746-R. B. Institute Of Management Studies

Culture and Education System
and
Energy Sector of Indonesia
Introduction of Indonesia

The name Indonesia was derived from Latin Indus, meaning "India", and Greek nesos,
meaning "island―

The economy is largely based on agriculture, manufacturing and mining, although growth
in these sectors is slowing down.

Other sectors, such as electricity, gas and drinking water, construction, trade, hotel and
restaurant and transport are expected to post an increasing contribution.

The country's vast extent, complex shape and wide range of altitudes and climates form the
basis of a wonderful natural richness.

There are total 17,508 islands in Indonesia. Out of these five are large islands and rests are
small in size.

Kalimantan
(539,450 sq.km)
Sumatra
(473,606 sq.km)
Papua
(421,952 sq.km)
Sulawesi
(189,035 sq.km)
Java including Madura
(132,035 sq.km)
Indonesia Facts & Figures
Capital City
Jakarta (+7 GMT)
Chief of State
President Susilo Bambang YUDHOYONO.
Currency
Indonesian rupiah
Major Languages
Bahasa Indonesia, English, Dutch, Javanese, and other local dialects.
Primary Religions
Muslim, Protestant, Roman Catholic, Hindu, Buddhist.
Main Airports
Bali, Denpasar (DPS) (Ngurah Rai), Java, Jakarta (CGK) (Soekarno-Hatta)
Indonesia Coastline 54,720 km
Population
The population of Indonesia was estimated at 237,512,352 in 2008.
Famous Tourist
Bali, Ubud, Jakarta, North Sulawesi and Kalimantan.
Attractions
Best Time to Visit
Between May to September.
CULTURE SYSTEM OF INDONESIA

Symbolism

The national motto, Bhinneka Tunggal Ika, is an old Javanese expression usually translated
as "unity in diversity" first formulated by President Sukarno in 1945.

Base on Five Principles: Belief in one supreme God; Just and civilized humanitarianism;
Indonesian unity; Popular independence governed by wise policies arrived at through
consideration and representation; and Social justice for all Indonesian people. Indonesia
was clear from the beginning as the successor of the Netherlands East Indies. sion usually
translated as "unity in diversity."

National Identity

Ethnic groups
Group
%
Javanese
40.6%,
Sundanese
15%
Madurese
3.3%,
Minangkabau
2.7%,
Betawi
2.4%,
Bugis
2.4%,
Banten
2%
Banjar
1.7%
Other or unspecified
29.9%

Religion
Religion
Muslim
Protestant
Roman Catholic
Hindu
Other or unspecified
%
86.1%,
5.7%,
3%,
1.8%,
3.4%


Indonesian Unit
In Indonesia nuclear family of husband, wife, and children is the most extensive domestic
unit.

An omission is the traditional, pastoral matrilineal Minangkabau, for whom the domestic
unit still comprises co resident females around a grandmother with married and unmarried
daughters and sons in a large long-established house.

Some societies, such as the Karo of Sumatra, exist in big houses with multiple hearths and
bedchambers that belong to connected or even distinct nuclear family units.

Inheritance

Muslim inheritance favors males over females as do the background of many traditional
societies.

Tradition generally favors males, but actual practice frequently give females inheritance.

Relative Groups

Indonesia ethnic groups have strong relationship grouping based upon Patrilineal,
matrilineal, or bilateral descent.

Government does not provide social security, joblessness insurance, old age care, or legal
support.

Socialization

Guests are served with a slight bow, and elders are passed by juniors with a bow.
Handshakes are suitable between men.

Confrontation should be met with smiles and quiet manner, and direct eye contact should
be avoided, especially with social superiors.

Social servants wear neat uniforms to work, as do schoolchildren and teachers.

Religious Beliefs
 In the Indonesia the Javanese are predominantly Muslim, although many are Catholic or
Protestant, and many Chinese in Java and somewhere else are Christian, mainly Protestant.
 Islam in Indonesia is of the Sunni variety, with small hierarchical direction. Two most
important Muslim organizations, (1)Nahdatul Ulama (NU) and (2)Muhammadiyah, equally
found in Java, have play an important responsibility in learning, the follower of freedom
effort, and policy after freedom.

Death and the spirit world
 Funerals, similar to marriages, call for a rallying of people, neighbors, and associates, and
surrounded by many ethnic groups social status may be expressed through the wealth or
simplicity of funerals.

Secular Celebrations

The most important national festival is Independence Day 17 August, which is obvious by
parades and displays in Jakarta and regional and district capitals.

Youth are often well-known Kartini Day, 21 April, honors Indonesia's first female
emancipationist; schools and women's organizations grasp activities that day.

New Year's is famous 1 January when businesses close and local fairs with firework are
held in some places.

On Bali a lunar calendar New Year's Day is celebrated with fasting, prayer, quiet, and
inactivity. All people must remain indoors and without lights on so that hazardous spirits
will think Bali is empty and will leave.

The Arts and Humanities

Preservation of art and craft people and objects, such as house structural design, batik and
tie-dye weaving, wood carving, silver and gold working, statuary, puppets, and basketry,
are under threat from the global arts and crafts market, local demands for cash, and altering
resident values.


Graphic Arts
Traditional hand-puppet or animal carvings of the mountain Batak of Sumatra or the
upriver Dayak of Kalimantan are now mostly for tourists, though they once showed rich
creativity.

Batik cloth varies very much in creativity, clarification, excellence, and cost.

Performance Arts

Performance arts are different and consist of:

Javanese and Balinese gong-chime orchestras and shadow plays,

Sundanese bamboo orchestras,

Muslim orchestral music at family proceedings or Muslim holiday happiness, trance dances
from east Java, the spectacular barong dance or the chimpanzee dances for tourists on Bali,
Batak puppet dances.
EDUCATION SYSTEM OF INDONESIA
 Education in Indonesia is under the duty of the Ministry of Education and Culture and the
Ministry of Religious Affairs.
 In that there is 90.4% literacy level in Indonesia, in that male education literacy level 94%
and female literacy level 86.8% of total population as per 2010 census.
 In Indonesia age 15 and over can read and write so it increases literacy level of Indonesia.
 Literacy
 Definition
:
Age 15 and over can read and write
Total population
:
90.4%
Male
:
94%
Female
:
86.8%
 Education expenditures

:
2.8% of GDP
School hours
 Schools are also open six days a week in Indonesia from Monday to Saturday.
 As well as their usual study, children can choose to join extra activities after school hours.
 Children can learn traditional dances, join gamelan orchestras or spend time playing their
favorite sports.

Subjects
 All students learn Bahasa Indonesia which is the official language of Indonesia. In regional
areas, students may also study the local language and in high school students learn English,
which is the official foreign language.

As well as languages, most students study maths, science, geography, history, arts and
crafts. Some schools offer sports like soccer and volleyball but these tend to be larger
private schools that can afford playing fields.

All children in Indonesia are also required to study Pancasila, the five guiding principles of
the Indonesian government.

Types of Education
The system consists of seven types of education, they are:
•
General education prioritizes expansion of general knowledge and improvement of
skills for the student. Specialization is also needed in the last grade;
•
occupational/technical education prepares students in mastering a number of definite
occupational/technical skills needed for employment;
•
Special education provides important skills and abilities for students with substantial
and/or mental disabilities;
•
Service-related education aims at increasing abilities required for a government official
or a candidate to apply a certain task;
•
Religious education prepares students to play a role which demand the mastery of
specific information about religion and related subject;
•
Academic-oriented education focuses primarily on improving the mastery of science;
and
•
Professional education prepares students primarily on mastering specialized or jobrelated knowledge and skills.
Comparison between India and Indonesia
 Comparison on the basis of culture system of India and Indonesia

Indian national motto is ―Vasudev Kutumbakam‖ it means ―all world is one family‖ but in
Indonesia national motto, Bhinneka Tunggal Ika, is an old Javanese expression usually
translated as "unity in diversity.―

Indian peoples believe in Dharma, Customs, Beliefs, traditions, languages, arts, values,.
While in Indonesian people follow many cultural practices and being influenced by
Hinduism Buddhism, Confucianism, and Christianity.

There are different dance pattern in India as per different religions and areas, and same in
Indonesia their dance pattern change as per religions and areas.

India has traditionally joint family culture but now rapid growth in Nuclear family whereas
in Indonesia there is nuclear family.

In Indonesia whether serving tea to guests, while india is concern with tea or coffee and
sweet water or cold drink to the guests, only the right hand is used to give or receive,
following people. In Indonesia Guests are served with a slight bow, and elders are passed
by juniors with a bow while in India same system followed by people but the most work
done by the women of house.

In Indonesia handshakes are suitable between men, but a soft feel, in India is touch the foot
of elders and say ―Namastey‖ and handshakes with same age people and meet with soft
feel.
Comparison Education system of India and Indonesia

Average years of schooling of adults in Indonesia is 5 and india is 5.1 is the years of formal
schooling received.

Duration of compulsory education is the number of years that child must legally be
enrolled in school in India is 14 years and Indonesia is 9 years.

Government Education Expenditure (% of GDP, 2000-2002) in India is 4.1% and Indonesia
is 1.2%.

Public Education Expenditure as a 12.7% in India and 9% in Indonesia of overall
government expenditure.

Girls enrolment share, primary level is the number of girls enrolled in primary school,
expressed as a 43.6% in India and 48.6% in Indonesia of the total number of pupils in
primary school.

Girls enrolment share, secondary level is the number of girls enrolled in primary school,
expressed as a 39.6% in India and 48.8% in Indonesia of the total number of pupils in
secondary school.



40.5% in India and 11.6% in Indonesia literacy rates by Sex, Aged 15+
39% of girls in India and 8% of girls in Indonesia is out of school from primary school.
Public expenditure per student, primary level is the total reported current spending by the
government on primary education, divided by the total number of pupils in primary
education, expressed as a 7.2% of per capita GDP in India and 3.2% of per capita GDP in
Indonesia.

40.2% in India and 20.13% in Indonesia to Primary school pupil-teacher ratio is the
number of pupils enrolled in primary school divided by the number of primary school
teachers (regardless of their teaching assignment).

Average 42 Weeks in India and 44 weeks in Indonesia per year by teaching primary level
teachers. Data for 2010.

Women to men parity index, as 68% of literacy rates in India and 94% of literacy rates in
Indonesia, aged 15-24.
Introduction of Energy Sector of Indonesia

Indonesia is the oil exporter and world’s largest exporter of coal by weight and the largest
exporter of natural gas in 2011.

According to the international Monetary Fund (IMF), Indonesia sustained relatively strong
economic performance with an average GDP rate of 6 percent per annum for the past five
years.

Growth should see Indonesia’s demand for electricity increase at 7% to 9% per annum for
foreseeable future.
Market Overview of Indonesia

Indonesia struggles to attract sufficient investment to meet growing domestic energy
consumption because of inadequate infrastructure and a complex regulatory environment.

