|
PRESS RELEASE
PRESS/TPRB/96
7 December 1998TRADE
POLICY REVIEW BODY: REVIEW OF INDONESIA
TPRB'S EVALUATION Back to top
The Trade Policy Review Body of the
World Trade Organization (WTO) concluded its third review of the trade policies of
Indonesia on 3 and 4 December 1998. The text of the Chairperson's concluding remarks is
attached as a summary of the salient points which emerged during the discussion. The
review enables the TPRB to conduct a collective examination of the full range of trade
policies and practices of each WTO member country at regular periodic intervals to monitor
significant trends and developments which may have an impact on the global trading system.
The review is based on two reports
which are prepared respectively by the WTO Secretariat and the government under review and
which cover all aspects of the country's trade policies, including its domestic laws and
regulations, the institutional framework, bilateral, regional and other preferential
agreements, the wider economic needs and the external environment. A record of the
discussion and the Chairperson's summing up together with the reports will be published in
due course as the complete trade policy review of Indonesia and will be available from the
WTO Secretariat, Center William Rappard, 154 rue de Lausanne, 1211 Geneva 21.
Since December 1989, the following
reports have been completed: Argentina (1992),
Australia (1989, 1994 & 1998), Austria (1992), Bangladesh (1992), Benin (1997),
Bolivia (1993), Botswana (1998), Brazil (1992 & 1996), Burkina Faso (1998), Cameroon
(1995), Canada (1990, 1992, 1994 & 1996), Chile (1991 & 1997), Colombia (1990
& 1996), Costa Rica (1995), Côte d'Ivoire (1995), Cyprus (1997), the Czech Republic
(1996), the Dominican Republic (1996), Egypt (1992), El Salvador (1996), the European
Communities (1991, 1993, 1995 & 1997), Fiji (1997), Finland (1992), Ghana (1992), Hong
Kong (1990 & 1994), Hungary (1991 & 1998), Iceland (1994), India (1993 &
1998), Indonesia (1991, 1994 & 1998), Israel (1994), Jamaica (1998), Japan (1990,
1992, 1995 & 1998), Kenya (1993), Korea, Rep. of (1992 & 1996), Lesotho (1998),
Macau (1994), Malaysia (1993 & 1997), Mali (1998), Mauritius (1995), Mexico (1993
& 1997), Morocco (1989 & 1996), New Zealand (1990 & 1996), Namibia (1998),
Nigeria (1991 & 1998), Norway (1991 & 1996), Pakistan (1995), Paraguay (1997),
Peru (1994), the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994),
Singapore (1992 & 1996), Slovak Republic (1995), the Solomon Islands (1998), South
Africa (1993 & 1998), Sri Lanka (1995), Swaziland (1998), Sweden (1990 & 1994),
Switzerland (1991 & 1996), Thailand (1991 & 1995), Trinidad and Tobago (1998),
Tunisia (1994), Turkey (1994 & 1998), the United States (1989, 1992, 1994 & 1996),
Uganda (1995), Uruguay (1992 & 1998), Venezuela (1996), Zambia (1996) and Zimbabwe
(1994).
TRADE POLICY REVIEW BODY:
REVIEW OF INDONESIA
CONCLUDING REMARKS BY THE CHAIRPERSON Back
to top
The third Trade Policy Review of
Indonesia was conducted by the TPR Body on 3 and 4 December 1998. These remarks, prepared
on my own responsibility, are intended to summarize the main points of the discussion;
they are not intended as a full report. Further details of the discussion will be fully
reflected in the minutes.
The discussion developed under three
main themes: (i) economic environment and structural reforms; (ii) trade policies and
measures; and (iii) sectoral issues.
Economic environment and
structural reforms
Members noted that 25 years of
continuous economic expansion had been abruptly interrupted by the Asian financial crisis.
Despite extremely difficult economic and social circumstances, Indonesia had resisted
protectionist pressures. Instead, it had adopted a comprehensive programme of
macroeconomic and structural reforms, which included, inter alia, an acceleration
of trade and investment liberalization, a major review of anti-competitive practices (such
as monopolies and cartels) and a reform of the banking sector. Indonesia was commended for
its steadfast implementation of these measures, which had already resulted in substantial
liberalization of the economy and set the stage for a recovery of growth
Members also focused on the issue of
macroeconomic stabilization and the effects of the depreciation of the Rupiah, stressing
the need for macroeconomic stability while ensuring adequate social spending both to
alleviate poverty and to achieve development objectives. They also pointed to the effects
of the Rupiah's depreciation, together with a decline in trade finance, on trade flows and
external debt, but viewed the recent recovery of the currency as a direct outcome of
economic and trade reforms. In addition, Members asked what other investment
liberalization measures were contemplated.
In response, the representative of
Indonesia said that, in the face of economic urgency and rising poverty, the Government
had focused on macroeconomic stabilization and measures aimed at providing adequate
supplies of food at affordable prices to the population. It also aimed at extending
reforms to the most protected sectors of its economy, in order to increase competitiveness
and strengthen the export base. However, economic recovery was likely to be slow and
difficult, and would depend on the implementation of a complex agenda of reforms and on
the necessary support from the international community. The representative explained that
the depreciation of the Rupiah had contributed to the sharp contraction of the economy.
However, the Government was determined to restore the confidence of international
investors and, in this regard, reaffirmed its commitment to maintain an open capital
account. As regards further liberalization of its investment regime, among the measures
envisaged were annual reviews of the negative list, simplification of investment
procedures and a review of policies and regulations pertaining to investment. Measures to
liberalize investment were also under consideration in ASEAN.
