FOREIGN TRADE BARRIERS 1999 -
INDONESIA
EXPORT SUBSIDIES
Since 1992, the
Indonesian Government has offered rediscount facilities
for "special exporters." The program had
previously been restricted to certain industries, but in
January 1999 its coverage was extended to qualifying
exporters from any industry. Exporters may sell their
export letters of credit or other instruments to the
central bank, Bank Indonesia (BI), through foreign
exchange banks. BI rediscounts the export drafts at SIBOR
for special exporters and SIBOR plus one for general
exporters. In September 1998, in an effort to get trade
financing moving again, the government announced a credit
guarantee program that guarantees up to 80 percent of the
value of letters of credit, minimizing commercial risk
for Indonesian banks. The government also maintains
several credit programs that provide subsidized loans,
primarily to agriculture and small and medium businesses.
Companies
producing 65 percent for export may apply for restitution
of import duties paid on inputs that are subsequently
re-exported in a finished form. Import-duty exemptions
may also be granted for capital equipment, machinery, and
raw materials needed for the initial investment.
Companies located in bonded or export-processing zones
pay no duty until the portion of production destined for
the domestic market is released, at which time duty is
owed only on that portion.
Under the Special
301 provisions of the 1988 Omnibus Trade and
Competitiveness Act, the U.S. Trade Representative raised
Indonesia to the "priority watch list" in 1996,
from the "watch list" where it had been since
1989. It remained on the "priority watch list"
in 1997 and 1998. Given the severe economic downturn,
Indonesia has not been able to devote significant human
or financial resources to either improving or enforcing
its intellectual property regime.
IPR protection
shortcomings mentioned by industry include: software,
video and VCD piracy, pharmaceutical patent infringement,
apparel trademark counterfeiting; audiovisual market
access barriers; inconsistent enforcement and an
ineffective legal system; and amendments to the
copyright, patent and trademark laws that are not
completely TRIPs consistent. The Indonesian Government
often responds to U.S. companies that raise specific
complaints about pirated goods and trademark abuse, but
the court system can be capricious, and punishment of
pirates of protected intellectual property is very rare.
In the view of some U.S. firms, the lack of sophisticated
intellectual property protection laws and regulations
acts as a considerable disincentive for industries to
invest substantially in high technology projects in
Indonesia. Amendments to the patent, trademark, and
copyright laws enacted in 1997 were intended to bring
Indonesia's laws into compliance with the WTO Agreement
on Trade-Related Aspects of Intellectual Property Rights
(TRIPs), but industry has raised questions in certain
areas.
Indonesia has
acceded to the following international conventions on
intellectual property: the Paris Convention for the
Protection of Industrial Property; the Berne Convention
for the Protection of Literary and Artistic Works (Paris
1971)[with a reservation on Article 33]; the WIPO
Copyright Treaty, the Patent Cooperation Treaty; the
Trademark Law Treaty; the World Intellectual Property
Organization Copyright Treaty; the Nice Agreement for the
International Classification of Unclassified Goods and
Services; and the Strasbourg Agreement Concerning the
International Patent Classification. Indonesia is a
member of the World Intellectual Property Organization
(WIPO).
Patents
Indonesia's first
patent law went into effect on August 1, 1991. The
amended law passed in 1997 improved the situation to some
extent. For example, the term of protection has been
extended to 20 years with a two-year extension period; a
patent shall be canceled only in the event the patent
holder fails to pay annual fees within a certain time;
use of product or process invention before grant of
patent shall constitute a patent infringement; and the
Article in the prior law that denied the right to prevent
importation was deleted to comply with Article 28 of the
TRIPs Agreement. Also, Indonesia now provides product
patent protection for foods and beverages. In some areas,
improvements were made that were not required by the
TRIPs
Agreement. For
example, the definition of the term "patent
examiner" was enlarged to include examiners in other
industrial property offices. This could facilitate
work-sharing in the search and examination process. Also,
the exclusion from patentability for plant and animal
varieties was deleted.
