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APEC Deregulation Report 2000
Indonesia
OBJECTIVE
APEC economies will:
a. promote the transparency of their respective regulatory regimes; and
b. eliminate trade and investment distortion arising from domestic regulations which not only impede free and open trade and investment in the Asia-Pacific region but also are more trade and/or investment restricting than necessary to fulfill a legitimate objective.
To promote economic growth, regulations which impede free and open trade and
investment as well as the effective functioning of the market will be reviewed as
necessary. Tariffs will be reduced gradually based on a clear and certain schedule. Non-tariff measures will be eliminated or reduced as appropriate. The number of business sectors included in the negative list of investment will also be reduced in order to increase the participation of the private sector in Indonesian economy. Deregulation measures in other areas such as the financial sector and privatization of state-owned enterprises will also be taken where appropriate with
to strengthen the market.
Over the past 15 years, Indonesia has carried out a systematic efforts
to increase the pace of development through the removal of government-based restraints on trade and industry and the empowerment of the private sector through a consistent process of deregulation and de-bureaucratization.
In the past, the Government provided most goods and services. Through Indonesia's privatization policy, the private sector has been given greater opportunity to provide goods and services.
In its continuing effort to increase economic efficiency, to improve the environment for trade and investment, and to implement its commitment under APEC and the WTO, Indonesia has undertaken a series of deregulatory measures in trade, investment, taxation, finance,
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monetary and banking, and other economic sectors. The May
Deregulation Package of 1995 and the June Deregulation Package of
1996 cover clear and certain schedules of continued tariff reductions;
As a continuation of the previous deregulation steps, the July Deregulation Package of 1997 was issued covering among others, further reduction of tariffs, simplification of export and import procedures, permission to transfer capital goods as well as simplification and reduction of regional taxes and levies.
The September Deregulation Package of 1997 further reduced tariffs on certain products.
On the transfer of capital goods, in July 1997 the Government decided
to exempt from paying import duty capital goods sold or transferred at least 2 years after they were imported.
On the local taxes and levies, simplification was made in July 1997 by reducing the regional taxes from 42 to 9 kinds of taxes and the regional levies from 192 to 30 kinds of levies.
To allow greater private participation in petroleum and gas industries,
in July 1997 the Indonesian Government issued a Presidential Decree
No. 31/1997 regarding the opportunity given to the private companies
to build and operate petroleum and natural gas refineries as well as to
sell their products. Hence, private companies may conduct their petroleum or natural gas refinery activities after obtaining approval from the Government.
In the area of electric generation, the Government has encouraged the development of private power producers. Since then, a number of private power projects have been approved.
In telecommunications, the Government has sold part of its
equity in the international communication firm (INDOSAT) and the
domestic communication firm (TELKOM). In the area of cellular
phone
services,
a number of private companies with some participation of TELKOM
and INDOSAT are currently operating in Indonesia.
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Privatization has also been implemented in the provisions of auction centers and bounded zones and other infrastructure services such as toll roads, harbors, airports, airlines, and potable water.
As part of its continued efforts to privatize state-owned enterprises, the Government has privatized one of the state-owned bank, i.e., Bank BNI.
In November 1997, Indonesia eliminated price control on cement.
Import marketing monopolies on certain agricultural commodities such as wheat, wheat flour, garlic and soybean have been abolished.
Export taxes on leather, cork, ore and waste aluminium products have been abolished.
In January 1998 Indonesia discontinued special tax, customs or credit privileges granted to the National Car Program.
Indonesia has amended Banking Act Number 7 of 1992 with Act Number 10 of 1998 to allow broader opportunity for foreign ownership on national bank, improve prudential regulations and create more transparent banking practices.
To strengthen banking system and to restructure troubled banks, a temporary agency called "Indonesian Banking Restructuring Agency
(IBRA)" has been established.
Indonesia has replaced Act Number 13 of 1968 with Act Number 23 of
1999 on Bank Indonesia to ensure the attainment of monetary stability and to give independence to the Central Bank.
Indonesia has enacted Act Number 24 of 1999 on Foreign Exchange Flow and Exchange Rate System to provide legal basis to support international trade transaction, investment and payment.
In order to further liberalize its economy, in June 1999 Indonesia relaxed 47 import licensing requirements on motor vehicles producers and phased-out the local content program.
In its efforts to enhance good public and corporate governance, Indonesia has established, among others, National Commission for Corporate Governance. Indonesia has also developed a national strategy for corporate governance reform aiming at improving accountability, disclosure, company registration as well as law enforcement and oversight.
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Indonesia will continue its efforts to further privatize state-owned
enterprises. It is expected that such privatization will improve the
efficiency of the firms, overcome the shortage of government funds and help to strengthen Indonesia's capital markets. State-owned enterprises that will be privatized in the short term include Perusahaan Listrik Negara (electric utility company), Garuda
(national flag carrier), Jasa Marga (toll-road developer/operator),
Krakatau Steel (steel production plant), and Semen Gresik (cement production plant).
Indonesia is in the process of restructuring its electric power sector.
Indonesia will allow qualified foreign investors to own 100% share
in wholesale and retail trade.
Indonesia will continue to liberalise fertilizer marketing by allowing general importers to engage in trade and opening domestic marketing to new participants.
Indonesia is in the process of developing an action plan to increase private sector involvement in SMEs support programs, which provides, for : (I) developing an institutional framework for SMEs policy formulation; (ii) making business development services more responsive to SME needs; (iii) expanding access to finance for SMEs, (iv) streamlining government regulation affecting SMEs businesses. With regard to expanding access to finance for SMEs, the government has established Indonesia Export Bank to allow SMEs to compete in international market.
Indonesia will continue to further deregulate its economy so as to
enhance the competitiveness of the economy.
Although Indonesia's regulatory framework has always been transparent, the Government will continue to explore ways and means to further increase transparency in the regulatory process.
Indonesia will continue to privatize state-owned enterprises by offering its shares to private sectors. Areas that will be further privatized include steel industry, services, shipping lines, and public railways.
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