations are summarised in this booklet, and they provide a guide to the actions to be taken in five important sectors and in a number of cross-sector issues.

Governments, but also the business communities in the European Union and in Indonesia, have a shared responsibility to remove impediments to trade and investment, for the benefit of the people in Indonesia and in Europe. The EIBD identifies win-win situations for private businesses, leading to overall sustainable economic growth and creation of employment.

Let us all work together to achieve this.


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EIBD 2013Roundtable of Indonesian and European Businesses

October 21, 2013

RecommendationsThe EIBD Roundtable is a dialogue between Indonesian and European business leaders to formulate possible solutions and joint recommendations on issues that affect trade and investment between the European Union (EU) and Indonesia.

Reiterating the report and the recommendations of the Indonesia-EU Vision Group (2011) the EIBD Roundtable recognizes the strategic importance of the EU-Indonesian economic and political relationship for both sides and the fact that both sides stand to win significantly from a strengthened relationship. The particular challenges of building supply chains in a very large emerging economy like Indonesia should be reflected in the EU’s capacity building programs and also those of the EU Member States.

The EIBD Roundtable 2013 has formulated the following recommendations:

1. Barriers to Trade

a. International product and labeling standards ensure that products and services are safe, reliable and of good quality. However, national Indonesian standards are not always consistent with internationally accepted standards; this problem exists in the Indonesian automotive sector, but also in the food sector in both the Indonesian and the European market. Indonesian companies are also struggling with the REACH regulations and excessive audits for exporting to EU.

b. Indonesian SMEs only have limited access to European market information, requirements and export techniques.

c. As a middle income country Indonesia does not qualify for the lowest European tariff categories. This not only affects the textile industry but also exporters of palm oil and agro-products. Other Asian countries enjoy a more favorable market access, esp. once their bilateral agreements with the EU are concluded.

RECOMMENDATIONS

• Indonesia should aim at adapting and implementing standards that comply with internationalstandards.TheEUandtheMembersStatesshouldcontinuetosupportthis,withadequatesupportfrom the Indonesiangovernment. Thesecapacity developmentprogramsshall be focusedand


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concentratedontheprivatesector,takingintoconsiderationthespecificweaknessesofIndonesianindustries.

• Interruption of trade and investment should be minimized by applying the principles of self-declarationandmutualrecognitionoftestingasmuchaspossible.

• TheGovernmentofIndonesiashoulddevelopamid-termExportPromotionStrategyforIndonesianSMEs.ThedesignofthisstrategyshallalsorelyontheinputfromtheprivatesectorsandliaisewiththeexportdevelopmentprogramsofferedbyEUMemberstates.

• Basedonanambitious,butalsorealisticscopeofthetopicstobecovered,EuropeanandIndonesianbusinessleaderscalledforthegovernmentsofIndonesiaandtheEUtoswiftlystartnegotiationsforaCEPA.

2. Investment Regulations

Indonesia and the EU countries welcome foreign investment, but apply restrictions. The two business communities believe that investment restrictions are counterproductive to stimulating economic growth, job creation and employment and that, where necessary, partnerships between international and Indonesian companies should be stimulated, not regulated.

A more favorable investment climate in Indonesia will also help to secure a larger share of Europe’s current investments to ASEAN.

RECOMMENDATIONS

• TheNegativeInvestmentList(DNI)shouldregularlybeevaluated,takingintoconsiderationgeneraleconomicandsocialrequirementsofIndonesia,notonlypurelysectoralinterests.

• ChangestobusinessregulationsshallnotoverruleorthwarttheDNI.Thehierarchyoflawshastoberespected;theintra-governmentaldialogueshallbeimproved.

3. Rule of Law & Intellectual Property Rights (IPR)

There is no shortage of laws and regulations in Indonesia that meet international standards. The Indonesian Government and Parliament are working on law reform and have made many improvements in recent years. Despite the lack of or delayed introduction of implementing regulations, the Indonesian legal system offers sufficient protection for the legitimate interests of businesses.

A major problem constitutes the lack of enforcement of laws and regulations, by executive as well as legislative institutions. This is true for registering and protecting the different claims associated to IPR (Patents, Trademarks, Geographical Indications (GIs), Copyrights, Industry Design and Trade Secrets). This is equally true for other fields of law, such as property rights and general legal claims.

RECOMMENDATIONS

• IPRenforcementinIndonesiashouldbestrengthened,especiallyprotectionontradesecretsandpiracy.Aneasierregistrationprocess,abetterlawenforcementofIPRandstrongerregulationsontradesecretsinIndonesiaareimportant.TheexistingEUcapacitydevelopmentprogramscanbeinstrumental.

• AsGIsareacrucial instrument forprotectionof IndonesianandEUproductoriginnamesbothgovernmentsarerequestedtosignificantlyexpandthenumberofIndonesianGIs.

• Theprocess of law reformshall be continuedwith highpriority, to ensure a competitive legalbusinessenvironment.Thefurtherstreamliningofcourtproceduresandtheimprovementoftheenforceabilityandsanctityofcontractsareimportantelementsofthisreformprocess.

SECTOR AUTOMOTIVE


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SECTOR

AUTOMOTIVE

1. Global Situation and trends for the development of the automotive industry

The automotive industry is one of the most prosperous industries worldwide, showing a steady increase in production and sales the last decades. The production figures have increased from 69.2 million units in 2001 to 84.1 million units in 2012 while the sales of automotive vehicles grew from 74.66 million to 82.1 million, 2010-2012.

In terms of production, China tops the list with 19.3 million produced vehicles, the US ranks 2nd with 10.3 million units and Japan 3rd with 9.9 million units produced in 2012. Indonesia produced 1.06 million vehicles 2012 and ranks 17th. China also holds the first position in terms of selling automotive vehicles with 19.3 million sold units, followed by the US with 14.8 million and Japan with 5.4 million sold units in 2012. From the world’s total sales of 82.1 million (2012), Indonesia sold 1.1 million and therefore ranks 14th, up three positions from previous year’s ranking at 17. Overall, analysts expect growth of 5-10% in the auto market in all regions but Europe where a decline of 7-8% in the upcoming years is predicted.

While future trends indicate growth of the global automotive industry, two major changes are taking place: 1) the supply chains for automotive car makers are enlarging. Companies are constantly looking into potential new production bases, and components are coming from all over the world. Countries compete with each other to attract foreign trade marks. 2) A change in demand is also predicted. Consumer demand is indeed transitioning from affordable and convenient vehicles to safe and environmentally friendly cars. By introducing new, progressive technologies the car manufacturers are adapting to these changes. In order to remain competitive in this environment, local industries need to adapt their production to the international requirements and increase their quality standards.

The ASEAN region is predicted to become the fifth largest automotive market on the globe by 2019, with an expected compound annual growth rate (CAGR) of 5.8% (2012-2019). The driving forces behind this development are Thailand, Indonesia and Malaysia, as they are the main production bases in ASEAN. The volume of intra-ASEAN trade in the automotive sector is very high and the three leading industries appear complementary as the Thai industry focuses on the production of trucks, the Malaysian industry on the production of medium sized passenger cars and its national brands and the Indonesian production on passenger cars.

In 2012, all three regional production bases have shown record highs in selling automotive vehicles, with Thailand and Indonesia hitting the one million mark and Malaysia with 600,000 sold units. Assessing


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exports of ASEAN member states to the world, Thailand is by far the largest exporter with USD 136 billion of overall value in 2012, compared to Indonesia with USD 4,7 billion and Malaysia with USD 1,7 billion. Thailand is currently the forerunner in terms of overall production, Malaysia is however underway to become the regional hub of hybrid and electric vehicles, indicated by a 84% raise of sold units from 2010-2012.

The Indonesian automotive industry shows great market potential and most analysts predict that it will become the regional automotive hub by 2019, due to various reasons. Firstly, the current car ownership is still low compared to the other regional industries (Indonesia: 80/1000 persons, Thailand: 123/1000 persons, Malaysia: 300/1000 persons). Due to the country’s rapidly growing middle class the demand for vehicles are likely to increase with the purchase power. Secondly, the Government of Indonesia shows great ambitions regarding the development of its industry and is on the way to setting up the necessary programs to meet some of them. Thirdly, while some ASEAN countries are facing an important shortage of labor force, Indonesia is likely to experience positive developments in terms of production with more than 60% of Indonesia’s population in the production group of age, between 20-60 years old.

While the future outlooks seem very promising, indicating a ‘golden-age’ period coming up for Indonesia they are not without major challenges. One of the main challenges is the current reluctance of aligning with the international standards, an indispensable step in order for the local industry to strengthen its position in the automotive global supply chain, boost exports to non-ASEAN countries as well as attract further foreign investments. Additionally, high import duties, heavy administrative procedures and technical regulations, as well as poor infrastructure, low fiscal incentives and a lacking of testing facilities are great challenges to the future growth of the automotive sector.

Over the past years and despite a very small market share (2 – 3%), a slow but constant growth of the European cars’ sales was witnessed with an increasing number of European brands, the development or the extension of the production facilities and a better penetration of the different segments of the market with the diversification of the models proposed.

The EU is the world’s largest producer of motor vehicles. The EU industry has always been keen to contribute to the development of the Indonesian automotive industry and the Indonesian economy in general. Indeed the EU automotive industry is generally a key industry in providing jobs, exports income, R&D and innovation and plays a decisive role in the transition to sustainable growth and mobility.

• The EU automobile manufacturers provide over 10% of EU manufacturing employment, with 3.5 million direct jobs and another 9.1 million jobs indirectly.

• Automobile manufacturers are the world’s technology leaders.• They are the largest private investors in R&D in the EU and play a large role in the innovation and

knowledge-based economy of today and tomorrow.The present paper aims at highlighting the issues affecting trade and industrial cooperation between the European and Indonesian industries. The present paper also aims at giving recommendations in order for the Indonesian automotive industry to unleash its full potential.


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2. Remaining issues & Key recommendations

2.1. General Recommendations

2.1.1. Enhance the communication platform between the automotive industry players and the Government of Indonesia

The Government of Indonesia has shown a great commitment to the development of the automotive industry and to the concerns of foreign cars and parts’ makers. The European automotive companies are key to the future of the Indonesian industry as they are among the market leaders in terms of R&D, innovation and technology advancements.

A good communication between the Government of Indonesia and the automotive industry players, European and Indonesian, ensures a joint comprehensive strategy for the development of the Indonesian automotive industry.

RECOMMENDATIONS

The European automotive industry therefore recommends enhancing the existingcommunication between representatives of the Government and of the industryviasystematicconsultationsandworkinggroupmeetings.Thisenhancedplatformwill contribute to easing possible regulatory uncertainties andmake possible thedevelopment of a joint comprehensive strategy for the future of the Indonesianautomotiveindustry.

2.1.2. Strengthen and harmonize the ASEAN automotive market

In 2019, ASEAN is foreseen to be the fifth largest automotive market in the world (after China, the US, India and Brazil). With an overall population of almost 600 million inhabitants and a combined GDP of USD 2 trillion, ASEAN will keep on attracting automotive global players keen on tapping the local demand and looking for new production bases.

The different member states’ automotive industries are complementary and the intra-ASEAN volume of trade in the automotive sector is already high. In order to strengthen this trend and for the local industries to remain competitive in the global automotive supply chain, all the ASEAN Member States need to keep on working towards the reduction of internal trade barriers.

InordertofacilitatetheexchangeofautomotivegoodsinASEANandtoallowASEANtomeet its target tobecomethe5th largestautomotivetradeblock, theEuropeanindustryurgesIndonesiaanditsneighborsto:

• Alignthefuelqualityandemissionstandards

• Harmonizetherulesoforigin

• Createasingleregulatoryregimeforapprovalandhomologation

• Implement the ASEAN MRA on automotive types of approval and allow themutualrecognitionofinternationalUNECEstandardstoavoidlimitationbythelocaldemandandgrowexport

2.1.3. Encourage the Indonesian automotive components’ companies to go tap the European market

With a combined population of over 500 million inhabitants and the largest nominal GDP in the world (USD 16.6 trillion), the EU is a key market for companies worldwide.


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Despite a significant volume of automotive exports from Indonesian car parts’ manufacturers towards the EU (mostly tires), a large potential is yet to be unlocked. The reasons for this untapped potential are partly due to a lack of know-how and the non-compliance of the Indonesian manufacturers to the international automotive standards (UN Regulations set up in the UNECE 1958 Agreement), but as well to a lack of visibility of the Indonesian companies and products in the EU.

To successfully carry their success stories in Europe, the European automotiveindustryrecommendstotheIndonesiancarparts’manufacturerstointensifytheirpublicrelationsandvisibilitycampaignsintheEU.Companiesshouldbeappointedin order to lobby the automotive industry in Europe. Furthermore, it is highlyrecommendedtotheGovernmentofIndonesiatoencourageitslocalmanufacturersin this approach and to consider providing incentives to Indonesian companiesworkingactivelytowardsdevelopingtheirexports.

2.2. New IKD Scheme

The Government of Indonesia is targeting an annual production of almost 1.65 million vehicles by 2015. In order to achieve this target, some regulations which could support the development of the national automotive industry need to be issued by the Government – such as the revision of the IKD (Incomplete Knock-Down) Scheme.

TheIKDSchemeisproposedtobebroadenedtoincludealltypesofvehicles,thusattractautomotiveindustrytoinvestmoreinIndonesia.TheIKDSchemefortruckandbuswasapprovedin2010,with0%importduty.ThenewproposalistoharmonizetheIKDSchemetoall typesof vehicles.Currently, IKD importduty fornon-truckandbusmotor vehicleis7.5%,and theproposal is toharmonize it tobecome0%.Considering thesignificantimportance of new IKD scheme for supporting the further development of the nationalautomotiveindustry,itisstronglyrecommendedtoissuethisregulation.

2.3. Regulatory issues

2.3.1. The implementation of certain mandatory SNI (Indonesia National Standard) affects the development of the Indonesian automotive industry

SNI is currently regulating most of the car parts either produced locally or imported. Harmonizing SNI with international automotive standards (UN Regulations) would have significant positive impacts on the development of the Indonesian automotive industry and allow local manufacturers to export to all countries contracting parties of the UNECE 1958 Agreement (among others the EU, Japan, South Korea). The Government of Indonesia has or is planning to make mandatory various SNI for car components, e.g. SNI for braking system, rear-view mirror, etc. the Government is also planning to impose mandatory SNI certification for CBU (Completely Built-Up) cars, which will require SNI certification for tires, mirror, windscreen and other components.

This development is seen as problematic since SNI certification and testing system proved to be lengthy and costly, adding an unnecessary burden on manufacturers and importers:

• SNIs sometimes deviate from international standards (UN Regulations) for automotive products.


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• Even though they could be based or inspired by international standards, testing should be done in Indonesia and not in the laboratory of the foreign factory as before (which increases the time for approval). In addition, the certification system requires audits and annual surveillance to be carried out by Indonesian certification body in all the foreign factories, thus creating significant bottlenecks.

• There is a clear lack of testing infrastructure in the country which significantly complicates the business operations for both importers and exporters.

In general, the application of domestic automotive standards, different from international standards, can potentially contribute to setting Technical Barriers to Trade (TBT) and non-tariff barriers (NTB) to both EU and Indonesian exports, affecting bilateral trade. Therefore, whenever possible, the Government of Indonesia should avoid using standards that deviate from international standards or create unnecessary burdens for producers and manufacturers. In order to facilitate trade and investment flows in the automotive sector, Indonesia should sign the UNECE 1958 Agreement as soon as possible. Adhering to the Agreement will indeed bring great benefits for Indonesian consumers, manufacturers and authorities alike. First, participation in the international regulatory process will allow both government and national manufacturers to influence it. Second, by implementing international and harmonized standards, Indonesian producers will raise the quality of their production and will automatically access foreign markets that recognized those standards (mutual recognition). Third, Indonesian consumers will benefit from increased vehicle safety and environmental performance guaranteed by those international standards.

RECOMMENDATIONS

Hereby,theEuropeanautomotiveindustryandGAIKINDOhighlyrecommendtotheGovernmentofIndonesiato1:

• SigntheUNECE1958AgreementinordertobecomeapermanentvoiceintheWP.29meetingsandstronglycontributetotheoveralldevelopmentoftheautomotiveindustryworldwide.

• ImplementprogressivelytheUNRegulations,takingintoaccountthecharacteristicsofitslocalindustry,takingasastartingpointthe19UNRegulationsidentifiedintheASEANMRAontypeapprovalforautomotiveproductsandsystems.

• Develop a technical authority and appoint qualified testing laboratories to test and approveautomotive products and systems to the UN Regulations in order that approval under theUNECEcanbe issued in Indonesia.Utilize the laboratoriesof thecarsandcarcomponents’manufacturers,aswellasindependenttestingfacilitiesforthispurpose.

• Identifythecapacity/knowledgegapsin its industryandcertificationbodiesandutilizetheexisting technical assistance programs to fill them in (JASIC, EU funded ARISE project, EUfundedTSPIIProgram).

• Respecttheprincipleofmutualrecognitionandapproveanymanufacturer’sregulatedproduct(‘E’marking),regardlessofthecountryinwhichthatcomponentwasproduced.

WithintheframeoftheUNECE1958Agreement,Indonesiawillnotlooseitssovereigntyoveritsautomobilemarket,butratherpositivelystimulateitsdomesticmanufacturersandtransformIndonesiaintoamoreadvanced,technology-drivenautomotiveindustry.

2.3.2. ASEAN Mutual Recognition Agreement

Since 2003 and the decision to form an ASEAN Economic Community, the ten ASEAN member states have been working together towards a greater regional integration, picturing ASEAN as a single market and production base. An open regional market would indeed facilitate

1 Kindly refer to the following position paper: “Prospects for the development of the Indonesian automotive industry”.


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the transfer of goods, capitals, services, investment and labor, further strengthening on the international stage a market of no less than 600 million people and combined GDP of USD 2 trillion.

In the automotive sector, the ASEAN Member States have agreed that the UN Regulations set up in the UNECE 1958 Agreement should be the basis for the harmonization of technical regulations for automotive products in the region.

There are 140 UNECE regulations as of today, in which some are only suitable for cold climates and are not suitable for the tropical region. The immediate adoption of all regulations would be inefficient.