Indonesia's total primary energy consumption grew by over 50 percent between 2001 and
2010.

Petroleum continues to account for the most significant, though decreasing, share of
Indonesia's energy mix at less than 30 percent in 2011.

Indonesia is also a significant consumer of traditional biomass in its residential sector,
particularly in the more remote areas that lack connection to the country's energy
transmission networks.
Indonesia’s demand for electricity

Indonesia GDP growth rate of 4.5% in 2009 and with growth for 2010 projected to be
5.6%.

This growth should see Indonesia’s demand for electricity increase at 7% to 9% per annum
for the foreseeable future.

This should translate into growth in electricity demand from an estimated 135 terawatt
hours (―TWh‖) in 2010 to 167TWh by 2014.

There are around 20 million households, or 80 million people, who currently have no
access to public electricity.
Indonesia’s generating capacity

Indonesia’s existing generating capacity is largely coal and oil fired and, at around 30GW,
results in a per capita MW capacity which is amongst the lowest in the region.

Reason :

The low take up in the use of primary energy sources.

This low take up has been primarily due to the lack of development of distribution and
transmission infrastructure

The lack of a robust regulatory framework especially to allow access to project.
Development chronology

The modern era for the electricity sector in Indonesia commenced with the 1985 Electricity
Law.

IPPs (Independent Power Producers) were licensed to sell their electricity solely to the
state-owned electricity company PLN (PT Perusahaan Gas Negara) pursuant to Power
Purchase Agreements (―PPAs‖).

The 2002 Electricity Law also allowed for electricity tariffs to be determined by the
market and for independent regulation through the establishment of the Electricity Market
Supervisory Agency.

Fast track program aimed to accelerate the development of 10 GW of generating capacity
with program geared towards IPPs and renewable energy.
Government support for infrastructure

The Government’s working plan for 2010, as part of the RJPM, outlines 45 key
infrastructure programs including:

The development of facilities needed for energy processing (e.g. oil refineries, power
generation), energy transmission and distribution (e.g. pipelines for gas and oil fuels) and
energy storage (e.g. depots);

The utilization of alternative energy including renewables (e.g. geothermal, solar, water,
wind and biomass); and
Attractive opportunities for IPPs

The targeted GDP growth rates of 6.2% p.a. and an electrification ratio of 91% by 2019
should see electricity demand growing by 7% to 9% p.a. (and even 9.2% p.a. through to
2019) and take installed capacity to 81.6GW by 2019.

For the next five years the investment required is estimated at US$31.4 billion for 22GW of
generating capacity, US$7.3 billion for some 17,000 km of transmission networks and
US$5.3 billion for distribution, totaling around US$44 billion.
Energy Development Resources in Indonesia

Oil:-

Indonesia ranked 20th among world oil producers in 2012 (21st for crude oil and
condensate production), accounting for approximately 1 percent of the world's daily
production of liquid fuels.

Natural Gas :-

Indonesia ranks eighth in world gas production. Indonesia produced approximately
7.9 bcf/d of natural gas in 2009.

Coal :-

In 2011, Indonesia became the world's largest exporter of coal by weight. Indonesia
plays an important role in world coal markets, particularly as a regional supplier to
Asian markets.

Nuclear Power

Indonesia will build a nuclear power plant by 2016 at a total cost of about US$1.5
billion.Earlier, Research and Technology Minister Kusmayanto Kadiman had
described plans to build up to four nuclear power stations, each with a capacity
between 1,000 MW and 1,500 MW, on a 600 hectare site on the northern coast of
Central Java.

Renewable Energy:-

Solar Photovoltaic:-

In Indonesia all major international solar photovoltaic (PV) system manufacturers,
including BP Solar, Kyocera, Shell Solar, Siemens, and Solarex, have subsidiaries or at
least local distributors in Indonesia.

Biomass for Power Generation

National studies estimate the electricity generation potential from the roughly 150 Mt of
biomass residues produced per year to be about 50 GW or equivalent to roughly 470
GJ/year.

Geothermal:-


Indonesia's 2011 capacity of approximately 1.2 GW
Plans to increase the use of renewable energy to 15 percent of the electricity portfolio by
2025

Small Hydropower

Indonesia has abundant hydropower resources and has been successful in developing
micro, mini, small and large hydropower plants over the past decades

Wind Power:-

Most wind turbines generate electricity from naturally occurring wind.
SWOT ANALYSIS OF INDONESIAN ENERGY SECTOR
 Strength


Adequate resources.


Adequate and rising domestic demand for electricity.
Huge workforce comprising of expert and highly skilled man power is available with the coal
companies.
Coal reserves are available at relatively shallow depth which can easily extracted by cost
effective open cast mining methods.
 Weakness

Decentralized governance system which further increase bureaucracy; foreign investors
would have to deal with central, provincial and local government officials due to
decentralization of power.

The government faces the challenge of increasing building and improving infrastructure to
maintain easy connectivity between the islands that can support its economic growth.

Protection of intellectual property right is not up to the world standards, and corruption
continues to be pervasive.


The financial sector is dominated by commercial banks.
Complex regulatory framework.
 Opportunity
Indonesia population is growing significantly, however electricity demand is also growing.
Opportunity for producing renewable energy in Indonesia.
Natural resources are available easily. Mining infrastructure developments (mainly in
Kalimantan and Sumatra).
Government support for infrastructure.
Government has started fast track program to attract investment of private players.
 Threats
 Securing Financing Needed by the Energy Sector.
 Developing Supplies of Natural Gas for Power Generation and Domestic Use.
 Access to Modern Energy Services
 Protecting the Environment Through Efficient Resource Utilization and Optimal Resource
Mix Increasing.
Bilateral Trade between India and Indonesia

India and Indonesia have shared two millennia of close cultural and commercial contacts.

Since the adoption of India’s ―Look East Policy‖ in 1991, there has been a rapid
development of bilateral relations in political, security, defense, commercial and cultural
fields.

This has facilitated trade, investment liberalization, fiscal and monetary policy reforms, and
infrastructural up gradation.

The two economies have been reaping the dividends of low labour costs and have
positioned themselves among the top five investment destinations in Asia.
India’s Trade Policy Strategy

Objectives

To double our percentage share of global merchandise trade within the next five years;
and

To act as an effective instrument of economic growth by giving a thrust to employment
generation.

Trends

India’s trade with Indonesia has shown dynamism both in terms of exports and
imports.
As evident from
Table India’s exports to Indonesia have made a quantum
jump from US $ 50 million in 1980 to US $92 million in 1990.
It is important to
highlight that India’s exports increased by more than three times between 1990 and
2000 and 3.7 times between 2000 and 2007, reaching US $1,463 million.
Indonesia Trade Policy Strategy
As of the end of July 2008; Indonesia has signed five FTAs that are being implemented namely:




The ASEAN (Association of South east Asian Nations) Free Trade Area (AFTA)
The ASEAN-China FTA
The ASEAN-Korea FTA
The Indonesia-Japan EPA (Economic Partnership Agreement) and the ASEAN-Japan
FTA. They are at different stages of implementation.
TRENDS
India’s imports from Indonesia have displayed a greater dynamism rising from a mere US $25
million (1980) to US $5438 million (2007). Thus it is discernable that Indonesia has remained a
more attractive imports source for India as compared to India’s export destination.
Consequently India’s trade balance with Indonesia got converted from a surplus of US $26
million in 1980 to a trade deficit of US $3975 in 2007.
Cooperation in the Energy Sector

According to India’s minister of state for coal, Shriprakash Jaiswal, coal imports are likely
to rise by 21 per cent over 2011.

This clearly indicates that India is in dire need of reliable and long-term coal imports,
without which domestic demand cannot be met.

Indian companies have been looking for mining rights and even joint ventures with their
Indonesian counterparts for securing long term supplies of coal.

Anil Dhirubhai Ambani Group’s Reliance Power also acquired three coal mines in
Indonesia and plans to invest over Rs. 3,000 crore in that country. In June 2010, it
announced that it plans to buy two Indonesian coal companies through its unit, Reliance
Coal Resources.
Indonesia Law regarding Energy Sector

The 2009 Electricity Law divides the electricity business into two broad categories as
follows:
a)Those activities involved in supplying electrical power such as:
i) Electrical power generation (both for self-use and for sale to
an
off-grid
captive consumer);
ii) Electrical power transmission;
iii) Electrical power distribution; and
iv) The sale of electrical power;
b) Those activities involved in electrical power support such as:
i) Consulting activities;
ii) The construction and installation of electrical power equipment;
iii) The operations and maintenance of electrical power equipment;
iv) The development of electrical supporting equipment technology.
v) Transmission, Distribution and Retailing

Operations and Maintenance (“O & M”)
O & M services for conventional electrical power can take the form of the following activities:
a) Consulting services for the installation of electricity power supply;
b) Construction and placement of electrical power supply installations;
c) Inspection and testing of electrical power installations;
d) Operation of electrical power installations; and
e) Maintenance of electrical power installations.


Business Law 2009 for Energy Sector
Electricity Supply Licensing

PLN is merely the holder of an Electricity Generation License for Public Use
(―IUPTL‖).

PLN has first right of refusal for un serviced areas which if not accepted can be
assumed by the private sector.

If the private sector does not take up a business opportunity, the Central Government
must instruct PLN to supply


the area.
Tariff
The Central Government approves tariffs for Central Government
issued
holders(e.g. PLN and IPP’s selling to PLN).




The regional authorities approve tariffs for IPP’s selling to non-PLN utilities
Tariff variations, according to different business areas, are permitted.
Tariffs must be approved by the Indonesian/Regional House of Representatives.
The Investment Law
Obligations for power plant investors under the 2007 Investment Law include:
a) Prioritizing the use of Indonesian manpower;
b) Ensuring a safe and healthy working environment;
c) Implementing a corporate social responsibility program;
d) Certain environmental conservation obligation
India and Indonesia in Energy Sector

a)
Indian Scenario
Research & Development Areas
1. Non conventional energy sources
license
2. Innovative green products
3. Development of waste recycling and reuse techniques
b)
Business opportunities in Manufacturing
1. Production of eco-friendly building materials.
2. Sensor based water and energy saving devices
3. Production of solar concentrators


Indonesian Scenario
Primary Objectives for Utilities by 2020
By minimizing interruptions in power delivery.

Improve Energy Efficiency
By reducing waste in power delivery and energy loses.

Accommodate Renewable Power
Prevent congestion on the power lines and interruptions.

Preparing for Growing power load.
Opportunity assessment in Energy sector in Indonesia

In 2008, the average electricity supply is 65% and the government plans to increase it to
93% in 2025, improving access to public electricity.

In 2011, the government plans to take several steps to find a solution to this problem, by
developing power generation and distribution network extending to all regions of the
country.

Development of transmission lines, power plants and other facilities throughout the
development of a potential area for investors.