Unfortunately,
some of the problems in the previous law were not
corrected and new problems were introduced by the 1997
amendment. Examples include: importation still does not
meet the requirement to "work" or exploit the
invention domestically as required by the first paragraph
of TRIPs Article 27; the right to prevent importation of
products made by patented processes is available only if
the process is also worked in Indonesia; the content of
voluntary patent licenses is more restricted than
permitted by TRIPs Article 40; there is no requirement
that Government use of patented invention comply with the
provisions of TRIPs Article 31; inventions that are
contrary to Indonesian laws and regulations are excluded
from patentability in violation of Article 4 of the Paris
Convention and TRIPs Article 2; and the standard for
excluding inventions contrary to the ordre public is
inconsistent with the requirements of paragraph 2 of
TRIPs Article 27.
U.S.
pharmaceutical industries feel that Indonesia’s
current patent law wording is suitably ambiguous so to be
difficult to fight patent infringement cases.
Furthermore, they remain concerned that the present
patent law does not satisfy the TRIPs requirements; that
it includes compulsory licensing provisions, a provision
allowing the import of certain patented raw materials;
and law and regulations on local working requirements and
patent cancellation. The Pharmaceutical Research and
Manufacturers of America (PhRMA) also pointed out the
incidence of smuggled counterfeit drugs to neighboring
countries, the issue of corruption, joint venture
requirements, generic drug prescriptions and supply to
government institutions and taxation.
Trademarks
The April 1993
trademark law provides for determination of trademark
rights by registration rather than by first use. The law
provides for protection for well-known marks but offers
no procedures or grounds for owners of well-known marks
to clear the trademark register of existing registrations
infringing on well-known marks. Currently, the only
avenue for challenging existing trademark registrations
in Indonesia is to bring a court challenge. Cancellation
must be sought within five years from the date of
registration. U.S. companies have found it difficult to
protect their well-known marks, since judicial and
administrative processes can be very time consuming and
unreliable. Injunctive relief is not provided, even when
a lower court invalidates false trademark registrations.
The 1997 amended trademark law enhances protection by
providing for administrative cancellation of
registrations competing with well-known marks.
The International
Anticounterfeiting Coalition (IACC) has stressed the
problems surrounding the protection of well-known marks;
specifically, the length of time it takes the system to
consider challenges to trademark applications, the
ability of Indonesian nationals to file applications for
well-known marks and the inconsistent application of
trademark laws. The complaint is also that the existence
of the amended law has not resulted in effective
protection or enforcement of IPR.
Copyrights
In 1997, Indonesia
enacted amendments to its copyright law that generally
brought it closer to conformity with international
standards for copyright protection. The law includes
provisions to: recognize rental rights for copyright
holders in the areas of audiovisual, cinematographic, and
computer software, which are protected as literary works;
adds protections for neighboring rights in sound
recordings and rights of producers of phonograms;
copyright licensing; and increases the term of protection
for many copyrightable works to fifty (50) years, as
required under the TRIPs Agreement.
A bilateral
copyright agreement between the United States and
Indonesia that went into effect in August 1989 extended
national treatment to each other's copyrighted works. The
Indonesian Government recognizes the problem of copyright
piracy and indicated that it is willing to work with
copyright holders against piracy, but enforcement is
still poor. Since 1996, there has been rampant piracy of
video compact disks (VCDs) in Indonesia which has
disrupted the market for cinemas, as well as sale and
rental markets for legitimate videos and laser disks. In
November 1998, the government announced that sellers of
pirated VCDs had until late February to convert to
selling legitimate product, after which it would begin
stringent enforcement. U.S. industry reports that the
government recently has carried out a few well publicized
anti-piracy raids that netted
a sizable amount
of pirate optical media products on the verge of export.
However, the Motion Picture Association feels that there
will be no anti-piracy enforcement until the Indonesian
Government regains control of the public order.
The major problems
cited by the International Intellectual Property Alliance
(IIPA) with the Indonesian copyright regime are the
following: copyright infringement of business software,
Video Compact Discs (VCD), laser discs, video games and
books; market access restrictions; insufficient
enforcement efforts; an ineffective court system and
deterrence penalties; restrictions on importation,
distribution and retailing by other than 100% owned
Indonesian companies; a ban on foreign investment in
cinema construction and development of video retail
outlets; and restrictions on videocassette duplication.
New Technologies and
Trade Secrets
Biotechnology and
integrated circuit layout designs are not protected under
Indonesian intellectual property laws. The government is
in the process of preparing laws on trade secrets,
industrial designs, and integrated circuits. Indonesia is
a member of the World Intellectual Property Organization
(WIPO) and is a party to the substantive provisions of
the 1934 London Text of the Paris Convention for the
Protection of Industrial Property.
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