The MRA will provide a mutual frame of recognition for the conformity assessment results (testing, inspection and certification) of the 19 automotive systems identified as priority:

Component Regulation number

Braking systems R13Braking systems (passenger car) R13HSeat belt anchorage R14Seat belt R16Seats R17Head restraints R25Pneumatic tire–passenger R30Speedometer (L category) R39Exhaust emission (L category) R40Noise (L category) R41Safety glass R43Rear-view mirror R46Diesel emission R49Noise emission R51Pneumatic tire–commercial R54Driver Operated Control R60Tire (L category) R75Steering equipment R79Exhaust emission R83

However, there is currently a slight difference of interpretation between the Government of Indonesia and the automotive industry. Two options to implement the ASEAN MRA are as proposed: 1) Marketed products: ASEAN countries must accept test report from origin country for products manufactured by non-ASEAN countries which are marketed in ASEAN countries. 2) Manufactured and marketed products: Non-ASEAN products marketed in ASEAN should be tested by ASEAN test facilities or – as understood by the Government of Indonesia - Non-ASEAN products marketed in ASEAN should be manufactured in ASEAN countries and tested by ASEAN test facilities.

It is deemed unfeasible for the automotive industry to apply the interpretation of theGovernment of Indonesia on manufactured and marketed products. The EuropeanautomotiveindustryandGAIKINDOproposetoapplythemarketedoption.TheASEANMRAneedstobeestablishedbasedonthetypeofapprovalsystemcoveringparts,systemandcomponents.


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2.3.3. Revision of Government Regulation No. 52 Year 2011 on Income Tax Facilities for Investment in Certain Business Lines and or in Specific Areas (“GR No. 52/2011”)

Previously, under the Government Regulation No. 62 Year 2008, all cars assemblers were eligible to apply for Tax Allowance Facility. However, the implementation of the Government Regulation No. 52/2011, exclude the cars assemblers of the sectors eligible for the Tax Allowance Facility (whereas car component companies can still apply for the Tax Allowance Facility).

TheEuropeanautomotiveindustryandGAIKINDOproposetoincludetheautomotiveindustryasabusinesssectoreligibletogetanincometaxfacilityintheframeofinvestment.

2.3.4. Proposal for Inland FTA (free zone) Schemes

Thailand has already implemented the ‘Customs free trade zones’ aiming at attracting foreign investment and promoting exports. To obtain the license to enter those free trade zones, the companies have to comply with certain legal and financial criteria and prove that they are using at least 40% of local content in their assembly chains. In return, all the companies installed in the free trade zone can import material necessary to the production with 0% import duty, and be eligible for a duty exemption or reduction if they are manufacturing goods to be exported overseas or sold domestically.

The application of such a scheme in Indonesia could have significant impacts: development of the national industry and the infrastructure, attraction of new investments. Despite those obvious benefits, the Government of Indonesia has shown some concern concerning the cost of implementing the necessary controlling measures.

The European automotive industry strongly recommends the implementation of such aschemeandstronglysupportstheideathatthecostsforthecontrolsshouldbedeemedbythecompaniesenteringthefreetradezone.Inparallel,theGovernmentofIndonesiahas to ensure a strict control over the grant of the licenses to the companies. Eachcompanyapplyingfor theentry inthefreetradezoneshouldcomplywithveryspecific,pre-determinedcriteria.

2.3.5. Importation of used trucks

By nullification of the Ministry of Industry and Trade Regulation No. 756/MPP/Kep/12/2003 on importation of capital goods in used condition, the importation of CBU used truck is prohibited. But up to now, the importation of CBU used truck is still ongoing, by using stipulation in article 10 in Minister of Trade Regulation No. 48/M-DAG/PER/12/2011, which the industry believes should not be applied on importation of CBU used truck.

Considering the negative impact that the importation of CBU used trucks have on thedevelopment of the national truck industry aswell as the danger it represents to roadusers,theEuropeanautomotiveindustryandGAIKINDOproposetotheGovernmentnottoissueimportlicensesforCBUusedtrucks.Tosupportthelogisticssectorrelatedwithtruckprocurement,theGovernmentcouldstipulatelowerinterestratefortruckpurchases.


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2.3.6. Bonded Zones Regulation

Minister of Finance Regulation No. 147/PMK.04.2011 on Bonded Zone (“MOF Regulation No. 147/2012”), as amended lastly by Minister of Finance Regulation No. 44/PMK.04/2012 (“MOF Regulation No. 44/2012”), stipulate a significant change relating to the sale of products from the bonded zone to domestic customers. Prior to MOF Regulation No. 147/2011, domestic sales up to a maximum of 50% of the current year production value were permitted. The new regulation stipulates that the delivery of bonded zone product to Indonesian customs area is only permitted in the maximal amount of 25% of export realization value in the previous year (2011).

Further, MOF Regulation No. 44/2012 allows capital goods which were imported prior to the issuance of MOF Regulation No. 147/2011 can be delivered from a bonded zone area to other customs area. MOF Regulation No. 44/2012 increased the limitation of delivery of Produced Goods back to 50% only up to 31 December 2012, provided that such Produced Goods still requires to be processed further, cannot function properly without being combined with other goods, and/or cannot be directly used by end consumer (intermediate goods).

TheEuropeanautomotiveindustryandGAIKINDOstronglyrecommendtotheGovernmentofIndonesiatoremovedomesticsaleslimitationforproductsprocessedinbondedzonearea.

2.4. Environmental Issues

2.4.1. Improvement of fuel quality standards and emission regulations

A high fuel quality with low sulphur content, for both petrol and diesel fuel, is essential for the introduction of modern low emission injection technologies. The low fuel quality in Indonesia is still the biggest hurdle for the introduction of such modern low emission technologies. Therefore, we are proposing the introduction of higher fuel quality standards (EURO 4) on par with more stringent emission regulations. This would lead to lowering emissions and the overall fuel consumption in Indonesia. This lower fuel consumption would result in lower dependency on crude oil imports and exposure to fluctuating prices and have the benefit of a smaller part of the state budget being spent on fuel subsidies. Furthermore, in order to prepare for the ASEAN Economic Community, the alignment of the fuel quality standards with other ASEAN Member States is essential.

TheEuropeanautomotive industryandGAIKINDOrecommend the introductionofhigherfuelqualitystandards(EURO4)asapre-requisiteforstricteremissionregulations.Thefuelqualityhastobeimprovedinordertoallowtheintroductionofenvironmental-friendlylowemissiontechnologies.Inpreparationfor2015anASEANwidealignmentisnecessaryinordertoguaranteefreemovementofgoodswithoutcreatingtechnicalbarriers.AdetailedmasterplanofdevelopmentofEuro4gasstationsshouldbedevelopedbytheGovernmentofIndonesia.

2.4.2. Bio Fuels

Indonesia, as the biggest palm-oil producer in the world, today has a major opportunity to introduce a biodiesel mixture (B5, B7). From a technical point view, engines are able to cope with biodiesel mixtures of B7 as a maximum. Higher blending would lead to technical problems and higher additional costs for both the consumer and the car producer. Additionally, in order to avoid technical problems and additional costs, a high fuel quality


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has to be ensured. It is therefore essential to increase the fuel quality before adding higher proportions of bio fuel.

TheEuropeanautomotiveindustryandGAIKINDOperceiveasnecessarytoimprovethefuelqualitybeforeincreasingthebiofuelmixings.FuelqualityshouldbeimprovedtoEuro4standardswithaB7biodieselmixture.

2.4.3. Technology neutral and emission based vehicle incentive program

Environmental issues are a major concern in the automotive industry worldwide. The Government of Indonesia released in July 2013 the LCGC and LCE program aiming at reducing the luxury tax on certain fuel-efficient vehicles. However this program takes as reference the fuel consumption usage and not the CO2 emissions.

To date, it becomes crucial for Indonesia to consider an overall long term plan for its automotive industry to achieve sustainable development including CO2 reduction and the promotion of the use of clean and efficient vehicles. Therefore, the excise tax for vehicles should be based on CO2 emission. This would encourage the use of low CO2 emission vehicles, thus, creating a premium price for clean and efficient vehicles.

It is also important to promote the availability of cleaner fuel (Euro 3 or 4) in Indonesia which can be used by more advanced and environmentally friendly engines used in greener vehicles now available in the international market. Currently such cleaner fuel is not available in the Indonesian market, making the entry on the market and the use of “greener” vehicles using higher standard fuel not possible.

Despite the recent introduction of the LCGC and LCE programs, the Government ofIndonesiashould introduce furtherschemesand incentives topromote theuseofcleanandefficientvehicles.TheEuropeanautomotiveindustryrecommendsatechnologically-neutralandemissionbasedtaxationbasedonCO2emissionforalltypesofpower-trainincludingpetrol,diesel,naturalgas(CNG),hybrid,andelectricvehicles.Anenvironmentalpolicyshouldbecreatedthatwillpromotethemanufacturingofcleanerfuelforthelocalmarkettoencouragetheuseofgreenervehicles

2.4.4. Government regulation No. 41/2013

In July 2013, the Government of Indonesia issued the regulation No. 41/2013 on Luxury Tax for Vehicles which also governs the luxury tax discount for vehicles with low carbon emissions (LCE program).

The aim of this regulation is to 1) increase the use of motor vehicles with low energy consumption and environmentally friendly; 2) support the energy conversion in the transportation sector; 3) support the effort to increase the capacity of domestic production of motor vehicle industry .

This regulation allows car manufacturers to apply for luxury tax discount if their vehicles are proven to consume less or equivalent of 1 liter of fuel / 20km (25% discount if ≥ 20-28 km/l; 50% discount if > 28 km/l).

However, the application of this regulation is not yet possible due to the missing technical guideline.


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Ingeneral,technicalguidelinesshouldbeattachedinannextoallregulationsissuedbytheGovernmentofIndonesiainordertoallowtheimplementation.

Regarding theregulationNo.41/2013, theEuropeanautomotive industryandGAIKINDOrecommend to utilize the testing protocol set up in the UN Regulation No. 101with aconstantspeedbetween60km/hourand80km/hourand toadapt it to the Indonesianmarket’scharacteristics:

• LCEcarsarenotdesignedascitycarsandaveragespeedforinter-citiesvehiclesinIndonesiaonprimaryarteryroadisbetween60km/hour-80km/hour.

• UsingUNRegulationNo.101testingmethod,thereisnoproductioncarabove1.4Lworldwidethatcanreachafuelconsumptionof20km/litre.

• Apply a 4% tolerance in accordance with the UN Regulation No. 101 technicalrequirements.


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SECTOR

AUTOMOTIVE“Prospects for the development of the Indonesian automotive industry”

Towards the harmonization of Indonesian and international

automotive standards

1. Executive SummaryWithin the past years, Indonesia has been on the road to establish itself as an automotive hub for the entire region and to become a major player in the Southeast Asia automotive industry. Vehicle sales have increased from roughly 300k in 2003 to 1.1 million in 2012 and glancing in the future, it is expected that vehicle sales as well as the production in the automotive manufacturing sector will reach new all time records. The accompanying industrial policies of the Indonesian government have played a major role in this astonishing development and hence will be even more important to a successful and sustainable expansion of their domestic manufacturing industry in the future.

Despite the bright outlook and high expectations, there are still some obstacles to overcome for Indonesia to reach out for the position as leading automotive hub in Southeast Asia. The implementation of the AEC put in place in 2015 will not only come along with new export opportunities but also with increased competition between the domestic industries and governments of the ASEAN countries, as some of them are trying to become the dominant regional automotive manufacturing hub. The major bulk to Indonesia within this race is currently the single focus on local production standards. A better alignment and improved capability with the international production standards represented by the UNECE could result in enormous benefits to Indonesian manufacturing facilities. The UNECE standards are accepted and applied by all major car brands and sales markets including but not limited to those of Europe, North America and Japan and therefore essential to a prosperous and export oriented automotive industry. An alignment to those international standards would therefore be essential for Indonesian manufacturers to extend their businesses globally.

A lack of adaptation to those standards might on the other hand lead to long term drawbacks for the Indonesian automotive industry. Due to the fact that global carmakers stick in the first place to the international UNECE standards, new technologies will, if at all, be introduced with major delays to unadjusted car markets and hence their automotive manufacturing industry. With production lines and technologies not up to date, global car makers might eventually move their preferences to other countries like Thailand or Malaysia. Furthermore, produced vehicles that do not fit the UNECE standards have very restricted options to be sold into overseas markets and are therefore not in the interest of exporting automotive manufacturers.

Another even more severe disadvantage resulting from not coping with international standards might turn out to be the structural loss of competitiveness. Shielding a local industry from international standards will necessarily exclude them from international competition. As this seems to have a


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slightly positive influence in the short term like an insignificant increase in domestic production share, it turns out that the long term consequences could be quite devastating. Without the need to keep up with new developments, an overprotected local industry will compulsorily lose its competitiveness to global manufacturers. With new technologies and cost reducing production schemes advancing in a free market, it is only a matter of time till it will be thrown back in terms of innovation, technology and efficiency with little chance of return. The longer an industry stays at this state of standstill, the more the competitive gap will widen and make getting back on track more difficult.

A development as described would not only prevent Indonesia from becoming the leading automotive hub in SEA but also consume the progress and achievements of the past years.

Becoming an exporting hub will be essential to Indonesia to create additional wealth in the post SEA economic boom area. With domestic economic growth slowing down eventually it might be essential to have an exporting industry to rely on. Thailand, with exporting rate at 60% of domestic car production, demonstrates impressively how such an industry can provide a countries economy with a strong backspin and ensure continuous growth in wealth.

In order to develop a leading exporting automotive industry, it is absolutely essential to adopt UNECE standards since cars not fulfilling those criteria will hardly find sales markets in overseas. An automotive industry only producing based on local standards will, as a matter of fact, not be able to export automotive parts or vehicles in a significant scale at all. For the current situation in the ASEAN market, the rush for the leading automotive hub could be decided by the adoption rate to the international UNECE standards. Whichever country will be leading in getting its automotive industry to produce according to these standards will have a major competitive advantage to other countries which might still struggle to get their manufacturers in shape and will yet not be able to export on a big scale. These countries will put themselves at risk to lose quickly the confidence and interest of international investors.

Therefore we strongly recommend the alignment of automotive products with international UNECE standards for following advantages:

1. Further enhancements of FDI’s by global car makers and by that, pave the road to a more advanced technology driven automotive industry in Indonesia.

2. Get the Indonesian automotive industry in shape to successfully compete in ASEAN and oversea markets now and in the future.

3. Indonesia becoming the leading automotive hub in SEA.

We see the Indonesian manufacturing industry on a good path into the future with prosperous opportunities. Following these recommendations, Indonesia would be provided with priceless advantages to strengthen their economy and therefore ensure steady and strong growth of wealth within the population.


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2. Indonesia’s automotive industry

2.1. State of play

For the first time in the Indonesian history, more than 1 million cars were sold in 2012, exceeding all predictions (rise of 25% compared to 2011). Analysts expect a similar sales’ growth trend in the upcoming years with projections up to 1.3 Million units sold in 2013 (up 16.5%). In the passenger vehicles’ segment, a raise of 7.6% is anticipated, with a growth very much driven by MPVs, SUVs and compact medium-small cars’ models. A similar growth trend of approximately 7.3% is predicted in the commercial vehicles segment.

Identified as one of the main sectors of growth and key to the development of the Indonesian economy, the Government of Indonesia has shown great ambition in regard to the development of the automotive industry in the country. Analysts expect that in the next few years Indonesia would become a world-class production base of automotive and component products as well as an export hub for the regional and global markets. The strategy of the Indonesian Government is divided into three components: 1) multiplying the automotive manufacturing facilities; 2) encouraging the expansion of its local component’s industry; 3) developing a domestic production base for environmentally friendly and low cost cars. Indeed, the Low Carbon Emission program and Low Cost Green Car Regulation just released by the Government could turn Indonesia as a major player in the regional market. With a commitment to provide fiscal incentives, including a reduction of a luxury-goods sales tax for locally made cost-effective green cars, the LCE program and LCGC regulation would significantly change the landscape of the domestic industry and differentiate it further from the other ASEAN automotive markets.

However, boosting the local manufacturing has appeared so far as a great challenge. The Indonesian automotive vehicle industry began to grow in the early 1980’s with the operation of a number of Trademark Holding Sole Agents (Agen Tunggal Pemegang Merk or ATPM). Originally, the Government of Indonesia hoped that the ATPMs would accelerate the process of transfer of technology while using high local content, and therefore further develop the country’s manufacturing industry. However, after 40 years, it is fair to say that the industry is still very close from its original position as the assembling industry still heavily relies on imports for the car components.

In general, the main activity of the Indonesian automotive companies is assembling (both intermediate goods – autoparts – or final goods – cars and motorcycles). The technology is mostly foreign, obtained through joint ventures with foreign technology-advanced companies, with Indonesian counterparts playing as suppliers of larger firms. As the majority of the inputs of the Indonesian firms are imported CKD parts, the local automotive industry merely assemble the CKD parts into final goods ready to be marketed to consumers. Likewise, nearly all components’ makers only assemble the inputs with technologies provided by larger foreign trademarks.

Overall, the local component industry in Indonesia has been developing (higher number of car parts’ manufacturing companies) but yet continues to produce less sophisticated items that lack value added processes and are therefore facing increased competition. Indeed, under the ASEAN free trade area and the ASEAN - China free trade agreement, import duties on auto components are set at zero. Japanese producers have maintained their own production of high technology components due to the weak enforcement of intellectual property rights regulations in production bases, to protect their core business. The high rate of investment needed to establish facilities capable of producing sophisticated components has also held back manufacturers from making the decisive shift to centralize all their production processes. Local component producers are therefore keen to establish financial and technology partnerships in order to add value to the production process and boost future exports.

However, this current status quo might soon be disrupted. Boosted by the regional dynamic and an important ongoing and upcoming amount of investments (either fresh strategic investment by new OEMs or expansion of existing activities), significant changes might occur in the next decade within the Indonesian automotive industry, transforming its market structure. To date, the Indonesian


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automotive market is dominated by the Japanese industry (90% of overall market share and 1/3 of the market for Toyota alone) and by seven-seating Multi Purposes Vehicles. But the introduction of the LCE program and LCGC regulation, an increased demand for SUVs and luxury cars, a better penetration of European brands in the various market’s segments, and the plans of some major global car makers to develop local production facilities are expected to further strengthen the local industry.

In the future, energy efficient cars (due to the increasing fuel prices), integrated transportation solutions and the integration of the smart phones with dedicated application stores and innovative HMI concepts (bringing connectivity inside the cars) will drive the growth of the automotive market, not only in Indonesia but as well globally.