This country was facing power shortages in some areas due to lack of infrastructure for
electricity transmission and distribution.

To meet the increasing demand of power supply, Indonesia needs additional capacity and
participation in development of Independent Private Power plants (IPP).

The project of electricity are:
10,000 MW Phase I
10,000 MW Phase II
15,000 MW


Renewable Energy
With 40% of the world's geothermal reserves, and is trying to increase their use in large
scale.

Geothermal and mining sector has a big opportunity for investors. Law issued in the mining
sector is predicted can create legal certainty and this will encourage investor confidence.


the government will also build more than five nuclear power plants.
Indonesia is considering the use of nuclear energy, which will increase electricity
production and also help Indonesia create environmentally friendly energy sources and
reduce carbon emissions.

Thus we can say that Indonesia has open their door for investment to improve their energy
sector and design a favorable legal policy for the investors.
Indian companies deal with energy sector in Indonesia

Tata Power

Tata Power has acquired a 30% stake in three of Indonesia’s leading coal companies, PT
Kaltim Prima Coal (KPC), PT Arutmin Indonesia, and PT Bumi resources, and entered into
an off take agreement with KPC.

Reliance Industries Ltd

Reliance Coal Resources Private Limited has acquired 100% economic interest in two coal
companies in Indonesia which own three coal mines in Indonesia.

Essar Energy

Essar energy acquire a 100 percent interest in the Aries coal mine in April 2010 fo US $118
million. The mining area comprises approximately 5,000 heactares located in the West
Kutai region of East Kalimantan.

Adani Power

Adani exploring possibility of setting 2x1100 MW Lignite based power plant in Indonesia.
Benefits to India doing Energy Business in Indonesia

Geographical Location

Booming Economy

Government Anti-corruption Strategies

Natural Resources

Large & Youthful Domestic Market

Political Stability

Energy access

Energy security

Climate change
Other Benefits

Benefiting to Currency earning.

Benefiting to utilize the Indian technology.

Improvement of Exchange Ratio.

Government can increase the foreign currency

You can more importing the products and goods to outside the countries.

Can Improve the country relation.

To increase the GDP of the countries.

Country become a financial Strong.

Skill workers are opportunity to work in foreign country and earning best amount and
improve the life style.
Drawbacks to India

Helping other economies

Can be difficult or expensive to understand laws and learning local ways of doing business

Dealing with different languages

No immediate transactions (time is a factor due to time zones, etc)
Business Barriers with Indonesia

Lack of Infrastructure

Investment issue and subsidy scheme.

Land acquisition issues

Complex regulatory frame work which leads to long chain of bureaucracy.
FINDINGS
 Indonesia is reorienting energy production away from exports to serve its growing
domestic consumption.
 Indonesia is a significant and well-established player in the international oil and gas
industry, though production has failed to keep up with demand in recent years.
 State-owned energy company PT Pertamina must balance its needs as a corporation against
its mandate as a national oil company to meet domestic demand.
 Aging infrastructure and fields suggest the country will struggle to meet production targets
in the short term.
 Indonesia was the world's eighth largest net exporter of natural gas in 2011.
 Indonesia was the third-largest exporter of liquefied natural gas (LNG) in 2011.
 In 2011, Indonesia became the world's largest exporter of coal by weight.
 Indonesia has 6.1 billion short tons of recoverable coal.
 Generation capacity growth in Indonesia has lagged behind the pace of electricity demand
growth, leading to power shortages and a low electrification ratio.
 Indonesia was the third largest geothermal generator in the world in 2011.
SUGGESTION

India has to invest in the energy sector in Indonesia as there is ample resource of energy but
they do not have good infrastructure and technology.

As Indonesian government has put some favorable policy and develops a ―fast track‖
program to attract foreign investors so this is a time for India to invest in energy sector to
capture more market share.

As Indonesia population growth rate is high which lead to high demand of electricity
consumption, so there is chance to generate and distribute electricity in Indonesia.

This is right time for India to enter into Indonesian market to deal with energy sector and
expand their business.
Conclusion

From the above discussion we can say that Indonesia has a growing economy and sustain
their economy growth 6% over the past five years.

As we have get the information about oil and Gas industry, Energy sector and find out that
Indonesia has ample resources of energy but they do not have good infrastructure to use
that effectively so that they are attracting foreign investment by their attractive policies.

