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FOREIGN TRADE BARRIERS 1999 -
INDONESIA
SERVICES BARRIERS
Despite some
loosening of restrictions, particularly in the financial
sector, services trade barriers to entry continue to
exist in many sectors. Foreign accounting firms must
operate through technical assistance arrangements with
local firms, and citizenship is a requirement for
licensing as an accountant. Foreign agents and auditors
may act only as consultants and cannot sign audit
reports. Foreign law firms cannot establish a legal
practice in Indonesia. Indonesian citizenship as well as
graduation from an Indonesian legal facility or an
institution recognized as the equivalent is a requirement
to be admitted to the bar. Foreign consulting engineers
can operate only by forming a joint-venture with local
partners in Indonesia.
Distribution
Indonesia has been
gradually liberalizing distribution and its agreement
with the IMF calls for an end to restrictions on trade in
the domestic market. In February 1998, restrictive
marketing arrangements for cement, paper, cloves, other
spices, and plywood were eliminated. Indonesia is also
opening wholesale and retail trade to foreign investment.
In September 1998, the government issued a decree
stipulating that distribution and retail companies may be
100 percent foreign owned, canceling the 49 percent
foreign ownership limit previously in effect. The
regulation carries a requirement that foreign firms (PMA)
establish "partnership participation" with a
domestic small scale enterprise, but the details of how
this requirement will be interpreted and applied are not
yet clear.
A number of U.S.
companies have expressed concern that existing
restrictions increase costs and impede their ability to
effectively market and service their products in
Indonesia, thereby limiting choice and competition, e.g.,
films and videos. Express delivery firms have expressed
concern with their inability to wholly own or control
express firms in Indonesia, obtain courier licenses,
truck licenses, customs brokerage licenses or bonded
warehouse licenses, and to self-handle their aircraft in
Indonesia.
GP Farmasi (local
Pharmaceutical Association) has agreed to implement a
Code of Marketing Practices which is adapted from IFPMA,
IPMG and the Philippine Association codes. The
Pharmaceutical Research and Manufacturers of America has
expressed concern that local companies do not abide by
such a code. Indonesia’s Hardwood Plywood Marketing
Board (APKINDO) was abolished as a marketing cartel
February 1, 1998. There are no longer any restrictions on
pricing, product mix or shipping arrangements. This could
offer increased opportunities to U.S. exporters of panel
products, but the U.S. industry reports that the wood
products industry is still heavily managed and influenced
by the government.
Financial Services
In its December
1997 WTO financial services offer, Indonesia committed to
allow 100 percent foreign ownership for non-bank
financial companies that are publicly listed, including
insurance and securities firms. The government also
guaranteed the access of existing financial services
firms in its market. Restrictions on joint venture banks,
where the foreign ownership limit is 85 percent, were
retained in the WTO offer. Also, multi-finance companies
with a foreign partner require 100 percent more paid-in
capital than domestic/locally owned multi-finance
companies. However, in November 1998, the government
passed amendments to the 1992 banking law that now allow
100 percent foreign ownership of Indonesian banks.
Indonesia committed to removing discriminatory capital
requirements on financial firms by the end of 1998 but
legislation is still pending. All insurance in Indonesia
must be purchased from either a domestic or joint venture
company. The only exceptions are for unavailability of
coverage in Indonesia and total foreign ownership of the
insured entity.
Banking: As of January
1999, the banking sector in Indonesia was slated for
massive recapitalization with government assistance.
Consolidation is expected. The World Bank, Asian
Development Bank, and the IMF were closely involved in
the restructuring plans. Restrictions on branching and
sub-branching for joint venture banks and foreign
branches were lifted in 1998.
Securities: In 1998, the
government removed restrictions on foreign ownership of
securities firms, pursuant to its offer in the WTO
financial services agreement.
Motion Picture Market
Access
Indonesia
prohibits foreign film and videotape distributors from
establishing branches or subsidiaries. All importation
and distribution is restricted by the film law to 100
percent Indonesian-owned companies. Importation and
in-country distribution of U.S. films must be handled
through a single organization, the European and American
Film Importers' Association (AIFEA). The quota on
videotape imports was removed in 1998 but annual import
quotas still apply to foreign films. Duties, taxes,
licensing, and other necessary payments also act as
barriers to the film industry.
In the WTO
negotiations on basic telecommunications services,
Indonesia made several commitments that, with one
exception, did not go beyond the status quo. Its adoption
of the reference price on regulatory principles was a
welcome step. It set a foreign investment limit of 35
percent for telecommunications services companies.
Indonesia maintained excessively long periods for
existing restrictions on the number of services providers
and made no guarantee of allowing unrestricted market
access to international services in 2005, long distance
in 2006, or local services in 2001. Fixed line services,
including local and domestic long distance services,
telex services, etc., must be provided in conjunction
with the partially privatized national firm PT Telkom.
Indonesia retained an economic needs test for mobile
cellular and PCS providers
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