2.2. Competing in ASEAN and worldwide

All ASEAN Member States’ automotive industries have differentiated strengths and characteristics: Thailand emphasizes on one-ton pick-up trucks and international energy-efficient and safety standard vehicles. Indonesia emphasizes on multi- purpose vehicles and small passenger cars 1,200 cc and below. Malaysia emphasizes on medium passenger cars and above. The Philippines have strength in the production of transmission systems.

The main three producing and exporting automotive nations in ASEAN are Thailand, Indonesia and Malaysia.

Thailand is the forerunner of the region in terms of production. A distinctive feature of the Thai vehicle market is that it became more and more specified on producing trucks rather than expanding its national car programs. Therefore, the direct competition with the other ASEAN member states is rather low. Key industry for the Thai economy (10% of the overall national GDP), Thailand has been constantly working towards its sustainable development. The ambitious master plan for the automotive industry 2012-2016 maps the focus for the Thai government until 2016, very much taking into account the global technological automotive trends and considerations of the consumers and private sector: development of R&D centers, increased capabilities of the labor force, special attention to environmental and safety standards.

The Malaysian automotive sector is the only one within ASEAN, producing its own local brands ‘Proton’ and ‘Perodua’, which are supported by the government’s rather protectionist measures. Moreover, Malaysia is developing to become the regional hub when it comes to hybrid vehicles and electric vehicles, with an increase of 84% of the number of units sold from 2010 to 2012. In 2012, Thailand and Indonesia have showed record marks with over 1 million vehicles sold and Malaysia with 600,000 vehicles sold.

Overall, Malaysia is a centre for major automotive components’ manufacturers, whereas Indonesia’s current production industry mainly focuses on montage activities. Hence, since 60% of the Indonesian population is between 20-60 years old, the country shows the best conditions in terms of production and income to support domestic consumption. So far, in 2012 only 80 in every 1000 people in Indonesia own a car, whereas in Thailand every 123 and Malaysia every 300 out of 1000 own cars. Hence, compared to Thailand and Malaysia, Indonesia’s big and cheap labour force could shift the companies’ interests to establish more production bases in Indonesia in the future.

When assessing intra-ASEAN exports, although Indonesia and Thailand are often regarded as opponents, they are rather partners. Thailand’s production focuses on commercial vehicles, whereas the production lines of Indonesia concentrate on passenger cars (about 70% of the overall production). The two industries are therefore complementary, Thailand being Indonesia’s most important exporter for vehicles, with USD 950 million overall value and Thailand exporting over USD 3.1 billion to Indonesia. Malaysia is also one of Thailand’s biggest importers, with an overall value of USD 1,6 billion in 2012. Assessing the exported products, Thailand is the pioneer in exporting ‘Trucks, motor vehicles for the transport of goods’ (USD 10,5 billion in 2012), ‘Parts and access


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of motor vehicles’ (USD 10,5 billion in 2012) and ‘Cars (incl. station wagon)’ (USD 10,5 billion In 2012), whereas Malaysia’s main exports are ‘parts and access of motor vehicles’ (USD 869 million in 2012), ‘parts and accessories of motorcycles’ (USD 491 million in 2012) and ‘Cars (incl. Station wagon)’ (USD 237 million in 2012). Indonesia exports mostly ‘Cars (incl. station wagons)’ (USD 2,26 billion in 2012), ‘Parts and access of motor vehicles’ (USD 1,47 billion in 2012) and ‘Trucks, motor vehicles for the transport of goods’ (USD 224 million in 2012). Exports do not only differ in the type of products but the figures also show that Indonesia and Malaysia are not yet able to export as much overall value as Thailand.

When looking at the exports of ASEAN member states to the world, Thailand is by far the greatest exporter with USD 136 billion of overall value in 2012, compared to Indonesia with USD 4,7 billion and Malaysia with USD 1,7 billion. Thailand’s main vehicle export destinations are Australia, Indonesia and Malaysia. Indonesia exports most of its vehicles to Thailand, Saudi Arabia and the Philippines, whereas Malaysia exports mainly to Thailand, Indonesia and Singapore. This indicates that up to now, main export destinations of the three ASEAN Member States lie within ASEAN as well. So far only Thailand has greatly expanded its export destinations to non-ASEAN countries.

2.3. Upcoming developments in the ASEAN industry

Since 2003 and the decision to form an ASEAN Economic Community, the ten ASEAN member states have been working together towards a greater regional integration, picturing ASEAN as a single market and production base. An open regional market would indeed facilitate the transfer of goods, capitals, services, investment and labor, further strengthening on the international stage a market of no less than 600 million people and combined GDP of USD 2 trillion.

To make this ASEAN Economic Community possible, the 10 Member States have been trying to address the trade barriers in a number of identified priority sectors – herewith among others the automotive sector. Over the past years, significant progresses have been made in the promotion of regional trade, especially in the automotive sector where most import duties have been exempted in 2011. To promote a free flow of goods in the region and progressively reduce non-tariff barriers, ASEAN is currently looking into harmonizing its regulations and certification processes. In all the priority sectors, working groups set up under the ASEAN Consultative Committee for Standards and Quality are working on harmonizing standards and technical requirements among the ASEAN member states. The frame of reference for those standards is based on international standards and practices (UNECE 1958 Agreement for automotive products). In the automotive sector, a Mutual Recognition Agreement utilizing as priority standards for harmonization 19 UNECE Regulations is planned to be signed in 20152. This MRA will provide a mutual frame of recognition for the conformity assessment results (testing, inspection and certification) of the 19 automotive systems identified.

The ASEAN MRA on type approval for automotive products and systems will have significant impacts on the local industries. It will not only increase ASEAN intra-trade in the automotive sector but also ASEAN automotive exports to non-ASEAN countries that have adopted UNECE regulations or Global Technical Regulations (which are transferred to UNECE regulations), such as South Korea, Japan, Australia, New Zealand, European Union, US and others. It will also attract further investment to the region by allowing foreign companies to mass-produce in ASEAN and export to the world without having to change the domestic specifications.

A harmonization of the standards and certification procedures will in general simplify the business process between the reviewing and approving phases and therefore enhances the competitiveness of the ASEAN automotive industry in the global supply chain. Indeed it is estimated that each additional day of delay (e.g. because of trade logistics procedures) reduces trade by at least 1%. Or that direct and indirect costs from import/export related procedures is about 1-15% of the

2 Please refer to Annex I for the list of the 19 UN Regulations selected


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product cost (World Bank, OECD). Harmonized standards and certification procedures will significantly reduce those delays and costs.

The signature of the ASEAN Mutual Recognition Agreement without Indonesia becoming a party to the 1958 UNECE Agreement will provide only partial benefits. It will lead the national automotive industries to adopt international standards and adapt to the global supply chain competition and develop their R&D in order to stay ahead of the automotive technology trends as well as focus on energy efficiency, eco-friendliness, and safety standards. It will however not provide Indonesia the right to issue Type Approval for exported components nor enable participation in the standards formulation. The availability of test and evaluation capability to the UNECE requirements will also provide an essential support to domestic producers to support the design and development of new components and systems.

3. Implementing international automotive standards

3.1. The international automotive standards

The World Forum for Harmonization of Vehicle Regulations is a working party (WP.29), established by the Inland Transportation Division of the United Nations Economic Commission for Europe (UNECE). It set out the establishment of a uniformed system of regulations, namely the UN Regulations, which aims at facilitating international trade. Since 1995, numerous non-European countries joined the 1958 agreement, which eventually became the international frame for automotive standards. Among the contracting parties it counts: the European Union, Russia, Turkey, Japan, South-Korea, Australia, New Zealand, South-Africa, Thailand and Malaysia.

It forms a legal framework wherein the participating countries agree on a common set of technical prescriptions and protocols for type approval of vehicles and components. Each contracting party recognized the others’ type approvals. Based on the principle of mutual recognition, any country signatory of the 1958 Agreement has authority to test and approve any manufacturer’s design of a regulated product, regardless of the country in which that component was produced.

Key objectives of this framework are still to increase the vehicle and road safety, the vehicle environmental performance and facilitate the international trade (through uniformed technical prescriptions for vehicles and vehicle parts and mutual recognition). So far, 58 countries have signed the UNECE 1958 Agreement, which significantly strengthened their positions in the automotive global chain supply and tend to increase their volume of trade with the other contracting parties (57 Contracting Parties to date – adhesion of the DDR expired in 1999)3.

Over the past years, the WP29 has been working into revising the agreement and making it more flexible to adopt for emerging industries. In order to become a contracting party of the UNECE 1958 Agreement, a variety of options are available, all of them leaving much sovereignty to the countries:

1) An interested party can decide to sign the UNECE 1958 Agreement and decide to implement the standards progressively to give the time to its industry to adapt (model which was followed by Japan and Malaysia);

2) An interested party can sign the UNECE 1958 Agreement and decide to adapt an earlier version of the UN Regulations.

These two first options give full flexibility to emerging countries whose industries are not fully developed yet (fuel and emission standards for instance). It also gives a lot of flexibility to countries with different domestic requirements (roads and climate in ASEAN are very different from the European ones). A contracting party could as well decide to get out of the UNECE frame with a one year notice.

3 Please refer to Annex II for the list of Contracting Parties in the UNECE 1958 Agreement


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3) Without signing the UNECE 1958 Agreement, utilizing the technical requirements of the UN Regulations and implementing them in the country’s national standards.

However, this last option does not offer much benefit to the various parties. This option does not give the right to Indonesia to appoint laboratories that may issue Type Approvals (E Mark) for components and systems manufactured domestically for export. Industry will need to rely on foreign services and bear the penalty of increased costs and delays in obtaining approvals. Indeed, while signing the UNECE 1958 Agreement, a contracting party gains the right to interfere in the decision making process and directly influence the regulations (participation in the preparations and right to vote). A new rule also allows flexible voting procedure: the contracting parties can decide to delegate their presence and right to vote to another contracting party or regional organization to which they belong.

The new flexibility offered by the UNECE 1958 Agreement leaves much authority to all interested parties.

3.2. Prospects for the Indonesian automotive industry

In 2006, Malaysia and Thailand signed the UNECE 1958 Agreement, showing a strong commitment to both their local automotive industries and global cars and components’ manufacturers. In Thailand, the two consequences were 1) the adoption of those standards by most of the Thai automotive manufacturers in their production; 2) renewed commitments from global automotive investors. Since 2008, Thailand increased its volume of automotive exports by 88% and from 2011 to 2012 alone increased its production of motor vehicles by 68%.

A similar signature of the UNECE 1958 Agreement will have a significant impact on Indonesia’s exports beyond the region (currently mainly within ASEAN). Main importing markets in the future will be Japan, South Korea, the EU, Australia, Thailand, Malaysia and South Africa, all also contracting parties of the UNECE 1958 Agreement.

The adoption of the international standards will enhance Indonesia’s automotive industry’s competitiveness in various ways. To give the signal to cars and components’ makers that Indonesia wants to be part of the global automotive supply chain will surely increase the number and volume of investments in the upcoming years. An increased number of manufacturers will lead to an increased demand for local suppliers. Combined with a transfer of knowledge and capacity building of the local staff, it is expected that the local industry will strongly develop. The ability to test products up to international standards together with an increased understanding of new technologies will lead on the long term the local industry to more innovation and to develop its own technologies. Within a few years, Indonesia could change entirely its market structure and become a production hub in the region, where it is to date mainly an assembly destination for foreign trademarks.

Moreover, in ASEAN, Indonesia is the country with the fastest growing middle class, predicted to double from currently 74 million middle-class and affluent consumers to 141 million by 2020. Therefore, adopting the UN Regulations will eventually also become important in order to serve the changing local demand, which is likely to shift from convenient and affordable cars to safe and innovative vehicles. In Malaysia, the global popularity of the European New Car Assessment Program - Euro NCAP (to be introduced in Indonesia) has brought an unprecedented amount of awareness towards safety. To better market their vehicles, the manufacturers have been focusing on safety features. In parallel, global trends are going towards ‘cleaner’ cars with a progressive introduction of higher emission standards and an increased quality of the fuel (both inter-linked elements also having a very positive impact on the overall fleet fuel consumption). The vehicles failing to meet those required standards cannot enter most markets and the cars’ manufacturers are not willing to reduce their own emission performances.


26

The UN Regulations do provide the framework for complying with this more stringent demand.

In that regard, it has to be mentioned that especially in terms of emission standards, the ASEAN automotive industry has been facing significant issues (the fuel used in each ASEAN Member States not always being up to the quality of the fuel in the rest of the world). Should the Government of Indonesia decide to sign the UNECE 1958 Agreement and attend the WP.29 meetings, it will give to Indonesia, Thailand and Malaysia, the perfect platform to express the concerns and needs of the overall ASEAN automotive industry, and be decision makers in the development of the global automotive industry.

Would Indonesia decide not to sign the UNECE 1958 Agreement, the message towards the global car makers and international community would be completely different. It would indeed give a clear signal that the main focus of the Indonesian automotive industry lays in its domestic market. Driving the streets of Indonesia’s main metropolis, one could question how many more cars the cities can take. Despite a very low level of car ownership, Indonesia would have to significantly invest in its infrastructure to allow more vehicles in its streets.

It is expected that in case of non alignment with the international automotive standards, car makers would keep on investing in Indonesia (mostly due to the relatively cheap labor force and to the size of the domestic market) but with a sole focus on the local demand, the volume of investments would be low. Indeed, vehicles built upon national standards are not internationally acknowledged and face restricted options to be sold overseas which therefore limits the volumes of local production from global car makers.

More dramatically, on the long term, the Indonesian automotive industry could lose most of its competitiveness. Indonesian manufacturers will face consequences such as delays in the introduction of new technological innovations and lack of up-to-date technologies. Eventually, global car makers might change their preferences towards other markets that have implemented the UN Regulations. With the upcoming ASEAN Economic Community, producing components lacking added-value would subject Indonesia to a strong competition from its ASEAN neighbors and in the long-term exclude it from the international competition due to weak developments in technology and innovation.. A non-alignment with the international automotive standards could condemn the Indonesian automotive industry to a grey future, with very poor chances to develop its own technologies marketable on the global market.

RECOMMENDATIONS

Harmonizingtechnicalstandardsworldwideaimsatreducingbarrierstotradeandatenhancingtheexchangeofgoods,knowledgeandtechnologybetweenthedifferentindustries.

Mostcountriesworldwidedohavetheirownnationalstandards.TheUNECE1958AgreementverymuchtakesintoaccounttheexistinglocalconditionsandUNRegulationscanbeimplementedinparalleltothenationalstandards.ShorttermprospectsfortheIndonesianautomotiveindustryarebright.Theadoptionoftheinternationalautomotivestandardspromisesevenbrighterprospectsonthelongterm.Hereby,wehighlyrecommendtoIndonesiato:

SigntheUNECE1958AgreementinordertobecomeapermanentvoiceintheWP.29meetingsandstronglycontributetotheoveralldevelopmentoftheautomotiveindustryworldwide.

Implement progressively the UN Regulations, taking into account the characteristics of its localindustry, taking as a startingpoint the19UNRegulations identified in theASEANMRAon typeapprovalforautomotiveproductsandsystems.

DevelopatechnicalauthorityandappointqualifiedtestinglaboratoriestotestandapproveautomotiveproductsandsystemstotheUNRegulationsinorderthatapprovalundertheUNECEcanbeissued


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in Indonesia.Utilize the laboratoriesof thecarsandcarcomponents’manufacturers,aswell asindependenttestingfacilitiesforthispurpose.

Identifythecapacity/knowledgegapsinitsindustryandcertificationbodiesandutilizetheexistingtechnicalassistanceprograms to fill them in (JASIC,EU fundedARISEproject,EU fundedTSP IIProgram).

Respecttheprincipleofmutualrecognitionandapproveanymanufacturer’sregulatedproduct(‘E’marking),regardlessofthecountryinwhichthatcomponentwasproduced.

Within the frame of the UNECE 1958 Agreement, Indonesia will not loose its sovereignty overits automobilemarket, but rather positively stimulate its domesticmanufacturers and transformIndonesiaintoamoreadvanced,technology-drivenautomotiveindustry.

Annex I

19 PRIORITY UN REGULATIONS FOR HARMONIZATION

Component Regulation number

Braking systems R13Braking systems (passenger car) R13HSeat belt anchorage R14Seat belt R16Seats R17Head restraints R25Pneumatic tire–passenger R30Speedometer (L category) R39Exhaust emission (L category) R40Noise (L category) R41Safety glass R43Rear-view mirror R46Diesel emission R49Noise emission R51Pneumatic tire–commercial R54Driver Operated Control R60Tire (L category) R75Steering equipment R79Exhaust emission R83


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Annex II

UNECE 1958 AGREEMENT – CONTRACTING PARTIES

Country Effective date Country Effective date

Sweden 20 June 1959 Slovakia 1 January 1993 France 20 June 1959 Estonia 1 May 1995 Belgium 5 September 1959 Belarus 2 July 1995 Hungary 2 July 1960 Turkey 27 February 1996 Netherlands 29 August 1960 Ireland 24 March 1998 Spain 10 October 1961 European Union 24 March 1998 United Kingdom 16 March 1963 Japan 24 November 1998 Italy 26 April 1963 Latvia 18 January 1999 Germany 28 January 1965 Bulgaria 21 January 2000 Austria 11 May 1971 Australia 25 April 2000 Luxembourg 12 December 1971 Ukraine 30 June 2000 Switzerland 28 August 1973 Serbia 12 March 2001 Norway 4 April 1975 South Africa 17 June 2001 Finland 17 September 1976 New Zealand 26 January 2002 Denmark 20 December 1976 Lithuania 29 March 2002 Romania 21 February 1977 Azerbaijan 14 June 2002 Poland 13 March 1979 Cyprus 1 May 2004 Portugal 28 March 1980 Malta 1 May 2004 Russian Federation 17 February 1987 South Korea 31 December 2004 Slovenia 25 June 1991 Montenegro 3 January 2006 Croatia 8 October 1991 Malaysia 4 April 2006 Republic of Macedonia 17 November 1991 Thailand 1 May 2006 Bosnia and Herzegovina 6 March 1992 Tunisia 1 January 2008 Greece 5 December 1992 Kazakhstan 8 January 2011 Czech Republic 1 January 1993 Albania 5 November 2011

SECTOR FOOD & BEVERAGES


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SECTOR

FOOD AND BEVERAGES

1. Business Prospects and Potential

1.1 . Indonesia

Indonesia, as the fourth most populous country in the world with a population of 235 million people, stable economic growth of 6% and a growing middle class provides a very large market for food and beverage products. The food and beverages industry is one of the industrial development priorities set by the Indonesian government and it is still promising for both domestic manufacturers and importers or suppliers of processing equipment and (semi-)finished products. The sector has proven to be very resilient during economic downturns, and for many multinational food companies, Indonesia is among their most important markets.