So this is the great opportunity for India to enter in this energy sector and expand their
business.
FAMILY BUSINESS AND SOCIAL PROBLEM OF INDONESIA
And
Agriculture Products
FAMILY BUSINESS AND SOCIAL PROBLEM OF INDONESIA
In Indonesia, Only 3% of family businesses which still exist up until now were built in 1932 to
1943, 2% were built in 1944-1955, 10% were built in 1956-1967, 24% were built in 1968 –
1979, 24% were built in 1980 – 1991 and 37% were built in 1992 – 2003, the composition is
dominated by relatively new companies. On the positive side the data shows us that within the
last decade there has been good progress in Indonesian family businesses development. It also
demonstrates there has been improvement in business management. The research analyzes the
steps needed in small scale Indonesian family businesses life cycle to enable them enhancing
their transformation and growing ability into professional ones.
Moreover, businesses could also learn from the failure and success of others. The research
applies five stage models which consist of: existence, survival, success, renewal and decline.
First, the existence stage is known as entrepreneurial or birth stage, founder communicated and
realized business idea thus business is still fragile. Simple organization structure is applied thus
information is processed informally and documented in the form of hand-writings.
Second, the survival stag , company has accomplish to overcome start-up problems, growth is
excellent and founder spots on new opportunities however the founder trap also starts to exist.
Third, the success stage, day to day operational activity started to be handled by professional
director except when competent relatives do exist. However, it is still difficult to give up the
authority for running the business to outsiders.
Fourth, the renewal stage, company wishes to re-experience early stages; execute collaboration
and teamwork to accelerate innovation and creativity by infiltrating matrix structure, thus
decision making will be much decentralized. Corporate is still big and bureaucratic but its
members are driven to work-hard.
The sample was chosen attributed to its 88 years business period and has been lead by three
generations. The methodology uses non-participative observer method. Qualitative design
(Naumes, 1979) is applied to observe participant as reference (Weber, 1968). The research uses
secondary data which has been well publicized yet by mass media and also by the company
itself. Secondary data is utilized to compare the result obtained through interview with the one
that is understood and broadcasted by mass media. Obtained information then grouped to analyze
its life cycle stages of the business sample.
Business foundation was triggered by her spouse’s death and since the traditional herbal
medicine business started, she was able to supply her customers regularly thus customers were
able to buy directly and people no longer felt hesitate asking for fevers.
The herb’s effectiveness popularity has becoming well-spread through word of mouth. Orders
started coming from outside Semarang city, product demands increased drastically which made
Mrs. Meneer no longer able to deliver the herbs on her own. The problem is solved by changing
product packages by putting her picture as an authenticity guarantee. Mrs. Meneer started to
expand her business by opening a shop in Padamaran and she kept developing her recipes. Any
reference books related to many kinds of medical plants were read to find new discoveries. Her
two daughters (Lucy and Marie) were actively included within the daily activities, with her full
passion and persistency Mrs. Meneer started analyze production needs, projected raw material
availability and also planned to increase her market share. Moreover, Mrs. Meneer began to
search for distribution agents who are willing to sell her products. Her first agents were in
Cirebon, Jogjakarta and Solo. Mrs. Meneer’s company had becoming more successful with the
increasing number of employees, her leadership style was discipline and direct manner,
affectionate but wise. Her philosophy regarding profit was to share it with others which made the
harmony within the work place and enhanced her employees’ hard-working characters. Nonnie,
her first daughter got married and moved to Jakarta to open a shop in Juanda Pasar Street with
the intention of improving their distributions channels. In late 40’ish, Mrs. Meneer’s products
had been brought by many Chinese-Indonesian doctors to abroad countries.
Many Dutch people were interested to bring her products to their homeland. She decided on
changing her company form became partnership in 1952 and observed carefully every word
within the certificate which claimed Lucy and Marie as corporate commissaries, herself as the
Chief Director and Hans Ramana as Vice of Chief Director.
Product’s distribution had started to be well-organized in 1952, a truck was provided to load and
freight the traditional herb medicine to Surabaya and Jakarta. She also bought a Germany
grinding machine with 100 times bigger capacity compared to human’s; it needed only an hour
compared to three days when it was done manually. Mrs. Meneer realized that traditional herbs
medicines are health products; therefore she had always reminded to keep excellent hygienic
level. Mrs. Meneer’s took an active role in the company, decided rules and regulation and
displayed superb commitment for its development. Founder managed the company directly,
started from mixing to selling, her skills and ability to process these spices was derived from her
many years experience.
In 1967 the company was formally trusted over to her son-in-law, Hans Ramana, the Vice
Director. Her daughter, Lucy Saerang, Marie Kalalo and Has Pangemanan sat down within the
commission board. Management model was still following founder’s model and simple
management system was employed. Beauty products lines were developed. Mrs. Meneer’s began
to send her products to smaller Indonesian regions using limited equipments and vehicles. In the
70’ish, the industry started to undergo intense competition level, the number of traditional herbs
medicine ( jamu ) companies recorded was about 70 companies. Hans Ramana short leadership
tenure ended in 1976, he passed away in Honolulu, U.S.A. and the business was changed into
corporation in 1977. Table 8 shows the transition era when leadership transferred from first
generation to first successor. It also shows the increasing demands for traditional herbs medicine
increased the industry competition, position was trusted to Nonnie Saerang, the second was
handed over to Hans Pangemanan.
Meanwhile commissary position was held by Marie Kalalo, Lucy Saerang and Charles Saerang.
Business was exclusively kept within family members, reserved their traditional authenticity
characters and still large profit-oriented. The same traditional management technique was still
employed. The main obstacle was to rebuild traditional herbs medicine image which had been
slowly overwhelmed by pharmacy’s medicine reputation. Conflicts between majorities group
and minority group started after three years Mrs. Meneer passed away. Fortunately Mrs. Meneer
had developed distribution system to gather information, ideas and data from customers such as:
critics, customers’ needs or any other suggestions to increase pr oduction quality. Products
within the market were controlled and maintained. The company maintained partnership between
manufacturer and agents/distributors. Advertising and promotion were done to increase sales and
incident where it was taken to the green court with assaulting claim.
Some of distribution and agents did not receive the supply they ordered thus some partnership
relationships were neglected and it happened right when demands reached the peak. Therefore,
competitors used this moment to supply the market with their products. In consequence, their
market share and demands increased significantly. In 1987 – 1989 periods, the company tried to
fix their distribution channels, packaging, maintaining good relationships with employees and
conducting continuous innovations. Plasma Agriculture program was developed to sustain
product’s efficiency in order to increase the certainty on receiving raw materials quantity, quality
and price stability levels. Mrs. Meneer’s product packaging was modernized to increase
customers’ eagerness and branding toward the products. The company has started to use recycled
material as their packaging material. As the result, the company’s product image has been
continuously becoming better and was able to penetrate abroad countries Malaysia, Brunnei
Darusalam and Singapore. It had also awarded employees with excellent performance and
loyalty. Product diversification was driven by the changing trend, therefore the company tried to
fulfill the market’s demand towards instant products. In 1989, Mrs. Meneer’s company owned
150 traditional herbs medicine ( jamu ) product lines. During 1990’ish periods, the company was
handed over to the third generation. Competitors had increased dramatically to 300-500
companies in Indonesia. However, Mrs. Meneer’s company had 34% national market share and
the rest were spread within abroad countries.
In 1995, product lines increased to 206 variety and in 2001 it reached 254 products. Clinicallytested products were done to increase traditional medicines quality to make their products able to
compete world-wide, it was done within five main products, which were: traditional herbs
medicine ( jamu ) for back pain, diabetes, diarrhea, hypertension and cholesterol The new
innovation boosted product demands which reached 270 tons per month and also to the growing
customers’ fanatics. Mrs. Meneer’s owned 40 distribution agents wide spread within 19
Indonesian provinces throughout these number of distribution agents, company were able to
strengthen and adding more outlets to become 28.665 outlets with 57.330 employees. The
number of abroad outlets was 4.900 within twelve countries, which are: Malaysia, Philippines,
Korea, Netherlands, Taiwan, Japan, U.S.A, Brunei, Arabia, Vietnam, Singapore, New Zealand
and Denmark.
Several problems identical to family business are:
(1) unfocused strategic planning, decision making and resources allocation processes
(2) informal and unsystematic procedures on solving the problems related to succession
(3) tendency to react reluctantly towards changes although maintaining a sustainable business
and continuously conducting innovative and creative improvements to increase the company’s
service quality for its customers and business partners are critical. To become successful family
businesses, the combination of three main aspects (business management, family management,
ownership management) is essential.
Indonesia, a vast polyglot nation, has weathered the global financial crisis relatively
smoothly because of its heavy reliance on domestic consumption as the driver of economic
growth. Increasing investment by both local and foreign investors is also supporting solid
growth. Although the economy slowed to 4.6% growth in 2009 from the 6%-plus growth rate
recorded in 2007 and 2008, by 2010 growth returned to a 6% rate and remained there in
2011. During the recession, Indonesia outperformed most of its regional neighbors. The
country experienced high inflation in early 2010, mainly due to food shortages, but agencies
across the government acted quickly to ensure sufficient food stocks. The government made
economic advances under the first administration of President Yudhoyono, introducing
significant reforms in the financial sector, including tax and customs reforms, the use of
Treasury bills, and capital market development and supervision, and in December 2011,
Fitch Ratings Agency upgraded the country's credit rating to investment grade for the first
time since 1997. Indonesia's debt-to-GDP ratio in recent years has declined steadily because
of increasingly robust GDP growth and sound fiscal stewardship. Indonesia still struggles
with poverty and unemployment, inadequate infrastructure, corruption, a complex regulatory
environment, and unequal resource distribution among regions. In 2011 the government faces
the ongoing challenge of improving Indonesia's insufficient infrastructure to remove
impediments to economic growth, while addressing climate change mitigation and adaptation
needs, particularly with regard to conserving Indonesia's forests and peatlands.
Character and Structure: Although the New Order brought spectacular development to
Indonesia during the 1970s and 1980s, lifting the nation out of the dire economic conditions of
the previous two decades, this success did not solve major structural problems and, indeed, may
have created new kinds of difficulties. Increasingly in the 1990s, the economic outlook was
weakened by charges dubbed ―Corruption, Collusion, and Nepotism‖ (Korupsi, Kolusi, dan
Nepotisme—KKN), which after 1996 were leveled particularly at Suharto and his family.
Despite liberalization and surveillance policies enacted in the late 1980s, these factors grew in
importance and left the economy particularly vulnerable to, and ill-prepared to address, the
financial crisis of 1997-98, which saw the gross domestic product (GDP) drop an officially
estimated 13 percent and inflation rise to nearly 60 percent in 1998 alone. In mid-1999, nearly 25
percent of the population was thought to be living in absolute poverty, compared with about 10
percent five years earlier. Since then, Indonesia’s economic growth has been slow and somewhat
erratic. Major factors are slow progress on legal, banking, and corporate reforms; continued
military action in resource-rich Aceh; and terrorism targeting international capital and tourism.
During the New Order, the economy was transformed from one having virtually no industry in
1965 to production of steel, aluminum, and cement by the late 1970s. At present, Indonesia is the
world’s number-one exporter of liquefied natural gas (LNG) and the seventeenth largest oil
producer in the world, responsible for about 1.8 percent of world production and 5.2 percent of
total Organization of Petroleum Exporting Countries (OPEC) production in 2004. The emphasis
in the early 2000s was on less government interference in private business and greater
technology inputs. Agriculture predominates and benefits from an infusion of modern technology
by the government. Indonesia is a major aid recipient.
Indonesia’s major trade partners are Japan, the European Union, the United States,
Singapore, and the Republic of Korea (South Korea); trade with Association of Southeast
Asian Nations (ASEAN) members is increasing. In spite of government liberalization of
