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FOREIGN TRADE BARRIERS 1999 -
INDONESIA
STANDARDS, TESTING,
LABELING AND CERTIFICATION
In May 1990, the
Indonesian Government issued a decree that states that
the Department of Health must decide within one year of
receipt of an application whether to grant registration
for new foreign pharmaceutical products. In practice,
registration can take much longer, although companies
report the process is slowly improving. Foreign
pharmaceutical firms have complained that copied products
sometimes become available on the local market before
their products are registered. Revised maximum pesticide
residues (MRLs) for all food commodities were announced
in August 1996. These MRLs are largely consistent with
the international CODEX standards. The United States has
commented on the unworkability of Indonesia's WTO
notification that shipment-by-shipment certification
would be required. U.S. industry reports that all foods,
including distilled spirits, must undergo a costly,
complex, and barrier-laden registration process with the
Ministry of Health every four years.
The government is
in the process of revising its law on government
procurement, which was enacted in 1994. Most large
government contracts are financed by bilateral or
multilateral donors each of which imposes its own
procurement requirements. For large, government-funded
projects, international competitive bidding practices
must be followed. The government seeks concessional
financing, which includes a 2.5 percent interest rate, a
25-year repayment period, and a 7-year grace period. In
May 1998, the government and state-owned enterprises
began to investigate some possible procurement and
contracting irregularities in response to domestic
demands to eradicate corruption, collusion, and nepotism.
Some projects do
proceed on less concessional terms. Foreign firms bidding
on certain government-sponsored construction or
procurement projects may be asked to purchase and export
the equivalent in selected Indonesian products, but this
rarely occurs. Government departments and institutes and
state and regional government corporations are expected
to utilize domestic goods and services to the maximum
extent feasible, but this is not mandatory for
foreign-aid-financed goods and services procurement.
State-owned enterprises that have offered shares to the
public through the stock exchange are exempted from
government procurement regulations.
Some U.S.
companies have expressed concern with regard to
Indonesian procurement policies requiring local
participation and content, that in many situations impede
U.S. companies' ability to compete in this market.
Non-transparent government procurement policies have also
rendered competition difficult. Concerns, in particular,
have focused on the engineering and construction
industries.
Foreign joint
ventures are not eligible to tender for government
pharmaceuticals procurement. The requirement that doctors
employed in government institutions prescribe only listed
generic drugs also prevents the procurement of foreign
pharmaceutical products. Foreign companies are generally
prohibited from competing in the generic drug market
whose prices are controlled. Because of the economic
crisis during 1998, the price of pharmaceuticals in the
private sector has increased by up to 100 percent. There
are current government discussions over whether to expand
the list of generic drugs and give subsidizes for
purchases of raw materials from overseas.
In January 1998,
the GOI issued a presidential decree regulating
cooperation between the government and the private sector
in the provision and/or management of new infrastructure
projects. The decree requires that infrastructure
projects, including independent power projects, be
publicly tendered on a competitive basis rather than
negotiated with a single preferred company. The decree
also contains provisions for the legitimate use of
intellectual property in projects. The government
announced in December 1998 that negotiations with
independent power projects over the terms of their power
purchase agreements would begin in February 1999, in
light of changing price and demand forces in Indonesia.
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