The turnover of the food and beverage industry has been growing at an average pace of close to 8-9% from last year , to a total of around US$ 70 billion in 2012. The Indonesian import value for food and beverages has increased by an average of 1,3% in 2012. This comes after a bumper in 2011 when imports grew 30% to a value of US$ 5,9 billion. The share of the European Union in the food imports into Indonesia has remained very modest, with just US$ 180 mln in 2011. It has also grown at a very low rate of 2.8% on average, annually since 2005, whereas imports from the USA, Canada, and Australia grew by 27% annually and imports from Asia by 18% annually during the same period.

Both domestic investment and foreign investment in the food and beverage industry fluctuated from 2005 to 2011. Domestic investment in the food and beverage industry grew at an average rate of 13.66%, from US$ 456 million in 2005 to US$ 580 million in 2011. Foreign investment realisation reached US$ 5.7 billion, a 30% increase year to year.

The figures indicate a robust growth of trade and investment in Indonesia’s food and beverages sector, creating many opportunities for European exporters of branded and specialty food products, and of food processing machinery as well as for suppliers of food ingredients and packaging.

The food and beverage industry continues to face a demanding market environment that requires companies to adjust and actively manage change. The impact of public policy and regulatory changes also affected the sales and performance for companies. Adoption of risk policies is important to do.


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1.2. European Union

Processed foods are increasing their participation of overall consumer expenditures in the European Union as people look for more convenient ways to store and prepare food. Key product groups include processed dairy products, frozen fruit and vegetables, confectionery industry products, various prepared foods and sauces, including pasta, ice-creams and soups, and processed starch products. Despite high tariffs and relatively strict requirements on imports, EU imports have expanded by an average of 10 percent annually in the last ten years.

Fruit and vegetable juices are the largest processed agri-food imported into the European Union. The imports of processed agri-foods is expected to grow by an average of 2% per year during the period 2011 - 2015, imports of fruit and vegetable juices are expected to grow by 4% per year.

In fishery products, the European Union is increasingly dependent on imports to meet its domestic consumption needs. In 2009 the European Union imported US$17 billion worth of fishery products, which represented 2.5 times the volume of domestic production. Net imports in that year supplied one-half of domestic consumption. The most important fishery products imported into the European Union are shrimp and salmon, followed by cuttle fish, octopus, sturgeon, cod and scallops. Imports of fisheries products into the European Union are expected to grow by an average of 10% per year in the period 2011 – 2015. Indonesia is the tenth largest supplier of frozen shrimp and has a 4 percent market share of the EU market.

Indonesian exports of food and beverages are developing well, but exports to Europe are still hindered by food safety issues (fish), environmental and social issues (palm oil), quality control and logistical problems (in horticultural products).

Growing environmental awareness as well as packaging standards in export markets, are creating a growing demand for more environmentally friendly packaging systems, such as biodegradable sachets.

In summary, both Indonesia and the European Union market offer great potential for new trade and investment in the food sector, provided companies respond to the market trends.

1.3 . What to do in Indonesia – EU Trade and Investment

There is much potential for increased Indonesian- EU Trade and Investment in the Food and Beverages sector. This potential can be optimally used by:

• Expanding investment in Indonesia’s natural resources, using advanced technologies to produce higher value added products;

• Improving access to markets and expanding mutual recognition agreements;• Expanded use of quality standards;• Establish economic partnerships with SMEs around the countries to help minimise social

status differences;• Capacity Building for Indonesia’s food and beverages sector, especially SMEs, in the

field of EU Food Regulations, hygienic standards and market access procedures such as REACH (Registration, Evaluation, Authorization and Restriction of Chemicals), DMF (Dimethyl fumarate), SPS (Sanitary and Phytosanitary Standards), MRA (Mutual Recognition Agreements), RED (Renewable Energy Directive) and the most important voluntary codes applied by importers, processers and retailers in Europe.

More specific recommendations are set out for a number of the main issues are set out in the chapters below. From last years position paper, there are several issues that are now still in progress or a result.


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2. Issues and Solutions

2.1. Indonesia

Like other sectors, the food and beverages sector in Indonesia has seen high growth with regulations and institutions struggling to keep pace. This has contributed to problems in food safety and quality standards, illegal imports but also overregulation and customs clearance delays.

Some of the factors affecting the growth of the food and beverages industry are of general nature, such as bottlenecks in general infrastructure. Some problems are however specific to the food and beverages industry.

Indonesia’s agriculture sector, being an important supplier of food products, faces a number of challenges which at the same time offer opportunities to foreign and domestic companies. Agriculture, along with fisheries and forestry, accounts for 41% of total employment in Indonesia. However, productivity in the sector is low, with underemployment of workers and negligible levels of capital investment. As a result the sector accounts for just 14% of GDP. Although Indonesia has been successful at developing export-oriented crops such as tea, coffee, cocoa, coconuts, palm oil and pepper, domestic supplies of staple food products have not been secured. The county still needs to import large amounts of staple food products, particularly maize, wheat, sugar, peanuts and soybeans. Initiatives are being taken to develop the production of these commodities domestically.

2.1.1. Decree of Chairman of BPOM No. HK.00.05.52.4040 regarding Food Categories

This Decree has been used as standard reference for the registration of food and beverages (MD & ML), but it is still incomplete and does not yet cover all food categories in Indonesia. This situation has created difficulties for the food and beverage industry in registering products with Indonesia’s Food and Drug Administration (BPOM), due to the implementation of the standard reference of food categories. BPOM should be requested to review the regulation that implements the standard reference for food categories, since acording to the regulation, product standards are set by the Indonesian National Standard (SNI).

Issue : Thestandardreferencefortheregistrationoffoodandbeverages(MD&ML)isstillincompleteanddoesnotyetcoverallfoodcategoriesinIndonesia.

Impact :ThiscreatesdifficultiesforthefoodandbeverageindustryinregisteringproductswithBPOM

Proposed Solution :BPOMisrequestedtoapplyawiderlistoffoodcategories,toallowallnewlydevelopedfoodproductstoberegistered.

Who should take action : BPOM

2.1.2. Regulation No. 22/M-DAG/PER/5/2010 of 21 May 2010 of the Minister of Trade to amend the existing regulation on Labelling Obligation (“MoT Regulation No. 62/2009)

The MoT Regulation No. 22/2010 was effective from 1 September 2010. Companies that produce or import goods for the domestic market in Indonesia are obliged to attach labels written in Bahasa Indonesia which is also mentioned in regulation No. 7/ 1996 about Food Act and PP No. 69/ 1999 about Labels and Advertisements. This regulation applies to all local and foreign businesses. The labelling regulation requires imported products to have the labels before such products enter the Indonesian Customs Area (effective on 1st of January 2013). Before an importer can import products, he has to submit an example of


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the label written in Bahasa Indonesia to the Ministry of Trade for prior approval. The labels can be in the form of stickers attached to a package, until further notice (waiting for the approval of this regulation). If the ban of using stickers is applied, it will causes entire production chains to have to be redesigned solely for the Indonesian market, especially if entire packages need to be redesigned. This will increase costs for Indonesian consumers and cause some producers to withdraw from the Indonesian market.

Indonesia is encouraged to apply a similar system to the EU, where the labelling must be attached in the form of a sticker prior to placing the product on the market and not prior to import. This is to ensure that trade continues to be facilitated whilst protecting consumer health and safety.

Issue : TheobligationtoattachlabelsinBahasaIndonesiapriortoimport

Impact : This causes entire production chains to have to be redesigned solely for theIndonesianmarket,whichwillincreasecostforIndonesianconsumers

Proposed Solution : Companies should be allowed to put stickers prior to placing theproductonthemarketandnotpriortoimport.

Who should take action : MinistryofTrade,BPOM,Customs

Progress :

TheseregulationsapplystartingJanuary2014.Businesses/importersaregivenagraceperiod to prepare. For rawmaterials, product labels are still allowed to use the nativelanguage.ThelabelingofconsumerpacksshouldalreadybeinIndonesian.Botharenotallowedtousethelabelsticker,itsmandatory.

2.1.3. Decree of Chairman of BPOM No. HK. 00.06.51.0475 year 2005 regarding Reference of Nutrient Label for Food Products

In the food product registration process, BPOM requires that the nutrient value attached in the product label should be precisely the same as the value from the analysis result. This is impossible, because analysis results may vary, influenced by raw material variations, production processes, storage and analysis procedures. As a consequence of this requirement, the registration process is problematic. It is imposible for the nutrient value information attached on the label to be the same as the value in the COA (Certificate of Analysis). The follow-up action to solve this problem is that BPOM should apply a tolerance value in the determination of nutrient values in line with the provisions that are internationally applicable.

Issue : Therequirementfornutrientvaluesattachedintheproductlabeltobepreciselythesameasthevaluefromanalysisresult

Impact : Theregistrationprocessbecomesproblematic,becausetheanalysisresultsmayvary.

Proposed Solution : BPOMshouldapplyatolerancevalueinthedeterminationofnutrientvaluesinlinewiththeprovisionsthatareinternationallyapplicable

Who should take action : BPOM

Progress :

This issue should not be longer valid since there is decree. BPOM decree noHK.03.1.23.11.11.09605year2011revisesBPOMdecreenoHK.00.06.51.0475year2005regardingtheguidelinesoftheNutritionInformationpanelinthelabel.Inthatnewdecree,BPOMregulatesthetolerancelimitforthenutrientanalysisresult.


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2.1.4 . Permenkes No.30 Year 2013 regarding Inclusion of Information Content of Fat and Sugar Salt and health messages to processed food and fast food

People’s lifestyles now turn to practicaly packaged food. However, the public are still not aware of the content of packaged foods. High consumption of sugar, salt, and fat is one of the factors that increase the risk of non-communicable diseases such as diabetes, hypertension, cancer, stroke or heart disease. The lack of public awareness in knowing the nutritional content of food is suppose to be the cause of the excess.

Therefore, the Health Minister Nafsiah Mboi made Minister of Health Regulation No. 30 of 2013 which contains a plea to regulate the consumption of sugar, salt, and fat. The Minister of Health also contains information about the rules of the inclusion of sugar, salt, and fat. There is also a health risk reminder message on the packaging of processed food products that are ready to eat.

Issue:Ontheformofregulationisawarningmessage

Impact : Regulationbythemessageisawarning,wouldscareconsumers

Proposed Solution : TheMinistryofHealthshouldmakethemessageoftheregulationintheformofanappeal

Who should take action :TheMinistryofHealth

2.1.5. Halal Regulation

Regulations on halal have been included in the Consumer Protection Act no.8 of 1999, PP No., 66/1999 on labeling and advertising, and the Food 7/1996 on food. In Indonesia, halal certification is issued by the Indonesian Council of Ulama (MUI). As stated in Animal Husbandry and Animal Health Act no. 18 of 2009, all products that use animal ingredients and derivatives circulating in Indonesia, whether local or imported, shall have the halal certification of its products. The attachment of the halal label is voluntary. The Body that has authority in Indonesia in approving of the inlucion of halal label/logo for retailed food and beverages is the National Agency of Foods and Drugs Control (BPOM). So, for retailed food and beverages that shall be claimed as halal product (shown by halal label), the producer shall register its product(s) to BPOM. Joint collaborative audits of halal certification and labelisation shall be conducted by auditors of BPOM, LPPOM MUI and the Ministry of Religious Affairs. Halal certificates are issued by MUI and BPOM will approve the inclusion of the halal label based on halal certificate of MUI.

Issue : ThefoodindustryseesagrowingtendencyformandatoryhalalcertificationoffoodandbeveragesinIndonesia.

Impact : Highcostandreducedvarietyofavailablefoodproducts

Proposed Solution :HalalcertificationsystemshouldbevaulantorybutaspartofMuslimConsumerprotection,thehalallabelofcertifiedproductshallbemandotary.Thereforethemuslimconsumersareassuredtoonlyconsumehalalproducts.

Who should take action :MinistryofTrade,MinistryofAgriculture,MinistryofIndustry,MinistryofReligiousAffairs,andTheAssessmentInstituteforFoods,DrugsandCosmeticsIndonesianCouncilofUlama(LPPOMMUI).

Progress :

Hasnotbeenestablishedwhetherthehalallabelisvoluntaryormandatory.


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2.1.6. Decree of Minister of Health No. 033/2012 on Food Additives

Food manufacturing technology has developed, so the number of different types of food additives is continuously increasing. Therefore, a new list of food additives is needed that accommodates this development as long as it is in line with the International Food Security Standard (CODEX). Therefore the regulation of Minister of Health No. 772/Menkes/Per/IX/88 regarding Food Additives need no longer be valid and should be replaced by the regulation of Ministry of Health No. 033/ 2012. In this regulation, the list of food categories are devided into 27 categories

Issue : Anewlistoffoodadditivesisneededinlinewiththetechnologicaldevelopments.

Impact : Theindustrywillfinditdifficulttocarryoutinnovation,whichwillhampernationalindustrycompetitivenessintheglobalmarket

Proposed Solution : A new list of food additives is needed that accommodates thisdevelopmentaslongasitisinlinewiththeInternationalFoodSecurityStandard(CODEX)

Who should take action : MinistryofHealth,BPOM.

Progress :

New BPOM regulation (on process), about sweetener labeling. The labeling containtsthewarningforbrestfeedingmothersandchildren.Thelabelof‘children’willresultinadecreaseofsalesandtherefor,modifiedintochildrenunder5yearsold.

BPOMhas issued25 regulations on the limit of each food additives according toMOHregulation.Theregulationonthelimitofsweetenersandflavoursisunderdiscussionwiththestakeholders(industries,expert)

Relatedtothecommentinitalicabove:warningstatementthatshouldbeputinthelabelofproductwithartificialsweetenerisalreadyputintheMOHdecree,thereforBPOMneedtoimplementthatregulation.Thestatementare:“containartificialsweetener,suggestnottobeconsumedbychildrenunder5yearsold,pregnantandlactatingmother.”

2.1.7. Horticulture

Horticulture is a subsector of agriculture and has great potential in Indonesia to contribute to a nutritiuous food supply and yield great results as an Indonesian export. It can however only thrive with innovation and well-functioning distribution systems.

The Horticulture Law of 13/2010 limits foreign ownership of companies in the horticulture sector to 30% and requires foreign investment companies to reduce their shareholding to 30% within 4 years. Not only does this send a signal to foreign investors that ownership regulations can be changed at any time, it will also deter foreign investment and the technological expertise that comes with it. The result will be counter productive to increase Indonesia’s competitiveness in growing fruits and vegetables.

Imports of horticultural products are severly limited by a limitation of the ports through which horticultural products are allowed to enter Indonesia and by extensive and often unwarranted testing of horticultural products (Permendag 60/2012 and Permentan 60/2012). Moreover, the testing requirements are not applied equally to all supplying countries. Facilities at major airports are often insufficient to support Indonesian exports of horticultural products.


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Issue : Limitsforeignownershipofcompaniesinthehorticulturesectorto30%,limitedportsforhorticultureproducts,extensiveproducttesting

Impact :Itwilldeterforeigninvestmentingeneralandinthehorticulturesectorinparticular,aswellas the technologicalexpertise thatcomeswith it. Itwillalso limit thesupplyofhorticulturalproductsontheIndonesianmarket,whichareessentialtoanutritiousdietandlocaldemand.

Proposed Solution : Article100of theHorticultureLawonForeignOwnershipmustbeamended.Thereshouldbenorestrictionsonforeignownershipinhortoculturalcompaniesand changes in ownership regulations should not be applied to companies establishedbefore1October2010.

All ports and airports should have sufficient facilities for the imports and exports ofhorticultural products and there should be no limitations on the ports through whichhorticulturalproductscanbeimported.

Testing of horticultural products should be applied equally to imports from differentcountries,basedonwarrantedsanitaryandphyto-sanitarystandards.

Who should take action :DPRCommissionIVandMinistryofAgriculture

Progress:

1. HORTINDOhassenta letterofobjection regardingHorticultureLawArticle100.3 toKADINwith the attachment of research on the impact of foreign investor precensefor farmers in Indonesia. Case study : PT ESWINDO. This letter will be sent to thegovernmentbyKADIN.

INAthroughtheEIBDprogrammearecurrentlyconductinganimpactstudyofHorticultureLawArticle 100.3 involving stakeholderswhowere affected by this regulation. TheresultoftheimpactstudywillbeasupportingdocumentfortherecommendationletteradressedtothegovernmentbyKADIN.

INA and KADIN have conducted workshops on horticulture conditions, which wereattendedbythechairmanofKADIN,companiesinhorticulture,thefarmer’sorganisationandotherrelatedassociations.TheresultisthathorticultureinIndonesiarequiresclearregulationsand investment forallaspects,suchas infrastructure,capacitybuilding,knowledgeandtechnology.TheresultwillbepresentedtothegovernmentbyKADIN.

2. Importersmayentering Indonesia throughTanjungPriokPorts if theyhave theCRA(CountryRecognationAgreement)withIndonesia.

3. Permendag 60/2012 has been replaced by Permendag 16/M-Dag/PER/4/2013 andrefinedbyPermendag47/M-Dag/PER/8/2013.These regulation simplyfyproceduresforsupplyinghorticultureproductstoIndonesia.

4. Permentan60/2012stillapplies,butMinistryofAgriculturereleasedanotherregulationrelatedtothisissue.TheregulationwasPermentan86/2013.Theministrygoverningaboutthereferencepriceandenteringtimeofimportedproduct.Harvesttimeinthecountrywillbeaconsiderationforimporttime.