previously restrictive investment rules, foreign investors continue to experience numerous
difficulties in conducting business. Since the late 1990s, companies have remained wary of
investing in Indonesia, and an increasing number of manufacturers have relocated outside the
country because of security issues, deteriorating infrastructure, substantial corruption, high
interest rates, and increasing
Government Budget: For 2003 Indonesia’s government budget was Rp 334.5 trillion (US$39
billion) in revenues and Rp 368.8 (US$43 billion) in expenditures, including capital
expenditures. The budget is formulated by the Ministry of Finance and approved by the
legislature. Budgets are developed as part of five-year economic development plans (Repelita—
Rencana Pembangunan Lima Tahun).
Inflation: The estimated inflation rate in Indonesia for 2003 was 6.6 percent. This level ranked
Indonesia 163d in the world. Among Southeast Asian nations, only East Timor, Laos, and Papua
New Guinea had higher inflation rates.
The fall of the Suharto Government in 1998 provided the impetus for the transformation of
Indonesia’s political system from an autocratic, centralised state to a democratic, decentralized
state. The first elections in the post-Suharto period were held for the national, provincial, and
sub-provincial parliaments in 1999. In 2004 the president and vice-president were directly
elected for the first time.The current administration led by Mr Yudhoyono emphasises the need
to increase economic growth and investment and to create jobs. The administration’s other stated
priority is to stamp out corruption, which significantly raises producers’ costs and deters
investments.
While recent and rapid political change under ―Reformasi‖ and decentralization may have
provided opportunities for long-term development that embraces these goals, they have also
generated an environment of political uncertainty, weak law enforcement, insecurity over
property rights, and increased local conflict. Increasing investments, particularly in infrastructure
is critical to Indonesia’s long term growth prospects.Indonesia has struggled to overcome the
Asian financial crisis, and still grapples with persistent poverty and unemployment, inadequate
infrastructure, endemic corruption, a fragile banking sector, a poor investment climate, and
unequal resource distribution among regions. Before the crisis, the Indonesian economy was
considered to be among the best performing East Asian economies. Annual economic growth in
the early 1990s was typically around 7 or 8%, and per capita income rose from 810 in 1992 to
1,240 in 1996. In 1998, per capita income had fallen to 500 and growth in real GDP fallen to 13,1 in 1998. The country continues the reconstruction process from the December 2004 tsunami
and from an earthquake in central Java in May 2006 that caused over $3 billion in damage and
losses.Declining oil production and lack of new exploration investment turned Indonesia into a
net oil importer in 2004. The cost of subsidizing domestic fuel placed increasing strain on the
budget in 2005, and combined with indecisive monetary policy, contributed to a run on the
currency, prompting the government to enact a 126% average fuel price hike in October 2005.
The resulting inflation and interest rate hikes dampened growth through mid-2006, while large
increases in rice prices pushed millions more people under the national poverty line.Economic
reformers introduced three policy packages in 2006 to improve the investment climate,
infrastructure, and the financial sector, but translating them into reality has not been easy3.
Economic growth in 2005 was the highest in 8 years, reaching 5,7 per year, and it is not until
2005, that per capita income reached its pre-crisis level of 1,250. Annual real GDP growth is
expected to average 6.3% in 2008. Significant progress has been made in rebuilding Aceh after
the 2004 tsunami, and theprovince now shows more economic activity than before the disaster.
Unfortunately, Indonesia suffered new disasters in 2006 and early 2007 including a major
earthquake near Yogyakarta, an industrial accident in Sidoarjo, East Java that created a ―mud
volcano,‖ a tsunami in South Java, and major flooding in Jakarta, all of which caused additional
damages in the billions of dollars. Donors are assisting Indonesia with its disaster mitigation and
early warning efforts.In physical and biological resources, Indonesia is a wealthy country. It is a
world leader in mineral exports, its rainforests account for more than 50 percent of the tropical
forests in Southeast Asia and more than 10 percent of the world’s total, it has unique and
extensive biodiversity resources, and its fisheries are some of the world’s most productive and
threatened. Indonesia, confronts a huge challenge in using and managing the vast natural
resources in a manner that is optimal for the economy, equitable for the population, and
sustainable for future generations. Indonesia’s economic recovery from the financial crisis makes
it a blend country meaning that it is eligible for both IDA grants and IBRD loans. It also means
that it is no longer subject to compulsory PRSP requirement. Still, Indonesia prepared an Interim
PRSP (2003) and a draft PRSP was submitted May 2004 to the Poverty Reduction Committee5.
The Poverty Reduction Strategy Paper (PRSP), 2003 has been taken as the National Poverty
Reduction Strategy Document (SNPK). The SNPK has been integrated in the Medium Term
Development Plan 2004 – 2009 that has been made as Law No. 25/2004. For the implementation
of the SNPK, the government has developed a National Program on People’s Empowerment
(known as PNPM) that sets out the details of operational plans for poverty reduction through
promoting capacities of the local communities and providing funds for development. PNPM to
certain extent overlaps with the World Bank supported project called Kecamatan Development
Program (KDP – Sub-District Development Program), or also known as the community-driven
development concept of the World Bank.Indonesia also prepared its own poverty analysis under
the Poverty Analysis Program,INDOPOV. The Indopov program resulted in the document:
Making the New Indonesia Work for the Poor (Nov. 2006) which includes recommendations for
policy and practice changes that will accelerate poverty reduction efforts in Indonesia.Current
issues include: alleviating poverty, preventing terrorism, consolidating democracy after four
decades of authoritarianism, implementing financial sector reforms, stemming corruption,
holding the military and police accountable for human rights violations, and controlling avian
influenza.
Indonesia Economic Future Challenges
Indonesia’s
growth performance remains solid, but with uncertainty over the
international outlook the country needs to continue improving crisis preparedness.
 The global growth outlook remains weak and financial markets turbulent.
 However, to date Indonesia’s growth performance has remained solid. GDP growth in
the first quarter of 2012 was 6.3 percent year-on-year, down slightly from 6.5 percent
in 2011 as a whole. Consumption held up well in the first quarter of 2012, investment
growth came down while net exports made a negative contribution to growth.
 Indonesia is not though immune from spillovers from international developments
through both the financial and trade channels.
 Falling international commodity prices, and weaker volumes, contributed to a sharp
slowdown in export growth in recent months and the narrowing in the trade surplus
has seen the current account move into deficit.
 Heightened international risk aversion was accompanied by portfolio capital
outflows. Domestic asset prices declined and the portfolio outflows, plus weaker
trade balance, put pressure on the Rupiah.
 Reflecting the performance, the baseline outlook is for growth of 6 percent in 2012
and 6.4 percent in 2013.
 However, in the event of a major freezing of international financial markets which
contributes to a drop in trading partner growth, a fall in global commodity prices and
reduced domestic investor confidence, similar to in 2009, it is projected that growth
could slow to 4.7 percent in 2013.
 In a scenario in which such a crisis was accompanied, or indeed precipitated, a
severe, prolonged global downturn encompassing the major emerging economies,
2013 growth in Indonesia could drop to 3.8 percent.
 With risks in the global economy are high and expected to persist, emerging
economies, including Indonesia, therefore face the twin challenges of enhancing crisis
preparedness to deal with near-term shocks while at the same time putting in place
policies to support medium-term growth in a weaker global environment.
There are around 300 distinct native ethnicities in Indonesia.
According to the 2010 national census, the population of Indonesia is 237.6 million,[133] with
high population growth at 1.9%.58% of the population lives on Java,[133] the world's most
populous island. Despite a fairly effective family planning program that has been in place since
the 1960s, population is expected to grow to around 265 million by 2020 and 306 million by
2050.
There are around 300 distinct native ethnic groups in Indonesia, and 742 different languages and
dialects. Most Indonesians are descended from Austronesian-speaking peoples whose languages
can be traced to Proto-Austronesian (PAn), which possibly originated in Taiwan. Another major
grouping are Melanesians, who inhabit eastern Indonesia.The largest ethnic group is the
Javanese, who comprise 42% of the population, and are politically and culturally dominant. The
Sundanese, ethnic Malays, and Madurese are the largest non-Javanese groups. A sense of
Indonesian nationhood exists alongside strong regional identities. Society is largely harmonious,
although social, religious and ethnic tensions have triggered horrendous violence. Chinese
Indonesians are an influential ethnic minority comprising 3–4% of the population.Much of the
country's privately owned commerce and wealth is Chinese-Indonesian-controlled, which has
contributed to considerable resentment, and even anti-Chinese violence.
The Istiqlal Mosque in Central Jakarta. Indonesia is the world's most populous Muslim-majority
nation. The official national language is Indonesian, a form of Malay. It is based on the prestige
dialect of Malay, that of the Johor-Riau Sultanate, which for centuries had been the lingua franca
of the archipelago, standards of which are the official languages in Singapore, Malaysia and
Brunei. Indonesian is universally taught in schools, consequently it is spoken by nearly every
Indonesian. It is the language of business, politics, national media, education, and academia. It
was promoted by Indonesian nationalists in the 1920s, and declared the official language under
the name Bahasa Indonesia on the proclamation of independence in 1945. Most Indonesians
speak at least one of the several hundred local languages and dialects, often as their first
language. Of these, Javanese is the most widely spoken as the language of the largest ethnic
group. On the other hand, Papua has over 270 indigenous Papuan and Austronesian languages, in
a region of about 2.7 million people.
While religious freedom is stipulated in the Indonesian constitution,the government officially
recognizes only six religions: Islam, Protestantism, Roman Catholicism, Hinduism, Buddhism,
and Confucianism. Although it is not an Islamic state, Indonesia is the world's most populous
Muslim-majority nation, with 86.1% of Indonesians being Muslim according to the 2000 census.
On 21 May 2011 the Indonesian Sunni-Shia Council (MUHSIN) was established. The council
aims to hold gatherings, dialogues and social activities. It was an answer to violence committed
in the name of religion. The majority of Muslims in Indonesia are Sunni. 9% of the population
was Christian, 3% Hindu, and 2% Buddhist or other. Most Indonesian Hindus are Balinese, and
most Buddhists in modern-day Indonesia are ethnic Chinese. Though now minority religions,
Hinduism and Buddhism remain defining influences in Indonesian culture. Islam was first
adopted by Indonesians in northern Sumatra in the 13th century, through the influence of traders,
and became the country's dominant religion by the 16th century. Roman Catholicism was
brought to Indonesia by early Portuguese colonialists and missionaries, and the Protestant
denominations are largely a result of Dutch Calvinist and Lutheran missionary efforts during the
country's colonial period. A large proportion of Indonesians—such as the Javanese abangan ,
Balinese Hindus, and Dayak Christians—practice a less orthodox, syncretic form of their
religion, which draws on local customs and beliefs.
FAMILY-OWNED BUSINESSES
A family owned business is defined as business in which two or more family member together
and start a business and majority of ownership and control powers. Family owned business may
be the oldest from of business organization and today they are familiar as important and different
participants in the world economy.
Family owned business may have some benefits over other business because of here focus on the
long term their commitment to quality (which is associated with the family name) and their care
and concern of employees. Family business also face different type of management challenges
like separation of family and different family business issues.
FAMILY-OWNED BUSINESSES IN INDONESIA
 Tourism
 Fishing
 Handicraft
 Agriculture and cottage industry
ISSUES IN FAMILY BUSINESSES
 A family can be defined as relation between two separate but connected systems. The business
and the family with uncertain business and different rules & regulation the way in which peoples
communicate with in a family.
 For example may be unsuitable in business situation, similarly personal concerns or rivalry may
carried out into the work place to the damage the firm. To become successful in family business.
Here must be open communication, use of different strategic planning tools and when here is
need get the advice and assistance of experts.
 Bowman- ―Upton listed a number of common issues that most family businesses face. Attracting
and retaining nonfamily employees can be problematic, for example, because such employees
may find it difficult to deal with family conflicts on the job, limited opportunities for
advancement, and the special treatment sometimes accorded family members.
 Many family businesses also have trouble determining guidelines and qualifications for family
members hoping to participate in the business. Some companies try to limit the participation of
people with certain relationships to the family, such as in-laws, in order to minimize the potential