Trade policies and measures
Members commended Indonesia for
having significantly liberalized its trade regime with: the reduction of MFN tariffs, from
an average of 20% to 9.5%, well beyond Indonesia's WTO commitments; the phasing-out of all
import surcharges; the reduction by half of restrictive licensing requirements and the
commitment to remove all remaining measures by 2000; the phasing-out of local content
programmes; and the conversion of restrictions and specific taxes on exports into low
resource rent taxes, to remove the long-standing anti-export bias of Indonesia's trade
policy.
Indonesia was commended for
establishing a freer and more competitive market-orientated economy. This involved recent
efforts to modernize legislation in the areas of customs, banking and intellectual
property rights; the termination of a number of monopolies and restrictive marketing
arrangements in sensitive sectors; and the removal of trade and tax privileges to specific
groups. Members welcomed Indonesia's progress throughout the review period in liberalizing
its investment regime, which is now one of the most open in the region. This contributed
to attracting an unprecedented amount of foreign investment to the country. They pointed
to recent liberalization of retail and wholesale trade and the possible further opening up
of banking and telecommunications sectors.
Members raised questions and
concerns in some specific areas on customs, including on the inspection and administration
of imports. On tariffs, questions were raised on the possible binding of recent unilateral
tariff reductions, which would reduce uncertainly for traders. Members pointed to
remaining tariff peaks on motor vehicles, alcoholic beverages, and certain chemicals, and
to tariff escalation in industry. Non-tariff barriers notably import licensing and bans,
also attracted attention. Some Members raised questions concerning export restrictions and
taxes as well as local content rules. They recommended further progress in creating a more
competitive business environment, particularly by strengthening the competition framework
and bankruptcy laws, introducing greater transparency in the attribution of government
loans and subsidies and a better enforcement of laws and regulations in areas such as
customs, intellectual property rights and government procurement. Members encouraged
Indonesia to speed up privatization of state-owned enterprises, and cautioned on the
excessive use of tax incentives to attract foreign direct investment.
In response, the representative of
Indonesia stated that the Government was continuously taking steps to improve customs
inspection and administration procedures, which included implementation of the early phase
of the EDI system. Notwithstanding the recent cuts in applied tariffs, bindings would be
maintained in accordance with Indonesia's existing commitments (which excluded automobiles
and chemicals). Whereas applied tariffs on chemicals and steel would be reduced further,
there were no plans to reduce high tariffs on alcoholic beverages, which were justified on
social grounds. Import licensing had been significantly reduced and simplified, so that it
now applied only for reasons involving public health and safety, security, public morals
and environmental protection. As regards export measures, the Government had relaxed
export controls on several products, including plywood, and cut export taxes on logs. The
only sector subject to local content rules is the automobile sector. The representative
outlined steps taken by the Government to foster competition, including the removal of
exclusive or special privileges previously enjoyed by BULOG and implementation of a
competition law, a draft of which is in Parliament. Measures were being taken to ensure
protection of intellectual property rights. The representative stressed the Government's
commitment to privatization, which would proceed in a transparent fashion. On incentives,
the Government felt that such measures were necessary to help restore investors'
confidence.
Sectoral issues
Members commended Indonesia for
the extensive liberalization of its agricultural sector; some sought clarification on the
use of import subsidies. Some Members stressed that social considerations should be fully
taken into account when reforming the sector. Questions on industry focused on recent
liberalization and de-monopolization measures, but also on remaining tariff peaks and
escalation in textiles and clothing, motor vehicles and steel. Questions were also raised
on the state of implementation of the recommendations of the WTO panel on the National Car
Programme and on the continuation of government support to IPTN, the national aircraft
manufacturer. On services, Members commended Indonesia for its contribution to the recent
GATS negotiations on telecommunications and financial services and asked about plans to
further open these sectors to foreign investment.
In response, the representative of
Indonesia provided further clarification on the liberalization of agriculture but
expressed concern about its effects on net-importing countries, including current
difficulties financing imports of basic foodstuffs at the current exchange rate, to
guarantee its supply to the population at affordable prices and to ensure food security.
On industry, the representative confirmed that all customs and tax privileges obtained
under the National Car Programme had to be repaid to the Government by the company
concerned, and reiterated that Government had discontinued support to IPTN. On services,
the representative confirmed that a new telecommunications law was under consideration.
The representative confirmed the entry into force of a new Banking Law on 10 November
1998, which, among other improvements, removed foreign ownership limits in joint-venture
banks.
***
In conclusion, it is my feeling that
this Body strongly supported Indonesia's impressive reform programme and expressed
confidence that it would ensure thorough implementation in the next few months.
Delegations appreciated that these reforms were being implemented on an MFN basis. Members
have also recognized that Indonesia had taken seriously the need for timely implementation
of its WTO commitments, and had applied the principle of open regionalism in its relations
with ASEAN and APEC. It is my sense that Members saw the importance of keeping their
markets open and maintaining stable and predictable trading conditions, in order to
support Indonesia's recovery from the current economic crisis. In turn, Members recognized
that once Indonesia's reform had been fully implemented, it would have one of the most
open economies among developing countries. It is my sense that the meeting also felt that
the consolidation of this liberalization in the WTO would contribute to the strengthening
of the multilateral trading system. Back to top |
|