Some new regulations related to this issues:

1. Permendag 84/M-Dag/Per/12/2012 (2nd revision of Permendag 27/M-Dag/Per/5/2012, jo Permendag 39/M-Dag/PER/10/2010) Terms of API (Import Identification Number)

2. Permendag 83/M-Dag/Per/12/2012 : Regulation to import certain product


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3. Permendag. 45/M-Dag/Per/8/2013 : Import regulation of Soybean4. Permendag. 46/M-Dag/Per/8/2013 : Import regulation of animal and animal

products 5. Permendag. 47/M-Dag/Per/8/2013 : Import Regulation for Horticulture Product

per 30 August 20136. Permentan 86/Permentan/OT.140/8/2013 : Import Recommendation for

Horticulture Product 7. Permentan 84/Permentan/PD.410/8/2013: Importation of Carcasses, Meat, Offal,

and / or derivatives product8. Permentan 85/Permentan/PD.410/8/2013: Importation of cattle, Cattle breeders,

and ready to cut9. Permentan 87/Permentan/PD.410/9/2013: Revision of Permentan 85/Permentan/

PD.410/8/2013

2.1.8 . Alcoholic Beverages

There is a legitimate demand for alcoholic beverages in many parts of the society and among tourists and expatriates. In the market for alcoholic beverages, there is a big difference between the companies complying with all regulations and taxes, and a large share of the market that is being supplied by illegal imports and production. The widespread smuggling and illegal production cause very large losses in revenue from taxes and excise duties to the Indonesian government, as well as severe health risks to the consumer. The very high import and excise duties as well as the severe local restrictions on distribution make alcohol very expensise and contribute to illegal supply. Compliant established companies in Indonesia should be allowed to expand local production to meet demand from the growing population and number of tourists, without the need to review the current Negative List on Investment.

Issue : High taxation and severe restrictions on distribution contribute to widespreadsmugglingandillegalproduction.

Impact : Major financial losses to the government, related crime and health risks forconsumers.

Proposed Solutions : Streamlined taxes and excise duties on alcoholic beverages,crackdownonsmugglingandillegalproductionandbringingthemundertheregulartaxandexcisesystem,revokationof localrestrictionsondistributionthatarenotcompliantwithnational legislation,andallowingestablishedandcompliantcompanies to increaseproductiontomeetdemand.

Who should take action : Ministry of Finance and Directorate General for Customs,MinistryofTrade.

2.2. European Union

For Indonesian exporters shipping fresh and processed agri-food products to the EU markets, the following are the general and specific market access issues in agri-food products:

2.2.1. Tarriffs

Import duties are applied to specified goods imported into the European Union in order to raise the world market price to the EU target price. Duty rates vary between 0 and 16.9% across individual products. Import quotas restrict the amount of food imported into the European Union.


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Issue : highimporttarrifforIndonesiancocoaproductof7.7%-9%comparedtoAfricancocoabean0%)withoutanyjustifications

Impact : Indonesia is struggling to export cocoa products to the EU and cocoa farmerschangeintomoreprofitablecropssuchaspalmoil

Proposed Solution : EUneedtoreleasestrictrulesofTariffsandnonTariffbarriers

Who should take action : EUDGTrade.

2.2.2. General Sanitary and Phytosanitary Measures in Spices

General Sanitary and Phytosanitary Measures, setting control standards over food and food product hygiene, animal health and welfare, plant health. It also provides rules on appropriate labeling for these foodstuffs and food products. This policy follows a so-called ‘From the Farm to the Fork’ approach that ensures a high level of safety for foodstuffs and food products at all stages of the production and distribution chains. Indonesian exporters however face difficulties in complying with these requirements. Problems exist for example in the spices sector, due to low quality and unsafe products as a result of aflatoxin content above the EU maximum limit standard.

Issue : Indonesiaspices(nutmeg)needtobesampledandtestedfrequently.Itissuggestedasampleof20%ischeckeduponimportationtotheEU.

Impact :Nutmegproducersgot lower incomefromnutmeg,costburdenfor Indonesianspicesexporter,IndonesianspicesexporterslosingmarketshareintheEU.

Proposed Solutions : Ministry of Agriculture should take into account the findings oftheFVOmissionandestablisheffectiveOfficialControlsfornutmegthatincludecorrectsamplingproceduresandanalysisofthosesamples.

Atthesametimethefarmers,traders,exportersshouldimplementimprovedpracticestominimisetherisksofmouldcontaminationandsubsequentformationofaflatoxin.

Who should take action :MinistryofAgriculture;Company,TSPIIEU,EUDGTrade.

Progress :

1.HortiChainCentre(HCC)withfundingbyCORDAIDisconductingapilotprojectforfoodsafetyandtraceabilityonnutmeginHalmahera,NorthMaluku,rangingfromfarmerstoexporters.Thegoaloftheprojectistoproducefree-aflatoxinandorganiccertifiednutmeg.Untilnowthereareabout1300registeredfarmerswaitingtoobtainorganiccerfication.

2.At thegovernment level, theMinistry of Agriculture are conducting training on foodsafetyandtraceabilitywhichareadaptedtoEUstandardsthroughaprogramorganizedbytheNESOandalsotheEuropeanUnionTradeSupportProgrammeII.Theexpectedresult is that the European Union will release the entry ban for Indonesian spicesproducts.

2.2.3. Environmental Regulations

The principal components of the environmental legislation relating to the processed foods industry are (a) Integrated Pollution Prevention and Control Directive; (b) Directive on Packaging and Packaging Waste; (c) Framework Directive on Waste; and (d) Climate Change known as the Emission Trading Scheme (ETS). The current ETS is compulsory for large food


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and drink companies and is intended to reduce greenhouse gas (GHG) emissions caused by large installations at the lowest cost. Indonesian exporters however, face difficulties in complying with these requirements. Residue standards that the EU applies for tropical fruits and wooden packaging, which are in some cases very strict, are difficult to comply with for Indonesian companies.

Issue: StrictenvironmentalregulationshampermarketaccessforIndonesianexporters

Impact: IndonesianFarmershavelessopportunitytogetgoodpricesfortropicalproducts.

ConsumerintheEUhavelesstropicalfruitsavailable.

Proposed solutions: Technical assistance to farmers to comply with environmentalregulationsontheEUmarket.

Who should take action: GovernmentofIndonesiaandEU

2.3.4. NGO activities on Palm Oil

NGO activities in Europe against environmental issues in some products are counterproductive in that they lead to disruptions in trade without offering realistic solutions. Examples include palm oil, cocoa and the traceability of eggs used in biscuits. The legal basis of applying labels such as “Free of Palm Oil”, as has occurred in France, should be questioned. Voluntary standards for food products applied by importers, processors or retailers, should not be in violation of trade regulations and should be based on generally accepted scientific evidence.

Issue : AggressivenegativecampaignsbyNGOs

Impact :Producersofpalmoilreceivelowprices;palmoilcompaniesloseexportmarketshare.EUimportersuselongchainstobuyIndonesianpalmoilatmoreexpensiveprices

Proposed Solutions : Observance by NGOs of a Code of Conduct to disseminate onlytruthful information. Government sanctions against distribution of untrue information.Reductionofimportdutiesonproductsthatcomplywithsustainabilitystandards.

Who should take action : GovernmentofIndonesia;EUandNGOs.

2.3.5. Fishery

There are also a number of specific issues brought forward by the Indonesian fisheries and aqua-culture industry as affecting the Indonesian exports of fishery products to the European Union:

Tariffs: The GSP rates range from a low of zero for some products to a high of 14,5 for canned tuna and 24 percent for loin tuna such as chilled or frozen sardines, some tunas like long-finned and yellow-fin tuna and skipjack or stripe-bellied bonito.

Issue : HightaxesforfisheriesproductstoEU,suchas24percentforcannedtunafromIndonesiaasopposedto0percentfrommanyothercountries.

Impact : CompetitivedisadvantageforIndonesiaontheEUmarketandhigherpricesforEUconsumers.

Proposed Solution : renegotiate the tarrifs and non tarrif barrier to EU

Who should take action: EUandGovernmentIndonesia


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Control over Illegal Fishing: Imports of fishery products must be accompanied by a catch certificate to demonstrate that the products concerned do not originate from Illegal, unreported and unregulated (IUU) fishing.

Issue :RFMOquestioningthesupplychainprocesstopreventillegalfishing.

Impact : Problemsforsmallfishermentocomplywithadministrativeprocedures

Proposed Solution : Strictbuyingstandardsby fishprocessingcompanies, trainingsoffishermen,monitoringofcompliancebyseniorofficialsfromMinistryofMarineAffairsandFisheries

Who should take action : Fish processing companies, Ministry of Marine Affairs andFisheries


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SECTOR INFRASTRUCTURE


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1. A short description of the sector and its potential for increased EU Indonesian cooperation, trade and investment

Infrastructure remains at the heart of Indonesia’s economic development, although delivery of the hundreds of projects that are required is still a challenge. Investors still grapple with regulatory and other bureaucratic issues. While FDI to the country has been at a satisfactory level, little is focused towards delivery of infrastructure. In recent years, only 2% of GDP has been devoted to infrastructure, whereas an emerging nation such as Indonesia should be spending as much as 5% of GDP. The reduction in the fuel subsidy earlier in 2013 may assist in freeing up additional funds for infrastrucutre in future years.

The current index on competitiveness released by the World Economic Forum (WEF) 2013 (Figure 1) has shown that Indonesia is in dire need of infrastructure investment. Inadequate supply of infrastructure has become one of the three biggest problematic factors for doing business beside inefficient bureaucracy and corruption. This remains true for all five successive surveys done by the WEF from 2009.

FIGURE 1: THE MOST PROBLEMATIC FACTORS FOR DOING BUSINESS

Corruption

Inefficient government bereaucracy

Inadequate supply of infrastructure

Access to financing

Restrictive labor regulations

Poor work ethic in national labor force

Policy instability

Tax rates

Inflation

Government instability/ coups

Inedequately educated workforce

Poor public health

Crime and theft

Tax regulations

Insufficient capacity to innovate

Foreign currency regulations

0.0 5.0 10.0 15.0 20.0 25.0

SECTOR

INFRASTRUCTURE


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FIGURE 2: INDONESIA RANKING ON INFRASTRUCTURE

Vietnam (82)

Phillipines (96)

India (85)

Indonesia (61)

China (48)

Brunei (58)

Thailand (47)

Malaysia (29)

Singapore (2)

0 1 2 3 4 5 6 7

In this index, Indonesia ranks below its Asian neighbours, Brunei, Thailand and Malaysia, but well ahead of the Philippines, Vietnam and India (Figure 2)

The challenge of legal certainty for foreign investors and the priority issue of land acquisition, particularly in the case of land transport projects, still hinder development. Without land connectivity the upgrades to airports and seaports becomes somewhat academic if there is no functional network back to the hinterland.

2. Land AcquisitionUp to now, land acquisition as well as shortfalls in availability of financing, public sector capacity and middle management skills – notably in designing and procuring Public Private Partnership (PPP) projects, has been the biggest barrier to the development of basic infrastructure. The acute lack of infrastructure has been one of the main obstacles to investment in the country. Most infrastructure development under the MP3EI and associated PPP projects have been delayed because of it.

The government is aware of the bottlenecks and issued a new land law last year. The government, through President Yudhoyono, enacted Law 2/2012 concerning Land Procurement for Development Purposes in Public Interest to improve and provide clarity around the land acquisition framework. The law is supported by Presidential Regulation No. 71/2012 concerning Administration of Land Procurement for Development Purposes in Public Interest. Mandated by this Presidential Regulation, the government has already completed the 3 (three) implementing regulations:

• Regulation of BPN No. 5/2012, on Technical Guidance for Land Acquisition Conduct;• Ministry of Finance Regulation No. 13/PMK.02/2013, on Operational Cost and Supporting Cost for

Land Procurement for Development Purposes in Public Interest Financing by State Budget;• Ministry of Home Affairs Regulation No. 72/2012, on Operational Cost and Supporting Cost for Land

Procurement for Development Purposes in Public Interest Financing by Provincial Budget.However, the new regulations have not yet helped to accelerate land acquisition because of different interpretations of the rules. Furthermore, this law does not apply retroactively, meaning only new projects that have not yet started their land acquisition processes will benefit. Thus, the government provides existing projects the opportunity to continue their respective land acquisition process via previous regulations until the end of 2014. Thereafter, if land acquisition has still not been completed, they would switch to the new law.


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Key toll road developments are continuing using previous land regulations, although government is providing support to certain less financially attractive sections which are economically needed. This is being undertaken by helping with land acquisition and the underwriting of the partial construction of certain links to assist the developer in finding an acceptable funding structure to complete the development. Government understands that, particularly for inter-urban links and for the development of the Trans-Sumatran highway, initial traffic levels are insufficient for attracting private sector involvement without a measure of government support.

3. Viability Gap Funding (VGF)An important new initiative in 2012 was the launching by the MoF of the VGF programme through the regulation No. PMK 223/2012. The VGF is designed for projects that are of economic feasible benefit, but may not be financially viable. In other words, private investors may not be able to earn a sufficiently attractive return from a project if the tariffs are sent at levels that end users can afford. The VGF is used to top up the IRR to a level that meets investors’ expectations. This is applicable often in the case of water projects or toll roads in more sparsely populated regions with a lower ability to pay. The maximum VGF will be 50% of project costs with the funds being provided during or at the end of the construction period. Bidders

To date the VGF has not been injected into any particular project, but is intended to be a component of the financing for water PPPs such as those under the procuremnet process for Umbulan, Bandar Lampung and West Semarang, as well as potentially for the Soekarno-Hatta express rail project.

4. Indonesia Infrastructure Guarantee Fund (IIGF)IIGF was established in late 2009 under the MoF and is intended to be the “single window” going forward for PPP projects, which require a performance guarantee for public sectors counterparties. Examples would include power project where PLN is the offtaker or a water project with a municipal water authority or PDAM.

IIGF has signed one guarantee agreement to date for the Central Java Power Project (see below) and is looking to do the same for other PPPs, particularly in the water sector.

In the last few years, two new institutions have been established via the MoF to help promote long-term project financing for infrastructure: Sarana Multi Infrastruktur (SMI) which is wholly owned by the MoF and Indonesia Infrastructure Finance (IIF), which is a private sector NBFI owned by SMI, IFC, ADB, DEG (KfW Group) and the Japanese bank SMBC.

5. Transport-related infrastructureThe geographical nature of Indonesia with its many islands and the uneven distribution of the population create enormous challenges in developing infrastructure and tackling regional disparities. The lack of infrastructure has hampered efforts to develop and realise the national and regional economic potential. The organisation of an efficient logistics system is a crucial factor in the socio-economic development of Indonesia.

Based on World Bank (2013) data, Indonesian logistics costs in 2011 constituted 27 percent of GDP (Figure 3), higher than in other ASEAN countries, such as Vietnam (25%), Thailand (20%) and Malaysia (13%). This is brought about by the poor quality and quantity of infrastructure. Of this cost, the largest share is devoted to physical transportation accounting for 11.63 percent (Figure 4). The rest is for administration (4.28%) as well as for inventory costs (8.73%).


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FIGURE 3: LOGISTICS COST TO GDP

Indonesia

Vietnam

Thailand

Malaysia

Singapore

South Korea

Japan

United States of America

0 5 10 15 20 25 30

Source: WB, 2013

FIGURE 4: COST COMPOSITION

Transportation Cost 11.63%

Inventory Cost 11.63%

Administration 11.63%

Source: WB, 2013

When we look further to which elements of the physical transport network are the most responsible for these costs, CGI 2013 (Figure 5) reveals that road, rail, airports and seaports are all underperforming. Indonesia’s performance in various physical transport sectors is below the average of its neighbors in ASEAN and APEC.


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FIGURE 5: INDONESIA’S SCORE IN RELATED-TRANSPORT INFRASTRUCTURE

Electricity

Air Transport

Seaport

Railroads

Roads

0 1 2 3 4 5 6

APEC Avarage ASEAN 6 Indonesia

The main development in the ports sector concerns the construction of the new large container terminal (New Priok) in Tanjung Priok, Jakarta. The first container terminal, under a joint venture between Pelindo II and Mitsui & Co, is underway and the next two terminals are due to be awarded to bidders before the end of the year. It is understood that the hinterland connections for this key project are vital for the successful operation of New Priok and progress towards putting in place road connections, in particular, are on the critical path. For a major port, Jakarta is suffering major congestion issues and users put up with long waiting times. Other important and much needed port developments are under consideration at key locations across the archipelago. Makassar in Sulawesi, for example, is now being considered as a PPP.

For transportation projects in Jakarta, the long-awaited MRT and monorail projects are getting underway and signs are that airport rail links (one commuter and one express line) will proceed in the foreseeable future.

Construction of a key element of the Trans-Java toll highway network, the 116 km Cikampek-Palimanan link, commenced in early 2013 and is expected to be in operation by late 2015. With other missing sections of the Trans-Java network between Jakarta and Surabaya at various stages of development there would now appear to be a real possibility of there being a completed toll linkage between Indonesia’s largest urban centres by 2017/8. Bali has also recently seen the completion of its first toll link from the airport area to the port district of Benoa.

There are also tenders under way for the Serpong-Balaraja and Medan-Kuala Namu-Tebing Tinggi toll roads.

6. Water SectorFor the water sector, little progress has been made in using the PPP model to close out key projects being promoted from central government (such as Umbulan, Bandar Lampung and West Semarang). Private sector players interested in investing in water are starting to find it easier to deal directly with local government, where responsibility for water mostly lies, i.e. on a B to B basis (as evidenced by the successful closing this year of financing for a BOT water treatment project to serve the residents of Tangerang City).


50

At this juncture the emphasis remains on water supply rather than sanitation although both are highlighted in the Millenium Development Goals.

7. Electricity SectorElectricity supply remains under an internationally accepted minimum safe level, even within the industrial heartland of Java and too many areas elsewhere are uder-provisioned. While renewable energy is an important and significant source for the overall supply requirement, many obstacles remain in implementing geothermal projects apart from the issue over support in the exploration phase. One key obstacle concerns the restricted forestry locations of some likely sources of geothermal energy. Two key hydro projects in western Java are underway, a 100MW mixed use project and Indonesia’s first pumped storage (1000MW) development near Bandung.A number of run-of-river projects are under various phases of the development cycle. Several solar projects, especially for East Indonesia, have been identified but progress is slow, awaiting clear feed-in tariff structures.

The large-scale PPPs in the electricity sector are proving challenging to bring to a successful close. The 2,000MW Central Java Power Project is facing a number of issues and that of land acquisition in particular and has already had the deadline for financial close extended twice for further 12-month periods until October 2014. A 1,800MW minemouth coal-fired PPP in South Sumatra, SumSel 9/10, has been launched and may be awarded in 2014.