for conflicts.
 Family businesses often face pressure to hire relatives or close friends who may lack the talent or
skill to make a useful contribution to the business. Once hired, such people can be difficult to
fire, even if they cost the company money or reduce the motivation of other employees by
exhibiting a poor attitude.
 Another challenge frequently encountered by family businesses involves paying salaries to and
dividing the profits among the family members who participate in the firm. In order to grow, a
small business must be able to use a relatively large percentage of profits for expansion.
 Another important issue relating to family businesses is succession—determining who will take
over leadership and/or ownership of the company when the current generation retires or dies.
 In family business there various troubles regarding determining guidelines and qualification for
family member, the want to participate in the family business. Some firms by to limit the
participation of people with certain relationships to the family such as in laws, in order to
minimize the conflicts problems.
 Family business often faces various kinds of pressures to higher close friends and relatives who
have insufficient skill and talent to make a useful contribution to the business. Once these people
are hired it will be difficult to hire them even if they cost the company money or reduce the
motivation of other employees by shaving a poor attitude.
 Another difficulty a family business faces paying salaries and dividing profit among the family
member to participate in the firm. In order to grow a small business has to reinvest a relatively
large portion of profit for that expansion.
 Another important issue and the family business is the succession, deciding. Who will take over
leadership or ownership the company when the current when retires or dies.
Agriculture provides only 4% of GDP however sectors importance to the economy is greater
than percentage of GDP. Because it provides employment and income opportunities in outer
atolls, attaining food security and self reliance in part through import substitution of certain
agriculture products. About 3.4% of Indonesia labor force is engaged in agriculture and related
activity. Sector provides employment to majority of female labor force. Most of the crops are
grown with heavier concentration of root crops in southland more field and grain crops in north.
Coconut is most common plantation crop in all the atolls as well as most popular home garden
tree and also coconut is essential part of the Maldivian diet and its supply is sufficient for local
use.
The production of Palm Oil, Rubber, Cocoa, Cassava, Coffee, Tea, Tobacco, Rice has been
increasing and they constitute a significant percentage of grower’s income. The production of
root crops like Taro, Cassava, and Sweet potato and grain is decreasing with increased in
consumption of imported rice and wheat floor at administered prices.
Nowadays root crops are more of delicacy than every day staple food. Recently farming trend is
increasing in resort island also. A total of 26 resorts have been recorded for producing significant
part of their tropical vegetables and fruits. An important component of agriculture is also timber.
Live stock production is limited to goat husbandry and poultry production. The poultry takes
places primarily in rural islands. Agriculture crops are mainly grown with rain fed water.
However, cash crops like chilies and watermelon are irrigated with extracted water
The main law governing international trade is the law on export and import of 1979( Law
No: 31/79) which stipulates the conditions and procedures for the imports and exports of
goods and entrusts the Ministry of Economic Development (MED) as the authority to
regulate export and import.
 The Law mandates the authority to determine the customs tariffs on the products imported
into the country. The tariff remains the main trade policy measure, and is mainly used as a
revenue instrument accounting for nearly two third of tax receipts. Some tariffs are levied on
environmental, health and religious grounds.
 Government has the discretion to exempt duty, especially if these imports are use for
industrial purposes and development of infrastructure and tourist resorts. However,
Government stopped duty exemption on imported items that are to be used for resort
development since 2006.
 Government aims to reduce the dependence on import revenue as an income source for
government expenditure and recently proposed much wider tax reforms. In this background,
in June 2009, government proposed amendments to the export-import law to eliminate
import duties on foods items and lower it for other commodities.
 The proposed amendments to the import and export law intend to address three broad policy
considerations which include economic development objectives, environmental objectives
and WTO obligations during its formulation.
 The government foresees that the proposed amendments will be initially costly. Therefore, in
order to compensate the loss of revenue government has also submitted a corporate tax bill in
parallel to parliament as a part of new broader tax regime which includes income tax and
goods and service tax.
 There are no changes to the Law (Law No: 4/75) on Prohibited Imports since last trade
policy review.
Under this, goods are prohibited on the basis of national security and
religious grounds.
 With effect from 1st of January 2006, a separate set of duties is being applied to goods
importing from South Asian Association of Regional Cooperation (SAARC) member
countries under the South Asian Free Trade Area (SAFTA)’s Tariff Liberalization Program
(TLP) for least developed countries (LDCs) which includes Bangladesh, Bhutan, Nepal &
Indonesia and for Non-LDCs which include India, Pakistan & Sri Lanka Tariff reductions under the TLP (Trade liberalization program) are divided into two
phases. Under phase one, Non-LDCs must reduce existing tariff rates (except for items
included in national sensitive lists) by at least 20% within the first-two years from the
date of coming into force of the Agreement, while for LDCs, tariff rates (for items not in
the sensitive lists) have to be brought down to 30% over the same period.
 Under the second phase of the TLP all Non-LDCs have to bring down all tariffs to a
range of 0 - 5% at the beginning of 2013. For LDCs, the same reduction has to be
achieved at the beginning of 2016.
 The Agreement puts special emphasis on special and differential treatment for LDC
member states, specifically:
 Giving special regard to the situation of the LDCs when considering the application of
anti-dumping and/or countervailing measures.
 Greater flexibility in continuation of quantitative or other restrictions provisionally and
without discrimination in critical circumstances by the LDC member states on imports
from other Contracting States.
 Considering, where practical, taking direct trade measures with a view to enhancing
sustainable exports from LDC States,
 Establishing an appropriate mechanism to compensate the loss of customs revenue of
LDCs arising from the implementation of TLP, until an alternative domestic
arrangements are formulated to address this situation.
 A separate article on special and differential treatment for Indonesia is also included in the
Agreement stating that after graduation, Indonesia will receive no less favorable treatment
than that accorded to LDC member states.
INDONESIA IMPORTS OF AGRICULTURAL PRODUCTS FROM INDIA
AGRICULTURAL SECTOR- INDONESIA:
Agriculture sector has little role to play in economy of Indonesia due to shortage of cultivate land
and labor. Because of adverse soil condition some limited crops such as coconut, banana,
breadfruit, Papaya, Mangoes, taro, betel, chilies, sweet potato, and onion are cultivated in
Indonesia. Almost all food including staples has to be imported. In December 2004 Tsunami
destroyed cultivable land with salt water in many islands spoiling the ground water till date there
islands do not have clean ground water for agriculture. Agriculture provides about 4% GDP.
The ratio of food imports to domestic food production is 10:1. Still some islands have sufficient
soil and water for horticultures products. However, fishing still remains traditional lively hood.
The scope for financing to the farmers is limited. There are constraints of transport and logistics
affecting competitively priced inputs to agriculture islands as well as capital of Male and the
major tourism islands.As 25% of production is spoiled before reaching Male and other islands.
AGRICULTURE SECTOR’S IMPORTANCE TO THE INDONESIA ECONOMY
Agriculture provides only 4% of GDP however sectors importance to the economy is greater
than percentage of GDP. Because it provides employment and income opportunities in outer
atolls, attaining food security and self reliance in part through import substitution of certain
agriculture products. About 3.4% of Indonesia labor force is engaged in agriculture and related
activity. Sector provides employment to majority of female labor force. Most of the crops are
grown with heavier concentration of root crops in southland more field and grain crops in north.
Coconut is most common plantation crop in all the atolls as well as most popular home garden
tree and also coconut is essential part of the Maldivian diet and its supply is sufficient for local
use.
The production of Palm Oil, Rubber, Cocoa, Cassava, Coffee, Tea, Tobacco, Rice has been
increasing and they constitute a significant percentage of grower’s income. The production of
root crops like Taro, Cassava, and Sweet potato and grain is decreasing with increased in
consumption of imported rice and wheat floor at administered prices.
Nowadays root crops are more of delicacy than every day staple food. Recently farming trend is
increasing in resort island also. A total of 26 resorts have been recorded for producing significant
part of their tropical vegetables and fruits. An important component of agriculture is also timber.
Live stock production is limited to goat husbandry and poultry production. The poultry takes
places primarily in rural islands. Agriculture crops are mainly grown with rain fed water.
However, cash crops like chilies and watermelon are irrigated with extracted water.
HEAVY IMPORT DEPENDENCY
Almost all food requirements except fresh fish & coconut are imported. Rice is the staple food of
the Indonesia and it is mostly imported from south east Asia. According to statistics from
Indonesia custom services, 66% of Rice & 90% of Wheat flour is imported from India. Indonesia
also import at 10% of fresh fruits, vegetables from India, Australia and Sri lanka.
 MAIN IMPORTS BY INDIA TO INDONESIA INCLUDE
 River sand & Aggregates.
 Groceries like Onions, Potatoes, Egg Wheat Flour, Rice & Sugar.
 Cement.
 Household &food stuffs including fruits and vegetables.
 Garments
 Medical & Surgical Equipments.
 Electronics.
 MAIN EXPORTS TO INDIA BY INDONESIA INCLUDE
 Live Ornamental Fish.
 Frozen / Fresh or Chilled Yellow fin Tunas, Fillets, and Loins.
 Fresh or Chilled Big eye Tunas and Loins.
 Fresh or Chilled Grouper, fillets and Loins.
 Frozen / Fresh or Chilled Marlin and Loins.
 Shells & Battery Waste, Shark-Liver oil.
 Aluminums, Copper, Tin, Alloy Steel Waste & Scrap.
Norms and policies of indonesia for import including taxation trade policy objectives and
framework:
 The primary objective of indonesia trade policy is to establish favorable environments for
speedy commerce and economic activity focusing on diversifying the economy with exportoriented trade in services and industrial development focusing to achieve the main objectives
– poverty alleviation and improvement in the standard of living – of Indonesia.
 Since many years Indonesia has maintain relatively open trade policy with no major direct
trade measures, how tariffs keeping non tariffs measures to an absolute minimum. The free
trade policy will be maintained and improved as per government development policies and
priorities. Further bilateral regional and multilateral approach to free trade will be pursued.
Bilateral trade arrangement:
 The oldest bilateral arrangement, as identified in the first Trade Policy Review report, is
the agreement in force since 31 March 1981 which is known as "Trade Agreement
between the Government of the Republic of Indonesia and the Government of the
Republic of India
REFERENCES
 National Communication of Indonesia to the UNFCCC
 Manik, A.A. (2001), ―Flood risk assessment: appropriateness of a GIS based approach for
small island states such as the Indonesia‖. Unpublished Masters Dissertation. University
of Portsmouth, United Kingdom.
 Maniku, H.A. (1990), ―Changes in the Topography of the Indonesia‖. Malé: Forum of
Writers on Environment.
 MCPW (2001),Direct communication with Ministry of Construction and Public Works.
 MCS (2001), Direct communication with Indonesia Customs Service.
 Manishmanwah .name/ agriculture _approach
 en.wikipedia.org/ wiki /agriculture_ in India
 www.Indiamba.com / faculty column /FC703/fc703
 TRADE POLICY REVIEW, Report by INDONESIA
 Anderson, K., M. Kurzweil, W. Martin, D. Sandri and E. Valenzuela (2008),
―Methodology for Measuring Distortions to Agricultural Incentives,‖ Agricultural
Distortions Working Paper 02, World Bank, Washington, DC, revised January.
 APEDA(2008), www.apeda.com/apedawebsite/trade_promotion/Agri_Export_Zone.htm;
http://dgft.delhi.nic.in/ [viewed 1 October 2008]. GAIN-IN8015 (2008), India, Grain and
Feed Annual, USDA FAS, 20 February.
Financial Market
A Financial Market is a market in which people and entities can trade financial
securities, commodities, and other fungible items of value at low transaction costs and
at prices that reflect supply and demand. Securities include stocks and bonds, and
commodities include precious metals or agricultural goods.
There are both general markets (where many commodities are traded) and specialized
markets (where only one commodity is traded). Markets work by placing many
interested buyers and sellers, including households, firms, and government agencies, in
one "place", thus making it easier for them to find each other. An economy which relies
primarily on interactions between buyers and sellers to allocate resources is known as a
market economy in contrast either to a command economy or to a non-market economy
such as a gift economy.
In finance, financial markets facilitates the raising of capital (in the capital markets), The
transfer of risk (in the derivatives markets), Price discovery, Global transactions with
integration of financial markets, The transfer of liquidity (in the money markets),
International trade (in the currency markets)
Typically a borrower issues a receipt to the lender promising to pay back the capital.
These receipts are securities which may be freely bought or sold. In return for lending
money to the borrower, the lender will expect some compensation in the form of interest
or dividends. This return on investment is a necessary part of markets to ensure that
funds are supplied to them.
Within the financial sector, the term "financial markets" is often used to refer just to the
markets that are used to raise finance: for long term finance, the Capital markets; for
short term finance, the Money markets.
The capital markets divided into- Primary markets and Secondary markets.
Primary markets:
Newly formed (issued) securities are bought or sold in primary markets, such as during
initial public offerings. The transactions in primary markets exist between issuers and
investors.
Secondary markets:
Secondary markets allow investors to buy and sell existing securities. While in
secondary market transactions exist among investors.
Stock markets which provides financing through the issuance of shares or common
stock, and enable the subsequent trading thereof.
Bond markets which provides financing through the issuance of bonds, and enable the
subsequent trading thereof.
These are the two major markets but apart from this there is also one market namely
Commodity Market.
Commodity markets facilitate the trading of commodities.
Money markets provide short term debt financing and investment.
Derivatives markets provide instruments for the management of financial risk.
Futures markets which provide standardized forward contracts for trading products at
some future date; see also forward market.
Insurance markets which facilitate the redistribution of various risks.
Foreign exchange markets facilitate the trading of foreign exchange.
Role (Financial system and the economy)
One of the important requisite for the accelerated development of an economy is the
existence of a dynamic financial market. Saving mobilization: Obtaining funds from the
savers or surplus units such as household individuals, business firms, public sector
units, central government, state governments etc. is an important role played by
financial markets. Investment: Financial markets play a crucial role in arranging to
invest funds thus collected in those units which are in need of the same. National
Growth: An important role played by financial market is that, they contributed to a
nation‘s growth by ensuring unfettered flow of surplus funds to deficit units. Flow of
funds for productive purposes is also made possible. Entrepreneurship growth:
Financial market contributes to the development of the entrepreneurial claw by making
available the necessary financial resources. Industrial development: The different
components of financial markets help an accelerated growth of industrial and economic
development of a country, thus contributing to raising the standard of living and the
society of well-being.
Functions of Financial Markets
Transfer of Resources: Financial market facilitate the transfer of real economic
resources from lenders to ultimate borrowers. Enhancing income: Financial markets
allow lenders to earn interest or dividend on their surplus invisible funds, thus
contributing to the enhancement of the individual and the national income. Productive
usage: Financial market allow for the productive use of the funds borrowed. It helps to
enhancing the income and the gross national production. Capital Formation: Financial
market provides a channel through which new savings flow to aid capital formation of a
country. Price determination: Financial markets allow for the determination of price of
the traded financial assets through the interaction of buyers and sellers. They provide a
sign for the allocation of funds in the economy based on the demand and supply
through the mechanism called price discovery process. Sale Mechanism: Financial
markers provide a mechanism for selling of a financial asset by an investor so as to
offer the benefit of marketability and liquidity of such assets. Information: The activities
of the participants in the financial market result in the generation and the consequent
dissemination of information to the various segments of the market. It aids to reduce the
cost of transaction of financial assets.
Financial Functions
It provides the borrower with funds so as to enable them to carry out their investment
plans. It provides the lenders with earning assets so as to enable them to earn wealth
by deploying the assets in production debentures. It provides liquidity in the market so
as to facilitate trading of funds.
About Indonesia
The Dutch began to colonize Indonesia in the early 17th century; Japan occupied the
islands from 1942 to 1945. Indonesia declared its independence after Japan's
surrender, but it required four years of intermittent negotiations, recurring hostilities, and
UN mediation before the Netherlands agreed to transfer sovereignty in 1949.
Indonesia is now the world's third most populous democracy, the world's largest
archipelagic state, and home to the world's largest Muslim population.
Current issues include: alleviating poverty, improving education, preventing terrorism,
consolidating democracy after four decades of authoritarianism, implementing economic
and financial reforms, stemming corruption, holding the military and police accountable
for human rights violations, addressing climate change, and controlling infectious
diseases, particularly those of global and regional importance.
Economic overview
Indonesia, a vast polyglot nation, has weathered the global financial crisis relatively
smoothly because of its heavy reliance on domestic consumption as the driver of
economic growth. Increasing investment by both local and foreign investors is also
supporting solid growth. Although the economy slowed to 4.6% growth in 2009 from the
6%-plus growth rate recorded in 2007 and 2008, by 2010 growth returned to a 6% rate
and remained there in 2011. During the recession, Indonesia outperformed most of its
regional neighbors.
The country experienced high inflation in early 2010, mainly due to food shortages, but
agencies across the government acted quickly to ensure sufficient food stocks. The
government made economic advances under the first administration of President
Yudhoyono, introducing significant reforms in the financial sector, including tax and
customs reforms, the use of Treasury bills, and capital market development and
supervision, and in December 2011, Fitch Ratings Agency upgraded the country's credit
rating to investment grade for the first time since 1997.
Indonesia's debt-to-GDP ratio in recent years has declined steadily because of
increasingly robust GDP growth and sound fiscal stewardship. Indonesia still struggles
with poverty and unemployment, inadequate infrastructure, corruption, a complex
regulatory environment, and unequal resource distribution among regions. In 2011 the
government faces the ongoing challenge of improving Indonesia's insufficient
infrastructure to remove impediments to economic growth, while addressing climate
change mitigation and adaptation needs, particularly with regard to conserving
Indonesia's forests and peatlands.
Indonesia Economic Future Challenges
Indonesia‘s growth performance remains solid, but with uncertainty over the
international outlook the country needs to continue improving crisis preparedness. The
global growth outlook remains weak and financial markets turbulent.
However, to date Indonesia‘s growth performance has remained solid. GDP growth in
the first quarter of 2012 was 6.3 percent year-on-year, down slightly from 6.5 percent in
2011 as a whole. Consumption held up well in the first quarter of 2012, investment
growth came down while net exports made a negative contribution to growth.
Indonesia is not though immune from spillovers from international developments
through both the financial and trade channels. Falling international commodity prices,
and weaker volumes, contributed to a sharp slowdown in export growth in recent
months and the narrowing in the trade surplus has seen the current account move into
deficit.
Heightened international risk aversion was accompanied by portfolio capital outflows.
Domestic asset prices declined and the portfolio outflows, plus weaker trade balance,
put pressure on the Rupiah. Reflecting the performance, the baseline outlook is for
growth of 6 percent in 2012 and 6.4 percent in 2013.
However, in the event of a major freezing of international financial markets which
contributes to a drop in trading partner growth, a fall in global commodity prices and
reduced domestic investor confidence, similar to in 2009, it is projected that growth
could slow to 4.7 percent in 2013. In a scenario in which such a crisis was
accompanied,
or
indeed
precipitated,
a
severe,
prolonged
global
downturn
encompassing the major emerging economies, 2013 growth in Indonesia could drop to
3.8 percent.
With risks in the global economy are high and expected to persist, emerging
economies, including Indonesia, therefore face the twin challenges of enhancing crisis
preparedness to deal with near-term shocks while at the same time putting in place
policies to support medium-term growth in a weaker global environment.
Structure of Indonesia’s Financial Market
Source: Bapepam-LK.
BI-RTGS = Bank Indonesia-Real-Time Gross Settlement;
BI-SSSS = Bank Indonesia-Scripless Securities Settlement System;
C-BEST = Central Depository and Book-Entry Settlement;
KPEI = Indonesian Clearing and Guarantee Corporation;
KSEI = Indonesian Central Securities Depository; OTC = Over-the-Counter;
PLTE = Securities Transaction Report Reciever System
The financial market is dominated by government debt instrument. The development of
Indonesian financial market actually took place from the post 1997/98 period. There is a
reasonably high degree of transparency in Indonesia‘s monetary policy.
The various stock exchanges of Indonesian are Jakarta Stock Exchange, Surabaya
Stock Exchange (SSX), Jakarta Composite Index (JCI), and Jakarta Futures
Exchange (JFX).
Indonesia’s bond market has grown steadily in recent years to offer a more diversified
array of debt instruments and cater to a broader investor base. The market
accommodates the needs of both local and foreign investors. In addition to its position
as one of the most attractive market for foreign investors, the potential of growing local
investors is also an area that can be cultivated further by local and foreign issuers alike.
As the largest issuer of bonds, the Government of Indonesia regularly taps the local
market to finance the state budget. The Indonesian money market is basically interbank money market, as it mostly involves only banking. So far, the transaction in the
inter-bank money market is dominated by unsecured lending/borrowing (PUAB), and
mostly in a very short term maturity.
BOND listed in IDX consists of Corporate Bonds Government Bonds State Bond
(Including Bond Retail/ORI), Treasury Bills (T-Bills), Corporate Sukuk. All these
instruments can be traded and has been and or reported the trading through Indonesia
Stock Exchange.
Source: Asiaonline, Ministry of Finance (2011)
Major Players in the Indonesia Market Participants in the Indonesian bond market
include issuers from the government and the corporate sector; supranational and
offshore borrowers; investors comprising financial institutions and asset-pooling
industries; intermediaries comprising securities companies, investment houses, and
dealers; rating agencies; and market associations. As the largest issuer of bonds, the
Government of Indonesia regularly taps the local market to finance the state budget.
Money market fund is a mutual fund that invests 100% in money market instruments
such as Sertifikat Bank Indonesia (SBI), Time Deposit, and bond with the remaining
maturity less than one year. There is no subscription and redemption fee charged for
this fund. Money-Markets Instruments in Indonesia are Treasury Bills (Surat
Perbendaharaan Negara), Islamic Treasury Bills (Surat Perbendaharaan NegaraSyariah), Certificate of the Central Bank (Sertifikat Bank Indonesia), Commercial Paper,
Repurchase Agreement.
Intermediaries in Indonesia consist of Banks, Securities, Companies, and Custodians.
The functions of banks in Indonesia are basically as financial intermediary that take
deposits from surplus units and channel financing to deficit units. According to
Indonesian banking law, Indonesian banking institutions are typically classified into
commercial and rural banks. Commercial banks differ with rural banks in the sense that
the latter do not involve directly in payment system and have restricted operational area.
In term of operational definition, bank in Indonesia are classified into non-syariah and
syariah-based principles commercial banks.
There are 121 commercial banks in Indonesia (4 state owned banks and 117 private
banks). Two of the state owned banks have Islamic banking units. Of the 26
government regional banks, 15 have Islamic banking units, while of 86 private national
banks, 7 have Islamic banking unit, and there are five Islamic commercial banks.
Indonesia Financial System (2011)
Top Largest Banks in Indonesia comprise of Bank CIMB Niaga, Bank Mandiri, Bank
Rakyat Indonesia (BRI), and Bank Central Asia (BCA). Best Banks in Indonesia
includes PT Bank DBS Indonesia, HSBC, and Bank Mandiri.
Structure
of
Indonesian
Banking
System
Envisaged
in
API
Source: Financial Stability Report, Bank Indonesia
Bank Indonesia (BI) is the central bank of Indonesia. It acts as the central depository
for the settlement and safekeeping of government bonds and the Certificate of Bank
Indonesia. BI objectives are public trust in respect of funding and disbursement of
funds; for implementation of monetary policy; contributing to economic growth and
equity.
The Capital Market and Financial Institution Supervisory Agency is Bapepam-LK)
which locally known as Badan Pengawas Pasar Modal dan Lembaga Keuangan.
This regulatory body is responsible for regulating all capital market players such as
securities companies, investment managers, custodians, and regulating non-bank
financial services industry, including insurance, multi-finance, and pension funds. As a
regulator, it grants licenses to various securities market intermediaries (e.g., brokers,
mutual funds, custodian banks, underwriters, etc.) and professionals (accountants,
public notaries, lawyers, and appraisers).
The entities are Self-Regulatory Organizations (SROs) are The Indonesia Stock
Exchange (IDX), The Indonesian Clearing and Guarantee Institution (KPEI), The
Indonesian Central Securities Depository (KSEI). These three SROs regulate the listing,