In 2011, the government unveiled its MP3EI 6-corridor framework document for the sustainable economic development of the country. Out of the different areas identified for attention to achieve the various economic targets, infrastructure is set as a key sector. It is also realised that implementation of the many infrastructure projects identified will require significant input from the private sector and will have to be driven in large part from the regions themselves, which in turn will need attention to the wide upgrading of skills to handle the various tasks involved.

The difficulty in securing private funding for infrastructure has made the government turn to directly using the SOE companies and their financial support without promoting to the construction industry generally. There is concern that this will further inhibit private sector interest.

Issues

• Resolution of outstanding legal uncertainty issues• Testing of the new land acquisition law• Testing of the VGF and IIGF frameworks;• Remaining overlapping regulations between central and regional governments• Continuation of the attempts to overcome corruption as manifest in terms of eneabling fees for

projects or obtaining necessary permits.• Direct arrangements for the appointment of SOEs to undertake key projects without normal

advertising with impact on private sector interest• Restricted opportunities in selected sectors for foreign investors

Impact:

The ratio of infrastructure spending to GDP remains at a suboptimal level; the funds that do exist are often poorly allocated to peripheral services rather than physical infrastructure; disbursement of funds through many related departments is slow in any fiscal year and the regulations that control the quality of infrastructure built are quite often not enforced. In parallel, there is a continuing lack of progress on implementing infrastructure projects, especially mega projects such as the development of Airports, Seaports, Railways and some Toll Roads.


51

PROPOSED SOLUTIONS

• Accelerate theactions required toaddress thedistortions in theeconomyarising throughcorruptionandissueeffectivelegalinstrumentstosupportthefasterbuildoutofinfrastructure;

• Recognise that there will be a very considerable shortfall in the required budget forinfrastructureinthecomingyear,takeimmediatestepstoallocate5%ofGDPperannumforsubsequentyearsandcontinuethisforthe10yearsthereafter.Inaddition,ensurethatthefundsarespentinatimelymannerandproperlyonphysicalinfrastructureandnotonperipheralconsulting,planning,monitoringandsupervisingservices;

• Proceedwith the implementation of the land acquisition bill as promptly as possible andensure that execution brings about the necessary legal and physical powers to executecompulsorypurchasewithoutdelay;

• Empowerallgovernmentdepartmentstocompletealloutstandingimplementingregulationsin all sectors (no exceptions) to allowa comprehensive investment in infrastructure as awhole;

• ImplementasensibleandstraightforwardVGFscheme toallow lessviableprojects tobeundertakenbytheprivatesector;

• Consider rolling back the regionalisation that has taken place in the last two decades toprovidemorecentralcontroloverkeyinfrastructureprojects,asmanyprojectsarecurrentlystuckasaresultofdisagreementsbetweencentralandregionalauthorities;

• ReassessthePPPprogramme,whichhasclearlyfailedtodeliverinitscurrentform,givingconsiderationtotheformationofastrongcentralPPPunit;

• ReducedominanceofSOEs inmajor infrastructure, particularly thePelindos in ports andAngkasaPurasinairports,whichdeterstheprivatesector(andparticularlyforeigninvestors)fromparticipatingintheprocess;

• Strongly support the implementation of the 2011 6-Corridor EconomicDevelopment Plan(MP3EI)andensurethatthelocalgovernmentsineachcorridorplaytheirroleintherealisationofthePlan’sobjectives;and

• InkeepingwiththeMP3EIcontinuetoactivelypursuetheprogrammeforPPPprojects,butwithoutprejudicingotherformsofprivateandunsolicitedinvestmentsthatareoftenmorerelevanttocommercialenterprise.

WHO SHOULD TAKE ACTIONS:

• GOIastheoverallownerofprojectsinnationaldevelopment

• Businesscommunity(investorsandentrepreneurs)asthetargetgroups

• ThepeopleoftheRepublicofIndonesiaasthefinalbeneficiaries.


52

SECTOR PHARMACEUTICALS


54


55

1. IntroductionThe EU and Indonesia have built robust commercial relations, with bilateral trade accounting for approximately EUR 25 billion in 2012 and a trade surplus for Indonesia of around EUR 3 billion. In addition, the EU is the second largest investor in the Indonesian economy. In the past years, an estimated 1000 European companies have invested about EUR 130 billion into the economy and directly employ 1.1 million Indonesians. From January to August 2013, total non-oil & gas exports to the EU amounted to US$ 11.04 billion, while total imports from the EU amounted to US$ 9.20 billion4.

The EU is one of the top three investors in Indonesia. From January to June 2013, EU Member States companies have made nearly US$ 1.5 billion investments in Indonesia5. However, compared to other countries in Asia, the EU’s direct investment in Indonesia is still relatively small.

Indonesia is a very attractive market for the EU pharmaceutical industry, while EU companies are set to assist the Indonesian industry to become a major supplier and exporter of drugs as well as new herbal medicine (jamu) products. Combining the vast natural and human resources of Indonesia with the know-how and technology of European investors would result in an increase in the competitiveness of Indonesian pharmaceutical companies as well as the supply of medical services in Indonesia. The EU pharmaceutical market is the world’s second largest after the USA. The EU market (extra EU imports) has grown substantially over the last 10 years. Around 80% of pharmaceutical imports to the EU come from Switzerland and the USA. Indonesia only provided 0.02% of EU imports in 2010.

The EU, on the other hand, constitutes a large and important market for Indonesia with its 500+ million citizens. It is also the source of investment and trade giving rise to fair employment conditions, sustainable development and innovative technological solutions.

SECTOR

PHARMACEUTICALS

4 Source: Statistics Indonesia. http://www.bps.go.id/brs_file/eksim_01okt13.pdf5 Source: Indonesia Investment Coordinating Board (BKPM)


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THE INDONESIAN PHARMACEUTICAL MARKET

Population 247 millionGross National Income per Capita (PPP international $) $ 4,500

GDP Growth (%) 6.2

Total expenditure on health (% of GDP) 3.1

Total Pharmaceutical Market US$ 7.6 billion

Source: PharmaBoard.Com (September 2013), EuroCham Health Seminar (2013)

Last year, Indonesia’s market for pharmaceutical products grew around 66% from US$ 4.58 billion (2011) to US$ 7.6 billion (2012). It is estimated that the market will continue to enjoy steady CAGR of 13% until 2018. Key drivers for this growth are the growing middle class, an increased awareness and understanding of the importance of health, government health spending which will gradually increase from 2 to 5% and SJSN implementation in 2014.

The market consists of 170 local companies, including state owned companies and around 50 international pharmaceutical companies. Out of the estimated 50 international pharmaceutical companies in Indonesia, approximately 20 European companies have an active presence. Local manufacturers dominate the market with an estimated 71% market share.

Distribution of pharmaceutical products takes place through wholesalers who later distribute the products to 11,000 pharmacies; 7,000 registered outlets; and 1.9 million retail outlets. Apart from the generics market, the price of pharmaceutical products in Indonesia is not controlled.

The price of generics is controlled by a series of regulations. Medicines included in the Indonesian List of Essential Medicines have a maximum retail margin of 50%. In particular, prices of Quality Assured Generics (or OBG Generics) are set at the same low levels throughout Indonesia6.

OTC medicines currently have a 40% market share in Indonesia. With a low level of insurance in Indonesia and a traditional avoidance of visiting doctors due to the expense, the OTC market has flourished. The generics market is also very important in Indonesia with the majority of drugs sold in Indonesia being generics. But, despite the country possessing huge manufacturing capabilities, the lack of R&D in domestic companies could cause the market to stagnate, especially if IPR regulations are not tightened.

2. Regulatory Issues

2.1. National Health Insurance

The pharmaceutical industry is currently gearing up towards the implementation of National Health Insurance (Jaminan Kesehatan Nasional) on 1st January 2014. This program is implemented based on Law No.40/2004 of the National Social Security System (SJSN) and Law No.24/2011 on Social Security Implementation Agency. The National Social Security System’s objective is to provide assurance of the fulfillment of the basic needs of life for every member and his/her family. This includes 5 programs, namely: old age savings, death insurance, work accident insurance, health benefits and pension program. The aims of the new universal healthcare coverage scheme are to ensure that the scheme is introduced in line with the principles of affordability, accessibility and the rational use of medicine. The National Formulary, an electronic catalogue, which is scheduled to be compiled before implementation, will record over 500 safe and cost-effective medicines.

6 Indonesia Pharmaceutical Market Update, 2013. Pharmaphorum.


57

The Ministry of Health expects that this program can create a better and more cost-effective national health insurance scheme. Starting on 1st January 2014, poor and financially disabled Indonesian nationals, armed forces and their dependents, members of police and their dependents, members of ASKES, as well as members of JAMSOSTEK will be covered by the National Health Insurance. Gradual implementation will begin in 2014 with full coverage expected by 2019. Employers that currently provide health benefits to their workers will be given until 2019 to enroll their workers so that everyone is covered by BPJS Kesehatan by 2019.

It is commendable that Indonesia wants to achieve universal healthcare coverage for its population and industry applauds this and stands ready to help the Indonesian government to achieve this goal. It is important that the government considers how best to meet the challenge of establishing a healthcare policy that meets the needs of all key stakeholders, namely patients (who want rapid access to the best treatments), payers (who want to deliver good healthcare to their citizens and manage budgets) and the industry (which wants to secure a return on investment that will incentivize further innovation).

Both local and foreign industry are ready to help the government to ensure the most effective and efficient implementation of the universal healthcare coverage. It is important to acknowledge however that UHC is just one aspect of the overall healthcare reform. Effective healthcare reform should involve a holistic approach covering all relevant stakeholders and addressing all aspects of the healthcare system, namely finance, infrastructure and resources, quality, safety and efficacy and awareness.

2.2. Key Concerns

For pharmaceutical companies the implementation of National Health Insurance (Jaminan Kesehatan Nasional) is seen as a double-edged sword. The domestic market will further increase and create downward pressure on the price of drugs. However, it will also increase the operational risk for companies (particularly those who produce generics). Companies will be required to be more careful in planning their production. Whilst generics will be very much covered in the Fornas, it is important not to omit innovative and new products for long term health outcomes of the population.

2.3. Overview of Current Situation

To successfully implement the National Health Insurance program, the Indonesian government needs to ensure that all relevant regulations are in place. This remains as uncertain, as many of the regulations have not been released.

According to the Regulatory Task Force of Health Insurance Implementation Agency (Pokja Regulasi BPJS Kesehatan) 7, the implementation of Law No. 24/2011 for Health Insurance Implementation Agency (BPJS Kesehatan) will be supported by 19 regulations. Currently, only 2 regulations have been released:

• Government Regulation No. 101/2012 concerning Beneficiaries Contribution• President Regulation No.12/2013 concerning Health Insurance

The government plans to release 14 regulations before 31st December 2013, and 3 regulations afterwards.

Whilst it is acknowledged that the Ministry of Health is working hard to ensure universal healthcare coverage, it is expected that there will be challenges in the implementation considering the lack of implementation guidelines to date. 96.7 million people are expected to be covered by the government from 1st January 2014.

7 Indonesia Pharmaceutical Market Update, 2013. Pharmaphorum.


58

Another concern from industry is that systems in which the government is the sole purchaser of medicines are likely to be unsustainable in the medium to long term. Governments should look at new funding options including a greater role for private health insurance, and increased patient co-payment, in a way that encourages compliance and cost-effective use of medicines while ensuring that low-income and other vulnerable groups are not excluded or discouraged from seeking and receiving medical care.

RECOMMENDATIONS

1. Industry recommends that the government issues the outstanding regulations related tothe implementation of SJSN in a timelymanner in order to provide a legal framework for theestablishmentandimplementationoftechnicalaspectsofthesystemandtoallowindustryplayerstoplantheirbusinessaccordingly.

2. Developdifferentiatedproduct lists (e.g.ListA,ListB)possiblywithco-payments, forexampletohaveanEssentialDrugListthatcoversallbasicmedications(typicallygenericsorunbrandedgenerics),whilsthavingone(ortwo)separatedruglistsfornewer/innovativemedicinespossiblywithco-payments.Suchdifferentiatedlistswillallowamorecomprehensivehealthcareaccesstobasicaswellasnewerdrugs,whichwillbenefithealthoutcomesofthepopulationinthelong-term.

3. GoIshouldstarttobuildcapabilitiesonHealthTechnologyAssessment(HTA),Cost-benefitRatiosandInnovativePricingModels.HealthTechnologyAssessments(HTA)cancontributetoanassessmentofclinicaleffectivenessandcost-effectivenessofnewmedicinesandnewtechnologies(includingmedicaldevices)

4. ManufacturingCapacitytoserveagrowingmarketwillrequirebetterplanningandforecastingofwhatmedicinesarerequired.

5. EffectivedistributionacrossthevastarchipelagonationofIndonesiawillbekeytothesuccessoftheuniversalhealthcarecoverageandindustrywouldliketoseeaflowchartoftheentiresupplychainonhowthiswillwork.

6. GovernmentofIndonesiashouldinviteindustryasapartnerandpartofhealthcarestakeholdertosittogetherandtoseekanyideas/feedbackwhendevelopingregulationsornewlawsinordertoprovideinputintotheimplementationchallengesandoffertrustworthysolutionsandpartnershipsandgreatertransparency.

3. Pension Programme of BPJS

3.1. Key Concerns

Industry is still waiting for the government regulation concerning pension benefits formula and contribution rates. Most companies are anxious to find out what the cost impact would be based on this government regulation. Since the pension program under SJSN is a new scheme, company contributions towards this scheme would be an additional cost borne by the company and therefore timely notification for better planning purposes is appreciated.

3.2. Overview of Current Situation

Current mandatory retirement benefits (pension benefit is essentially retirement benefits paid on monthly basis) include:

a. Jaminan Hari Tua (JHT) or Old Age Allowance under Jamsostek plan Under this plan, a company contributes 3.7% of salary, and employee contributes 2% of

salary. Under certain assumptions, this would yield retirement income around 14% - 16% of final salary prior to retirement (in other words, income replacement rate is around 16%).


59

b. Uang Pesangon (Severance Pay), Uang Penghargaan Masa Kerja (Service/Gratuity Pay) and Uang Penggantian Hak (Compensation pay) under Labor Law (Law No. 13/2003)

Based on certain assumptions, this would generate around 17% income replacement rate.

The estimated total replacement rates coming from mandatory retirement plans is around 33% which is short 7% compared to ILO’s standard minimum replacement rate of 40%. This shortage could be covered with contributions of around 2.5% - 3% of salary.

RECOMMENDATION

Thecompanycontributiontopensionplanshouldbesetatamaximumrateof3%ofsalaryconsideringthatthisratewouldbringuptotalincomereplacementratefrommandatoryretirementplanstoaround40%,whichisinlinewithILO’sminimumstandardforreplacementrate.


60

SECTOR TEXTILE AND FOOTWEAR


62


63

Indonesian government will make a new government regulation that ensures the minimum wage increase in all 33 provinces is kept below 20 percent in 2014. This new rule is directed to labour-intensive industries including Indonesia’s small and medium sized businesses. The limitation on the regional minimum wage is much lower that the demand from Indonesia’s labour associations which has requested minimum increases of 50 percent.

This new government regulation will only be applied in the year 2014. After 2014, the government proposes to base the provincial minimum wage increase on Indonesia’s inflation rate and add three to four percentage points to that figure. It is concerned that higher wages become a large burden for employers and impact negatively on industries.

Related to the REACH regulation, it shows that there is a lack of awareness and knowledge amongst practitioners and related Ministries. This current issue is due to un-harmonised policies between Indonesian and EU government.

1. Highlights• Textile and footwear industry are the strategic industry that need to develop for Indonesian economic

because it has a significant role in contributing foreign exchange and also gives surplus on the trade balance, labor absorption and supplying domestic;

• In the international market Indonesia is known as one of the manufacturers of textile and footwear with good quality products. Market share of textile products in the international market was 1.8% and footwear is 2.8%;

• Textile and footwear industries in Indonesia are export oriented with the main export destinations are USA, EU and Japan;

• Textile and footwear industry are expected to continue to grow over time because the demand of the product continuously both domestic and abroad.

SECTOR

TEXTILE AND FOOTWEAR


64

2. FootwearExport Import development 2007-2012:

• Indonesian exportation 2007-2012 increased from 1,638 to 3,525• The three main export destinations of Indonesian products are Europe (1,367,310.8 /38.8%), USA

(890,483.9 / 25.3%), and others (1,266,797.5 / 35.9%),• The stability of growth in the European market is related to our policy which opens up to Non

Traditional Markets (Eastern Europe, Middle East and Africa)- In 2012, there were 15 countries highlighted as major export destinations for Indonesian

products to EU. Divided by 5 major countries; Belgium, Germany, UK, Netherlands and Italy (20 million per month)

- Other major countries such as; Japan, Australia, Mexico, Canada and Panama (2 million per month)

We had previously predicted that exports would reach 5 billion US$, but several problems hindered this. Otherwise, imports are relatively flat, from 82 to 387.

EU1,367,310.8

38.8%

USA890,483.925.3%%

OTHERS1,266,797.5

35.9%

Value : Billion US$

2007 2008 2009 2010 2011 2012

TAHUN

82 162 132 244 353 387

1,6381,885 1,736

2,502

3,302

3,5254,000

3,500

3,000

2,500

2,000

1,500

1,000

500

Export Import

Threats:

• The most important issue that we are currently facing is the impact of the increasing minimum wage (40% generally 70% in the Bogor area). This totals IDR 2.200.000,- for Jakarta which includes: Social security payment, Overtime, Separation / Termination, Holiday allowance (the 13th salary) and payment for over one year service. However, higher salary must be balanced with skill requirement;

• Other issue for the industry is the uncertain regulation from the government related to the system and matter of bureaucracy;

• Indonesia has a higher interest rate (13,96%) than any other country. According to bankers, Indonesia cannot give a lower interest rate among other ASEAN countries, therefore Indonesia is the highest interest rate;

• Increase of electricity cost of an average of 4,3% in 2013.

Other minor problems:

• Original Equipment Manufacturer• Tight competition between Indonesia and other countries like Vietnam, Burma and Cambodia• Indonesia does not fully meet European standards


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3. Textile

2007 2008 2009 2010 2011 2012 2012 2013

Q1 + Q2 Q1 + Q2

10.00

9,00

8,00

7,00

6,00

5,00

4,00

3,00

2,00

1,00

0,00

1,41

2,61

4,91

1,82

5,48

8,71

3,71

4,54

+22.3%

Textile Industry Investment ValueInvestment Realization (FDI=DDI), Trillion Rp.

Textile Industry Investment% Contribution by Status

TEXTILE INDUSTRY INVESTMENT SECTOR 2013 (TRILLION IDR)

Contribution:

• Textile industry plays a main role for the absorption of laborers. It has increased to 1.35% in 2012• Textile industry contribute to the national export income, is stable up 10,77% from the previous year.

In other segments, like non-oil exports, there has been no, or very small increases whilst from 6,58% of national export growth

• The contribution of the textile industry boost the manufacturing sector to 13,9% (2012)• Development of the industrial zone in 2012 was 2,894 business units. Jakarta (16,4%), West Java

(43,6%), Banten (14,8%), Central Java (13,5%), and East Java (5,5%)• Textile industry contributes to Indonesians GDP in 2012: industry 5,9%, non-oil (1,7%) and national

(1,4%)• Textile sector has contributed to the industrial sector of 5,6% and national investment of 2,8%

Investment in 2012 (Trillion IDR):

• The textile industry investment value increased (+75%) from Q1 2012 (1,67%) to Q1 2013 (2,92%). The trend is still going to rise because this is one of the positive influences from the restructuring programme

• Textile industry investment percentage contributing by status, FDI (Foreign Direct Investment) in Q1 2013 was dominant from 51% to 71%.

2007 2008 2009 2010 2011 2012 2013

Q1 + Q2

84%

16%

28%

72%

46%

54%

24%18%

49%

22%

76%82%

51%

78%


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Figures:

• Textile growth in 2012 has decreased due to weak global demand from 2011 (7,5%) à 2012 (4,19%)• In 2012 exports were higher than imports, 12,46% and 8,14%• Indonesian textiles trade by lines of product in 2012:

- Export -> Garment 57,6%, Fabric 15,3%, Yarn 17,8%- Import -> Fabric 55,8%, Fiber 27,2%, Yarn 7,9%

Textile and Footwear Industries Restructuring Programme

• One of the major problems facing by the textile and footwear industry is the outdated machinery (over 20 years) this leads to high energy consumption, low performance and quality product. Other issue is the emergence of newly industrialized countries that already adopting new technologies

• Ministry of Industry has launched a Textile and Footwear Industry Restructuring Program. The main idea is to support textile and footwear industries in replacing old machinery to enhance the competitiveness by providing government incentive.

INDONESIA TEXTILE & CLOTHING EXPORT TO EU

Indonesian TC Export to EUin Billion US

Indonesian Portion to EU TC Importsin %

3,00%

2,50%

2,00%

1,50%

1,00%

0,50%

0,00%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

0,6

1,8

2,4

2,22,4

2,52,3

2,72,5

2,7

2,32,5

3,0

2,6

1,61,8

2,0

1,8

2,11,9

2,11,9 1,9

2,3

2,0

0,6 0,6 0,60,5

0,6 0,6 0,60,4

0,60,7

0,5

3.50

3,00

2,50

2,00

1,50

1,00

0,50

0,00

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Textile & Clothing Textile Clothing Textile & Clothing Textile Clothing

1,0%

0,8%0,7% 0,7% 0,7% 0,7% 0,7% 0,7%

0,8% 0,8%0,7%

1,0%

1,8%

2,4%

2,0%1,9%

1,8%

1,5%1,7%

1,3% 1,3% 1,3% 1,3% 1,3% 1,3%

1,6%1,5%

1,4%

1,2%1,3%

1,1% 1,1% 1,1% 1,1% 1,2%1,1%

Both groups of textiles and clothing products group of Indonesia origin respectively ranks 10th


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Problems in Textile and Footwear Industries:

• Infrastructure : Road, Port, Airport, and Energy• Lack of information regarding standardisation / REACH• Regulation on Labour and Wage• Lower import tariffs for industrial products• Security distribution flows of raw materials, limited number of raw materials for production• Imported raw material blocked in quarantine and red line• Trade barriers for IAK & IPK Industries with dumpling allegations, safeguards, and anti-subsidy• Condition of Machineries affect the productivity of the industry (60% at textile machineries >20 years)• Limited number of skillful operator• Limited number of investment• High cost transportation

Opportunities for Textile and Footwear Industries

• Close cooperation between APRISINDO (Indonesian Footwear Association) and API (Indonesian Textile Association) with the Ministry of Industry for technical schools with industry oriented curricula

• Program for revitalisation of outdated machinery in the footwear industry is underway and will be implemented in 2014

• Downstream industry for supplying raw materials has just begun, the association has already discussed with the government to focus on this sector. The footwear industry depends on 70% of raw materials imported from other countries

• Indonesia does not have the know-how on dyeing and finishing material, only good in certain aspect like spinning and garment (e.g. synthetic)

• The need of development ECO factory in Indonesia

INDONESIA TEXTILE & CLOTHING EXPORT TO EU

All Type Machinery Import (HS 8401-8484)(Mn US$)

238

4,297

6,3118,076 7,404

9,519

18,305

14,724

19,908

24,612

28,316

297 281 326 423 648 388 663 983 1,113

3,00

2,50

2,00

1,50

1,00

0,50

0,002003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Textile Mchinery HS 8444 - 8453All Type Machinery HS 8401-8485

Textile Machinery Import (HS 8444-8452)(Mn US$)

67

238

77

297

66

281

79

326

93

423

140

648

68

388

112

663

182

983

269

1,1131,200

1,000

800

600

400

200

02003 2004 2005 2006 2007 2008 2009 2010 2011 2012

From EUFrom World

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

% from EU 28.1% 26.0% 23.6% 24.3% 21.9% 21.7% 17.6% 16.9% 18.5% 24.2%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

5.5% 4.7% 3.5% 4.4% 4.4% 3.5% 2.6% 3.3% 4.0% 3.9%% Textile Machinery


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Current Issues for the Industrial Zone

The main problem that we are dealing is the increasing of minimum wage. As we know now the minimum wage in Jakarta area is IDR 2.200.000,-. The payment is for social security, overtime, separation / termination, Holiday allowance (THR-13th salary), also payment for over one year service. Although minimum wage has been increased per 2012, the GoI is planning to raise a wage up to 40% in 2014, which results a debate between associations, stakeholders and labours union.

Other problems are with the uncertainty in regulations issued by the government as well as the complexity of the bureaucracy. From the study, we found that all major problems source from government regulations. Simply problems with a simple soloution…

Other Issues

The companies which are located in the bonded warehouse is mostly in west Java followed by Banten, Central Java, Jakarta and East Java. The facility of distribution is leading from West Java following the same area previously, but now all industries are moving their business to Central Java like Semarang, Ambarawa, Sragen. This is due to the limitation at the port of Tanjung Priok where there are queues of up to 10km. On May 2013, there are 1399 bonded companies and KITE has dropped to 346 because of the withdrawal of national income, whereas there are only 261 bonded warehouses.

In the bonded zone areas, there are 490 companies who are in textile production and for the shoe industry is at 4th position with around 66 companies.

In terms of location base, the Government Regulation no 44 in 2009 about industrial zoning, there is still more than half of the companies situated in non-industrial zone (60%). The contribution of textile in the production of bonded zone is 35%, footwear is only 5% and others is 60%.

For yarn, fabric and garment/apparel based on industrial zones West Java still holding the biggest location which is 50% following Jakarta, Banten, East Java and Central Java.

For shoes, sandals, accessories, midsole and outsole based on industrial zones, Banten has played the biggest role contributing to 62% followed by West Java and East Java.

Partnerships Opportunities for Industrial Sector

• Maintaining growth between Indonesia and Europe partnership can be determined by:• Developing a better understanding of EU regulation• Provide updated information on standardisations and/or amendments of regulations• Increasing the action plans on business matching, information and market research• Synchronising regulations between the Ministries in trade issues• Enforcing investment process at province, region and district levels• Make better coordination between the Central and Regional Government• Capacity building to help meet EU requirements• Review existing agreements on tariff systems for the Indonesian Textile and Footwear Industry• Partnership in machinery programme for revitalization• Co-operate with EU in training programme for special skill workers• To maintain and enhance its market share of Indonesia in European Union, the FTA negotiations

should be accelerated


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LOCAL ISSUES IMPACT PROPOSED SOLUTION

WHO SHOULD TAKE ACTION

Multiple Value Added Tax (VAT).

While in China, India and Pakistan apply sales tax

The price will be competitive

Tax reform, apply sales tax Indonesian Government

Labour pressure for wage hikes, anti-outsourcing and

health insurance

Investor and Capital outflow

Review multi-party agreements between

manufacturer associations, labor

federations and Government.

Indonesian Government (Ministry of Labour)

Domination of Chinese textile products in the domestic

market, with lower prices

The share of the domestic market held by Local manufacturers will

decrease

Local Market Protection Indonesian Government (Ministry of Trade)

Limitation of raw materials availability. Indonesia only produces fiber & polyester as a basic material, while

high quality cotton is totally imported from Brazil

High production costs and Production instability

G to G export import agreements.

Indonesian Government in cooperation with

Manufacturers

Crucial investment process at provincial and region/

municipality levelHigh investment costs Set up a Foreign

investment desk Indonesian Government

Condition of Machinery Low productivity of the industry Revitalisation programme Private sector

Needs of ECO factory Environmental problems ECO green development system

Government with NGO and Private sector


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EXTERNAL ISSUES

Unbalanced Tariff Exports/Imports between Indonesia

and the EU

- Tariff of Textile exports from Indonesia to the EU is considered too high. (12%-16%)

- Zero import Tariffs for Textile Machinery and equipment from the EU to Indonesia

The textile price from Indonesia will not be as competitive as Chinese

product

Review the agreement of the tariff system for Textile products. Textile

tariff reductions will increase textile will

almost triple exports to the EU

Indonesian Government and the EU

CROSS SECTOR INTELLECTUAL

PROPERTY RIGHTS


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1. IntroductionThe EIBD Working Group on Intellectual Property Rights (IPRs) aims at better understanding the opportunities arising from an improved legal and institutional protection of intellectual property, trademarks and cultural heritage.

Based on various reliable sources, the existing IPR issues remain the same without significant progress to cope with the problems. The issues are therefore still similar with the former recommendation made for the EIBD 2012. This year’s recommendation will highlight the urgency of IPR enforcement efforts in addressing challenges such as the implementation of law enforcement and the IPR prosecution system which must be adequate in order to protect the rights of IPR holders as business entities as well as the importance of awareness and socialisation activities in various targets of the population. Any instruments of protecting intellectual property, or other achievements and resources deserving protection, should follow – among others - a business-minded rationale.

The following laws are related to IPR protection:

1. Law No. 7 Year 1994 concerning the Ratification of Agreement Establishing the World Trade Organization;

2. Law No. 30 Year 2000 concerning Trade Secrets;3. Law No. 31 Year 2000 concerning Industrial Design;4. Law No. 32 Year 2000 concerning Layout Design of Integrated Circuits;5. Law No. 14 Year 2001 concerning Patents;6. Law No. 15 Year 2001 concerning Trademarks;7. Law No. 19 Year 2002 concerning Copyrights;8. Government Regulation No. 51 Year 2007 concerning Geographical Indication (“Government

Regulation No. 51/2007”); and9. Government Regulation No. 7 Year 2005 concerning Organisational Structure, Duty, and Function

of Trademark Appeal Commission (“Government Regulation No. 7/2005”).

CROSS SECTOR

INTELLECTUAL PROPERTY RIGHTS


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General Directorate of IPR (DGIP) in co-operation with several IPR experts from the Academic circle, practitioners and other relevant Government institutions are still working to prepare a new draft of the Trademark Law, Patent Law and Copyrights Law. However, the only draft that will be entering National Legislation Programme (Prolegnas) before next year is the draft of new Copyright Law. Apart from the above, DGIP has been working since mid- 2012 on restructuring their Information Technology infrastructure in welcoming the implementation of the Madrid Protocol in 2015.

One of the problems that has not been settled from the enactment of IPR laws to date are the lack of Government Regulations that should be created and used as technical procedures in IPR prosecution. Such a lack of Government Regulations has caused confusion in the implementation of IPR Law.

The United States Trade Representative (USTR) has once again put Indonesia under their Priority Watch List for 2013 together with other countries including; Algiers, Argentina, Canada, Chile, China, India, Israel, Pakistan, Russia, Thailand, Ukraine and Venezuela. The main concern that led USTR to include Indonesia on the said list is the effectiveness and efficiency to conduct legal enforcement especially related to the copyrights.

2. Issues

2.1. Duration of prosecution process

IPR registration process in Indonesia takes very long compared to other neighboring countries. The Trademark Registration process may take more or less 2,5 years. The registration process for patent takes more or less 6 years and Industrial Design takes more or less 2,5 years.

2.2. Trademark

• The absence of Government Regulations in several matters is still considered as a hindrance towards the protection of Intellectual Property Rights in Indonesia. According to Article 6 Paragraph 1 letter b of Law No. 15 Year 2001 concerning Mark should provide technical regulations regarding the Protection of the Well-Known mark. In the same light as lack of Government Regulations towards the protection of the Well-known Mark is the Government Regulation concerning Recordation of Trademark License Agreement. On the other hand, according to the Trademark Law, the said recordation is compulsory; otherwise the Agreement between Trademark Licensor and Trademark Licensee does not have any impact to third parties.

• Apart from the absence of Government Regulations, limited sources, knowledge, skills, as well as very subjective implementation of trademark substantive examination during trademark registration process, has resulted in many inadequate decisions on the registration of marks.

• Both regulation and implementation on Legal enforcement and protection for trademark infringement is not sufficient. There are still probation and minimum fine sentences which do not act as deterrents for perpetrators. Apart from that, legal action, according to the penal provision, can only be taken for infringement and counterfeiting of the same goods. There are no provisions that enable the trademark rights holder, especially the well-known mark rights holders, to take legal action against infringement and/or counterfeiting done by other parties for different kind of goods. However, Article 6 Paragraph 2 regulates the provision for protection of the well-known mark from any other parties in bad faith that would like to register the well-known mark for a different kind of goods.

• High number of pirated products of well-known marks in Indonesia.


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2.3. Patent

• There is a lack of relevant regulations for Patents that causes a lack of regulation application in practice.

• The obligation to submit patent document applications in the Indonesian language demands an accurate translation in accordance with the substance, especially within the claim documents Invention.

• Patent transparency and the protection of confidential information.• Lack of boundaries on invented software patent protection.• Due to a lack of co-ordination between NA-FDC (BPOM) and DGIP, some pharmaceutical

companies may register their medicine where a partial substance is still protected under the Patent rights belonging to another party and no licenses/permission has been granted.

2.4. Knowledge and awareness

Information regarding IPR is very limited. Further, many groups of people such as; artisans working in various home industries, students at the faculty of technic, who will potentially become future inventors, entrepreneurs or companies involved in malls and department stores as well as officers from various relevant institutions must receive more information and gain a basic knowledge of IPR

2.5. Copyright

• Misunderstanding on how to obtain copyright protection due to limited awareness• Absence of technical regulations that may guide Judges to count minimum compensation

regulated by the relevant laws in private law for copyright infringement (statutory damages);• Inadequate enforcement against copyright infringement in order to provide better legal

protection• Number of Copyright infringement cases using media and information technology which are

not easily tracked and handled by ordinary officers without special the capacity on information technology and other relevant skills

2.6. Industrial Design

• Much confusion and uncertainty on how to examine and decide on the similarity between an Industrial Design that has been registered and its infringed/counterfeited products

• Too much subjectivity in examining industrial design, especially in determining whether there is a similarity between 2 or more design products

• Lack of socialisation on which products can be registered as industrial design, especially related to the novelty condition. Many products should not be registered as industrial design because they actually cannot be considered as a new or original design.

2.7. Geographical Indication (GI)

• Lack of strategic programmes to socialise and raise awareness on Geographical Indication, especially for Indonesian and foreign SME’s having businesses related to GI products

• Currently there are very many Indonesian products that may be considered as GI because of their particular geographical area, but have yet to be granted protection under the GI scheme by the Indonesian government;


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• Furthermore, there is no concrete step of supervision and protection of Indonesian registered GI products offshore. This may lead to the circumvention of conditions and abuse of the use of name of a place for products which are not related to such place.

• Lack of sufficient knowledge and information on how Trade Secret Law can protect Trade Secret as the most valuable intangible asset in Indonesia. This can give the impression that the Trade Secret Law is inapplicable.

3. Impact

3.1. Duration of Prosecution Process

• Prosecution process. is very slow and does not support the rhythm of business activities in the country which are very fast and dynamic.

• The very slow prosecution process creates protection uncertainty considering that the applicant must wait very long to have a “green light” before they can be secure in the fact that they are able to conduct their business activities based on their registered IPR

3.2. Trademark

• The absence of government regulations regarding well-known marks led to the passage considered to be rudimentary and can harm the owner of the well-known brand or Trademark in Indonesia;

• Inadequate legal protection can cause difficulties and uncertainty for trademark owners, especially well-known mark owners. This situation can gradually decrease investor confidence. Apart from that, counterfeiting related to products which are directly consumed and used by humans such as pharmaceutical or cosmetics products may have fatal impacts on the public as potential consumers.

• Many trademark owners believe that the lack of Government Regulations on Recordation of Trademark License Agreements, while compulsory to record Trademark License Agreements, is one of the failures in the completion of regulation on the protection of IPR in Indonesia. The only action that can be taken is submitting a request for recordation of Trademark License Agreement to obtain the receipt, although, on the other hand, Trademark owners know that they will not be able to be proceeded due to the absence of Government Regulation.

• Examination process conducted by a DGIP Officer, with limited knowledge and sources, may lead to the improper registration of generic words such as “Kopitiam” and “Luwak”. This is not clearly regulated under the current Trademark Law.

• Lack of qualified Officers with adequate knowledge in DGIPR to represent every province leads to difficulties for the IPR owner when protecting their rights when taking legal action in other provinces apart from Jakarta and its surrounding areas and East Java.

• The trademark rights holder, especially trademark owner, cannot take any action according to penal law against an infringed mark used for a different kind of product because there is a lack of regulations surrounding the current Trademark Law.

3.3. Patent

• Double patent registration for content of products owned by different parties;• The low understanding of domestic patents gives the impression that the patent system is

more reliable for foreign inventors or foreign companies;• Protracted patent application process due to unclear explanation or description of the

claim and unclear formulation in the patent application documents;


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3.4. Copyright

• Various impacts of copyright can reduce creativity in the youth, potential loss of state revenue from taxes, loss of employment, and lack of international trust on copyright enforcement in Indonesia;

• Huge numbers of breaches against Copyright Law may gradually discourage foreign investment in Indonesia.

3.5. Industrial Design

• Confusion and subjectivity on the examination of the similarity between registered Industrial Design and counterfeited products may create frustration among registered Industrial design owners and the impression that industrial design registration does not give sufficient protection.

• Acceptance of non-novelty products as a registered industrial design may create a problem for other business entities who would like to produce similar designs which are actually in the public domain due to being listed as ‘non-novelty’.

3.6. Geographical Indications (GI)

Misuse of Geographical Indications for names and other indications of origin may mislead the public, especially consumers. There will be unfair competition caused by the improper use of Geographical Indication which may result in the loss of revenue for companies or producers that belong to that Geographical place/indication.

3.7. Trade Secret

Trade Secret breaches can cause loss on the side of the Trade Secret owner. This isespecially true if the company has made great efforts in their research and development to create the trade secret. Many Trade Secret disclosures are done so illegally via an employee or ex employee of the owner of Trade Secret itself. Worryingly, the existing Manpower Law does not touch on this important subject.

SUGGESTED SOLUTIONS1. Provideamoreeffectiveandefficientsystemtoaccelerate the registrationprocessofmark,

patent,copyrightandindustrialdesigninordertoimprovelegalcertaintyforinvestors.

2. Provide an official mechanism to accelerate trademark, patent and copyright registrationapplicationswithanofficialfeeinaccordancewiththeprinciplesofjusticeandpublicorder.

3. CreateandimplementabetterformulationofanationalpolicyonIPR.

4. ConductDisseminationonIPRfordifferenttargetpopulationsinanendeavortoraiseawarenessandpassonknowledgetothepublic.

5. StrengthentheenforcementofIPRlawsandregulations.

6. Enhance and support education and training programmes on IPR amongst Law Lecturers,Judges,PublicProsecutors,PoliceOfficers,CustomsOfficersandAttorneys.


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7. Trademark

• Urgently issueandenactnecessaryGovernmentRegulations (PeraturanPemerintah) togivecertaintyofmarkprotectioninIndonesia;

• Improveworkingfacilities,infrastructureanddatabasesofongoingapplications,publishedapplicationsandregisteredmarks;

• AssigncompetentandqualifiedIPOfficersineveryMinistryofLawandHuman

• Rightsrepresentativeoffices(Kanwil).

• Motivateandencouragelocalproducerstocreatetheirowndesignandtrademark.

• Incorporateadditionalpenalprovisionallowinglegalactionandrelevantsanctionsagainstinfringementsorcounterfeitingofwell-knownmarksinongoingdraftsofthenewTrademarkLaw.

8. Patent

• Hold an Intensive socialisation among industry, research and development ministries,government institutions,universities, includinghomeindustriesregardingthebenefitsofthepatentsystemandlegalprotection,inordertogrowawarenessoftheimportanceandbenefitsofthePatentLaw.

• Necessary training on patent drafting for inventors, researcher and IPR consultants,especiallyconductedbypatentexaminersatthePatentOffice;

9. GeographicalIndication(GI)

a. TheIndonesianGovernmentneedstobemoreproactiveinprotectingproductsembodyingspecificanddistinctiveGeographicalIndication’s;

b. DG-IPRplaysamoreactiveroleinidentifyingproductswithparticularcharacteristicstobedeveloped.DG-IPRshouldinvolvelocalcommunitieswhohavebeendirectlyengagedintheprocessofproductionofsuchproducts;

c. Inadditiontoit,TheIndonesianGovernmentshouldcontributebydoingthefollowing:

• Fundtheresearchanddevelopmentofaproducttodefinethebasicstandardofsuchproduct;

• Encourage local populations to maintain and rejuvenate existing products in theirrespectiveareas;

• CreateaschemethatallowsbusinessentitiesthatproduceGeographicalIndicationsproductstoexpeditetheregistrationprocessofGI;

• ActivelymarketandcreateagoodimageofIndonesianproductsinforeignand/ortheinternationalmarket.

d. EncourageandsupportproducersandtheassociationstoprotecttheirGIproducts;

e. TheGovernmentofanotherstatecanhelpprotectproductsbearingcertaincharacteristicswhicharecloselyrelatedtoageographicalareabydoingthefollowing:

• Conductscrupulousduediligenceuponanyregisteredtrademarksinitsownstate;

• Imposelegalconsequencestoimitatorsorcounterfeiters.

f. Studyand learn fromothercountries thathavesuccessfullyprotected theirGIproducts.Asanillustration,withmorethan3000productsbeingregisteredandprotectedunderGIscheme,are thecountriesof theEuropeanUnionwhichareverymuch familiarwithGI,bothinthepracticeandinknowledge.ComparativestudiesandthetransferofknowledgebetweenofficialsfromIndonesiaandcountriesoftheEuropeanUnionwillhelpIndonesiagain better insights on (i) how to increase society’s awareness of the importance ofGI


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protection; and (ii) themosteffectiveway tomaintain theparticularquality andprotectproductsunderGIscheme.

10. ImprovecoordinationbetweenDG-IPRandNA-FDC(BPOM)intheprotectionofthecontentsofdrugssotherewillnotbeadoubleregistrationofoneproduct;

11. Enforcement and sanctions need to be affirmed and fully supported in order to generatea deterrent effect. Coordination between relevant law agencies at various levels need to beimprovedandenhancedsothatitwillsimplifythecontrolandlawenforcement;

12. ImproveSources,skillsandabilitiesofexaminersinordertobemoreprofessional,objectiveandcomprehensive indecidinga trademark,patent, Industrialdesignandcopyrightapplications.SystemisedandcontinuousEducation,socialisationandtrainingactivitiesaswellasdiscussionsessionbetweenGovernmentandbusinessesentitieswillbeusefultoimprovethecapacityofexaminers.

WHO IS TO TAKE ACTION1. CoordinateallrelatedagenciestomakechangesandimprovementstotheTrademarkregulation.

Coordinationandco-operationamongrelevantGovernmentinstitutionsareveryimportantintheendeavortocopewithIPRproblemsfromvariousaspects.

a. DGIP:byissuingseveralimportantGovernmentRegulationsareactuallynecessaryandalsomandatoryaccordingtocurrentTrademarkLaw;

b. IndonesiaPoliceDepartment:Workinaharmonioussystem,especiallyintermsofcapacitybuilding for IPR investigators thatmustbewell-trained inhandlingvariousenforcementcasestoprotectTrademarks,Patents,CopyrightsandIPRingeneral;

c. The Court: appoint well-trained and experienced Judges that have been specialised indealingwithIPRcases.JudgestobeplacedateachoftheCommercialCourtsasaspecialCourtdesignatedtohandlecivilcasesofIPR;

d. NationalAgencyofFoodandDrugsControl(BPOM):coordinatewithDGIPontherequiredpatent licensingdocumentsor letterofconsentofaparticularpharmaceuticalproducts,cosmeticproductsorfoodandbeveragesproductsthatrequirecertificationfromBPOM.Apartfromthat,coordinationregardingtheregistrationofmarkandBPOMmustalsobecarriedoutbetweenthetwoinstitutions.

e. Customs Department: Executing instructions and complete technical guidance relatedtoeffortstoprotectIPRespeciallyrelatedtotrademarksandcopyrightsattheportsandairportsofIndonesia.AlthoughSupremeCourtRegulationNumber4and5areassociatedtotemporarysuspensionandbordermeasuresandhavebeenenactedandeffectivesince2012,thetworegulationsstillleavesometechnicalissuesandlackclearimplementationofcertainareasinthefield.

2. DGIPandNAFDC(BPOM)haveanimportantroleinmaintainingtheconfidentialityofpatentdata.Theyarefurtheradvisedtopaymoreattentiontothisandcoordinateasystemthatensuresdataprivacyofpatentapplicationsateachinstitution.

3. DGIPshouldbegintodevelopasystemthatenablesallIPRregistrationstobeprocessedinashorttimeframe.

4. DGIPshallorganiseasocialisation,educationanddisseminationtrainingsonIPRlaws,intensively;

5. Reorientation and improvement of Copyright and Patent law enforcement to encourage the


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multiplyingeffectofamorepronouncedandwidespread,especiallyinemployment,technologytransferandforeigninvestmentinIndonesia.

6. StrongpoliticalwilloftheGovernmenttomaximisetheperformanceoflawenforcementwithanyrelevancetotheneedforeffortandimprovementmeasuresofCopyrightLaw.

7. Extensivepromotion throughvariousmediawithinandoutside thecountry, including forumsbilateral andmultilateral, to reassure investors and foreign parties of Indonesian conducivepoliciestoinvestandtradewithCopyrightedproducts;

8. Anti-piracyandanti-counterfeitingcampaign;

9. Government: Immediately complete and enact the draft of amendment of Copyright Law,PatentLaw,andTrademarkLawinorderto]moreeffectivelyaddressvariousviolationsandlegalissues;IndustrialDesignLawneedsalsotobeamended,especiallyinordertoclarifythetechnicalaspectsonhowtodistinctadesignwithothersimilarproducts.

10. Indonesia National Police: Increasing better cooperation with relevant law enforcementagencies,includingtheupgradingofinvestigatorsinthefieldofIPRinperformingthedutiesofinvestigationandhandlingofcasesortheCopyrightandotherintellectualpropertyrights;

11. Customs: Immediately make provision guidelines and technical instructions for controllingthe flow of imports and exports of goods in the ports and airports, especially those relatedtotheSupremeCourtRegulationNo.4andno.5oftheprovisionalmeasures,andtemporarysuspension;

12. MinistryofIndustryandTrade,MinistryofTourismandCreativeEconomy,MinistryofCooperativesandSMEs,Universities,AssociationsandProfessionorganisations,toholdintensivesocialisationandeducationactivitiesregardingIndustrialDesign,Patents,TrademarkandCopyright;

13. Government to Government cooperation and support to simplify the registration process forIndonesianGIinEuropeandviceversa.

CROSS SECTOR SUSTAINABILITY


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Indonesia’s growing waste problem and its increasing need for clean energy can be addressed simultaneously with the use of European technologies in generating energy from waste.

1. Background

Waste products in solid, liquid and gas forms from human production and consumption activities are a source of environmental contamination that may harm the economy in urban areas. The problems in handling the waste occur because of an imbalance between the production of waste and the capacity in the management of waste. Waste volumes continue to increase in line with the growth of the population, changes in living standards and the dynamics of community activities. Waste that is not maintained well can be the cause of health problems, causing diseases, flooding, pollution of soil, water and air and a reduced value of the environment. Waste management is an effort to reduce waste volumes or change its shape into something useful, such as by way of composting, compacting, crushing, recycling or generating energy. New technologies developed in Europe and Indonesia offer many new possibilities that need to be utilised to reduce the waste-related problems and generate value.

2. Business Opportunities

Based on Law no 18 of 2008, supported with Government Regulation no 81 of 2012, it is the joint responsibility of the people in the place where waste is generated and the government to limit and manage their waste.

Principles of waste management should be to subsequently reduce the amount of waste generated, to re-use waste products as much as possible, to recycle materials from waste, to produce derived products from waste and finally to generate energy from the residual waste by incineration or gasification.

2.1. Waste Gathering & Transporting

The market size of waste management continues to increase in line with the growth of the population and human activity. Private parties can set up a co=operation with the government or the manager of residential areas and other areas to become the partner for waste management in those areas. Private parties can help to renew the equipment that is used for waste gathering, put

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SUSTAINABILITY


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management expertise in place to increase the quality and productivity of the workers that will lead to better results for the society and also for the worker. For the revenues, commonly the policy that is applied is “Polluter Pays”, where people pay a monthly fee to the manager of waste management in certain area. This creates the possibility to increase the price in exchange for a better service. To add to the revenue stream, this waste management can also be integrated with other business, such as recycling product, deriving new products from waste, such as fuel and sanitation services. In some communities, “Bank Sampah” or Waste Banks have been set up. These “banks” function as waste collection and sorting centres, and citizens can maintain an account in which they can save the amount of money they receive from recycled waste.

2.2. Derived products and Energy from Waste

Un-reusable and un-recyclable waste can be used to produce derived products, such as compost, building materials or fuel, and it can be used to generate energy through incineration or gasification in landfills. Municipal waste-based power plants are power plants that use municipal solid waste for producing renewable energy that is converted into electrical energy. This can be done either by gasification or incineration.

3. Several problems that need to be addressed for this business are:

1. Finding a location and the required land area to build waste to energy power plants and the land acquisition process can be a difficult process;

2. It is sometimes unclear who needs to provide the supporting infrastructure, such as access roads;3. Competition for waste might appear after a first plant is built; 4. Financing of waste-to-energy plants may be challenging, partly because the financial market

for emission rights has largely disappeared. The market for voluntary emission rights still offers relatively attractive prices, but this also usually requires top environmental standards.

Based on Law no 18 of 2008 that regulates waste management, and also from Presidential Regulation (Perpres) No.13 of 2010, municipal waste-based power plants areprojects under the Government’s responsibility that can be given to a private entity using a Public-Private Partnership (PPP) scheme. With this type of cooperation, the government will support and provide the needs for the private party to build the municipal waste-based power plant. For example for the municipal waste-based power plant project in Batam, the government will support and provide payment for waste management services, waste supply, electricity purchase, licenses and permits and an area with road access to build the waste-based power plant.

To ensure sufficient supply of waste, the government should guarantee the supply of waste. The government should also encourage the private sector to get involved in the operation of waste management especially in waste gathering and transportation to ensure the waste is managed well and delivered in time.

Several public and private financing institutions are interested in co-financing PPP projects in waste-to-energy. However, special effort is needed to bring these institutions together.


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RECOMMENDATIONSSeveralrecommendationscanbemadetothegovernmentandrelatedpartiestoaccommodateandexpeditethecooperationinwastemanagement:

1. Waste Collection Governmentshouldimprovethewastecollectionsystem.Relativelysimplemodernisationsof

wastebins,wastetrucks,logisticsandtemporarywastecollectionsitescanalreadycontributetohigherwastecollectionratesand lesspollution.Stimulatingcommunity involvement,suchsupportingtheestablishmentofwastebanks,canhelptoimprovethecollectionandrecyclingrates. Co-operation with private sector will make many of these improvements easier andcheaper.

2. Derived products and Energy from Waste Inordertomaximisetheproductionofderivedproductsandenergyfromwaste,anumberof

recommendationscanbemade:

• The localgovernmentneeds toguaranteewastesupplyandallnecessary licensesandpermitsforaminimumperiodof10–15years;

• Abankablefeasibilitystudyneedstobeprovided,addressingnotonlythetechnical,butalsothelegalandeconomicaspectsoftheproject;

• APowerPurchasingAgreementneedstobeinplace,whichthelocalgovernmentshouldbewillingtohelpestablishwithPLN;

• FinanciersoftenprefertoseelandfillmanagementandWTE-managementinonehandinordertoavoidmutualinterference.Theyalsooftenpreferamanagementcompanywithagoodcombinationoflocalandinternationalexpertise;

• Fullfinancingbytheprivatesectorisunrealistic.Thelocalgovernmentswillneedtoinvestinsupportinginfrastructureandmayneedtocontributetoabankablefeasibilitystudy.Thelocalgovernment shouldalsobewilling topay realisticgate-fees,withoutwhichmanywaste-to-energyplantsaredifficulttofinance.

• As a general principle in PPP-projects, the Government needs to make sure that theregulationssupporttheproject.ThelocalGovernmentshouldconsidera“singlewindowsystem”topreventtheoverlappingofadministrationmattersforPPP-projects.

• An active exchange of experiences between Indonesian municipalities, and betweenIndonesianandEuropeanmunicipalitiesontheentirepolicyframeworkofwaste-to-energyisnecessary.


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NOTES:

Active

made possible with the support of:

23 October 2013

This paper do not reflect any official governments position.

For further information please contact:

Indonesian-Benelux Chamber of Commerce (INA)Menara Jamsostek Building Tower A 20th Floor R. 2002 Jl Gatot Subroto No. 38Jakarta 12043Tel : +62 21 52902177Fax : +62 21 52902178Email : [email protected] : www.ina.or.id

British Chamber of Commerce in Indonesia (BritCham)Wisma Metropolitan I, 15th FloorJl. Jend. Sudirman Kav. 29-31Jakarta 12920Tel : +62 21 522 9453Fax : +62 21 527 9135Email : [email protected] : www.britcham.or.id

Indonesian Chamber of Commerce and Industry (KADIN Indonesia)Menara Kadin Indonesia, 24th floor Jl. H.R. Rasuna Said X-5 Kav 2-3 Jakarta 12950 Tel : +62 21 527 4503Fax : +62 21 527 4505Email : [email protected] : www.eibd-conference.com

German-Indonesian Chamber of Industry and Commerce (EKONID)Jl. H. Agus Salim No. 115Jakarta 10310Tel : +62 21 3154685Fax : +62 21 3157088Email : [email protected] Website : www.ekonid.com

Indonesian French Chamber of Commerce and Industry (IFCCI)Jl. Wijaya II No. 36, Kebayoran Baru Jakarta 12160Tel : +62 21 7397161Fax : +62 21 7397168Email : [email protected] Website : www.ifcci.com

European Business Chamber of Commerce in Indonesia (EuroCham)Wisma Metropolitan 1, 13th FloorJl. Jend Sudirman Kav. 29-31 Jakarta 12920 IndonesiaTel : +62 21 571 0085Fax : +62 21 571 2508Email : [email protected] : www.eurocham.or.id

eurocham

APINDO (Asosiasi Pengusaha Indonesia)Gd. Permata Kuningan Lt.10Jl. Kuningan Mulia Kav. 9CGuntur - SetiabudiJakarta Selatan 12980Tel : +62 21 8378 0824Fax : +62 21 8378 0823 / 8378 0746Email : [email protected] : www.apindo.or.id

Organized by:


Recommendations for Increased Trade and Investmentbetween Indonesia and the European Union

21st and 22nd of October 2013, Jakarta

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EU-INDONESIA BUSINESS DIALOGUE 2013

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Transcript of EU-INDONESIA BUSINESS DIALOGUE 2013