trading, clearing and settlement of listed bonds when transacted on the exchange. Each
regulates its own areas of operations, subject to Bapepam-LK approval.
Indonesia’s insurance industry is fairly small, but it has been growing steadily since
2000. Currently, there are 141 insurance companies in Indonesia. Insurance companies
are important institutional investors in the Indonesian capital market. As of September
2011, the insurance industry holds about 13% of all tradable government bonds, or
IDR92.95 trillion out of IDR696.56 trillion.
Individual Debtor Information (IDI) is a Credit Bureau of Indonesia to collect and
record credit/loan facilities data, and finally distribute it as credit information.
The Mutual-Fund industry in Indonesia has grown considerably since 2000. Fixedincome assets comprise a considerable portion of investment fund assets. As of
September 2011, the net asset value of mutual funds was valued at IDR154.53 trillion.
The Indonesia Commodities and Derivatives Exchange (ICDX) is an exchange that
launched on March 31, 2010. It began operations with a single palm oil futures contract,
but planned to add other heavily-traded Asian commodities in the near future. The ICDX
not only competes directly with Indonesia's existing commodities exchange, the Jakarta
Futures Exchange, but also attempts to win business from the South East Asian
region's other main venues that list palm oil contracts, most notably Bursa Malaysia.
The Global Economic Crisis adversely affected Indonesia`s exports during the first
two months of this year, which recorded a slower growth than in the same period in
2011. Since the crisis began, Bank Indonesia‘s monetary strategy has been to support
the rupiah exchange rate, and limit any increase in inflation, by maintaining a firm
monetary stance.
IDBI Bank Limited is an Indian financial service company to provide credit and other
facilities for the development of the fledgling Indian industry. State Bank of India (SBI)
is the largest banking and financial services company in India. India‘s major Stock
Exchanges are Bombay Stock Exchange, National Stock Exchange. India‘s insurance
regulated by Insurance Regulatory and Development Authority (IRDA). Credit
Information Bureau India Limited (CIBIL) is India's first credit information bureau. It's
a repository of information, which contains the credit history of commercial and
consumer borrowers. Regulatory body Of Mutual Fund in India Association of Mutual
funds in India (AMFI). India has four national commodity exchanges namely, Multi
Commodity Exchange (MCX), National Commodity and Derivatives Exchange
(NCDEX), National Multi-Commodity Exchange (NMCE) and Indian Commodity
Exchange (ICEX).
Financial Sector Information (2011)
Source: Asiaonline, Ministry of Finance (2011)
After analyzing the indicators of India and Indonesia we have come up with the following
conclusion:
The GDP growth worth in Indonesia was worth 846.83 billion US dollars in 2011,
according to a report published by the World Bank. While, according to a report
published by the World Bank, in India was worth 1847.98 billion US dollars in 2011.
The inflation rate in Indonesia was recorded at 4.61 percent in October of 2012, while
in India was recorded at 7.45 percent in October of 2012.
GDP Deflator in Indonesia increased to 316.14 Index Points in the third quarter of 2012
from 315.11 Index Points in the second quarter of 2012.
The GDP in Indonesia expanded 6.17 percent in the third quarter of 2012 over the same
quarter of the previous year. While, in India expanded 5.30 percent in the third quarter
of 2012 over the same quarter of the previous year.
The GDP per capita in Indonesia was last reported at 1206.99 US dollars in 2011,
according to a report published by the World Bank. While, in India was last recorded at
837.75 US dollars in 2011.
Gross National Product in Indonesia increased to 623414.10 IDR Billion in May of
2012 from 610440.80 IDR Billion in February of 2012, according to a report released by
the Statistics Indonesia. While, in India increased to 48404.28 INR Billion in June of
2009 from 44375.83 INR Billion in June of 2008.
Interbank Rate in Indonesia increased to 4.20 percent in October of 2012 from 4.09
percent in September of 2012. While, in India increased to 8.19 percent in November of
2012 from 8.14 percent in October of 2012.
Introducing Steel industry, it is the crucial to the development of any modern
economy and is considered to be the backbone of human civilization. The level of per
capita consumption of steel is treated as one of the important indicators of socioeconomic development and living standard of the people in any country.
Japanese companies are considered the largest producers of the steel and Russia also
has very huge plants for the production of this material. The large companies are going
to merge and increase their status in the steel production all around the globe. Steel
prices also fluctuate with the fluctuations in the patrol prices, the oil producing countries
are determined to keep the oil prices at a constant level for the next few years.
Global scenario of steel output trends remained on a firm upward path. The rising
demand has primarily been dueled by the increased demand from China. The favorable
trends in the international markets promise to continue for some more time as the US
and some of the leading European economies are showing early signs of recovery.
Global Steel has become one of the most coveted annual steel events around the
globe. With the recent sluggishness of the global markets, in addition to the economic
and political challenges facing the major economies of the world, we seem to be
entering a more complex and difficult to forecast phase of the economic cycle. The
slowing down of the Chinese economy and the not so impressive Indian growth story
which seems to be losing its steam is bound to have a strong impact on the steel and
steel making raw materials industry.
Global Steel 2013, the complexities of the current situation, will also focus on the
possible solutions of overcoming the crisis, and further assess how the global steel
industry could adjust and innovate itself in the current scenario to become a rallying
point for economic recovery in India and the world.
About the Domestic demand of steel, the present steel consumption per capita per
annum is about 30 kg in India, compared to 150 kg in the world, and 350 kg in the
developed world. The estimated urban consumption per capita per annum is around 77
kg in the country, expected to reach approximately 165 kg in 2019-20, implying a CAGR
of 5 percent.
The role played by the steel industry in India, is the pre-deregulation phase has
seen the Ministry of Steel in the key role of a regulator which was essential, given the
operating economic conditions, the limited presence of industry and the scarcity of key
raw material for steel-making at home. Through skillful and judicious decisions on
allocation and pricing and formulating related policy measures, the Ministry of Steel had
played an important role in taking the steel industry forward in this phase.
In the post-deregulation period, the role of the Ministry of Steel has primarily been that
of a facilitator for the Indian steel industry, being responsible for the planning and
development of the iron and steel industry, development of essential inputs such as iron
ore, limestone, dolomite, manganese ore, chromites, sponge iron, and other related
functions.
The role of Steel market in Indonesia is US$ 7.38 billion Rs 66.4 trillion in 2012.
Growing demand is expected from the construction and manufacturing sector with
economic growth predicted at 6.5% this year. The construction sector is forecast to
expand 7.3% & the manufacturing industry is predicted to grow 6.5%.
Talking about the Functions of steel production, Blast furnace basically converts iron
ore into liquid form of iron. Iron produced by BF contains high amount of carbon and
other impurities, this iron is called pig iron. Pig iron due to its high carbon content has
limited end use application such as covers of manholes. To make steel products out of
pig iron it is further processed.
Basic purpose of the EAF (Electric Arc Furnace) is re melting sponge iron, melting
scrap, its main inputs, to produce finished steel. It uses electricity as much as 400-500
kWh/ton.
COREX is an advance process of making steel. Though few use this process, it is
possible to use non-coking coal directly in smelting work and it also makes it possible to
use lump ore and pellets as inputs.
Induction Arc Furnace (IAF) is one of the most advance processes of making steel. Like
EAF it uses electricity as its main fuel. IAF is most environment friendly and efficient
way of producing steel.
Structure of Steel Industry
The four distinct components of the structural steel industry are, Producers of structural
steel products, Service Centers, Structural Steel Fabricators and Erectors.
The major economic sectors of Indonesia are agriculture includes three types of
farming, the manufacturing sector, and the country‘s hospitality industry.
Position of India in Steel Sector is that India has emerged as the fourth largest steel
producing nation in the world, as per the recent figures release by World Steel
Association in April 2011. In 2010, India was the 5th largest producer, after China,
Japan, USA and Russia had recorded a growth of 11.3% in steel production as
compared to 2009. Overall domestic crude steel production grew at a compounded
annual growth rate of 8.4% during 2005-06 to 2009-10. The Indian steel industry
accounted for around 5% of the world‘s total production in 2010.
Position of Indonesia in Steel Sector is Indonesia‘s steel consumption grew robustly
by 22.4% y/y to 10.95 million metric tons in 2011 in line with the growth in domestic
steel demand. As the country with the largest economy and highest population in
ASEAN, its share of steel consumption reached 20.9% making it the top second steel
consuming country in the region.
State-owned PT Krakatau Steel (KRAS) is the largest integrated steel producer in
Indonesia. The steelmaker is capable of producing 2.5mn tones of crude steel and is
the largest producer of hot- and cold-rolled coils with a domestic market share of 41%
and 24%, respectively.
Trade & Economic Relations in India – Indonesia bilateral trade increased from US $
4.38billion in 2005-06 to US $ 21.30 billion in 2011-12 making Indonesia India‘s second
largest trading partner in the ASEAN.
Main items of India‘s Exports to Indonesia are Petroleum products, telecommunication
equipment and parts, hydrocarbons and derivatives, oil seed, motor vehicle for goods
transportation, animal feed, cotton, flat rolled product, alloy steel while the main items of
India‘s imports from Indonesia are Fixed vegetable fats& oils, Coal, Copper ores,
natural rubber, pulp & wastepaper, alcohols & phenols, hydrocarbon, machine tools,
fertilizers, paper & paperboard, carboxylic acids, dyeing/tanning extracts, medicinal &
pharmaceutical products, chemical products, etc.
In order to spur growth and attract investment, the Government of Indonesia organized
the Indonesia Infrastructure at Jakarta with the agenda titled ―A World Forum – A
National Priority‖. This was a second conference and exhibition of its kind. Four
companies namely, BHEL, TCS, Punj Lloyd and ESSAR exhibited in Indonesia
Infrastructure and many more such as ICICI, IDFC, and NTPC etc. were present in the
conference.
The current trends in India-Indonesia steel sector are, India has a huge advantage in
raw materials based industries such as steel and aluminum as there is abundant supply
of good quality iron ore in the country. Indian companies will need to build a focused
China strategy, cultivate close customer relationships and focus on quality to tap the
market for flat steel. Domestic steel industry needs to further reduce conversion costs to
emerge as the lowest cost players, and devise strategies to tap the Chinese flat steel
market.
Indonesian investment in India is rather low and it ranks 36th in FDI inflow to India.
Indonesian companies have started bidding for infrastructure and energy related
projects in India. Problem for the steel industry was a shortage of raw material in the
form of scrap iron, which mostly had to be imported.
Indonesia‘s steel industry still imports 70 percent of the scrap material for its raw
material. Only Krakatau Steel, a state-controlled steelmaker, produces steel with 70%80% iron ore and the rest from scrap metal. Other industries rely entirely on scrap
metal.
PT Essar Indonesia is the largest producer of cold rolled steel in Indonesia's private
sector. It has a domestic market share of 35 per cent and a history of process and
product innovation. With close proximity to its customer base and raw material
suppliers, PT Essar Indonesia caters to diverse market segments that extend beyond
Indonesia to other countries as well.
Essar has asked the Indonesian government for mining concession for 30 years to
ensure supply for its pellet plant. The planned 2 million tone pellet plant would need
about 7 million tons of iron ore. The projects will integrate Essar Steel's operations in
Indonesia.
Jindal Stainless has acquired Stainless Steel Cold Rolling plant in Indonesia from
Maspion Stainless Steel. Jindal Stainless has established its foothold in the South East
Asian & Oceania market with acquisition of a Stainless Steel Cold Rolling plant from
Maspion Stainless Steel, Indonesia.
Essar steel limited is the first steel plant in India to be awarded ISO 9002 certification for
the complex as a whole. In addition, it is the first steel plant in India to receive ISO
14001 certification for the best environment management. Gujarat NRE and The
Economic Times present Global Steel 2013, the 8th international conference on steel
and steel making raw materials. Acknowledging the vital role that the emerging nations
are bound to play in the years to come and steel being the catalyst of such growth, the
theme of Global Steel 2013 has been chosen as ―Growing on Steel‖.
Trends and Developments in Steel Sector, India has become 4th largest producer of
crude steel in the world as against the 8th position in 2003 and is expected to become
the 2nd largest producer of crude steel in the world by 2015.
India continues to maintain its lead position as the world‘s largest producer of direct
reduced iron (DRI) or sponge iron.
301 MOUs have been signed with various States for planned capacity of around 488.56
million tones. The break-up of 301 MOUs signed by various State Governments are
given in the table below:
Source: Ministry of commerce & industry, GOI
About the Future trends, it has to be said that the global recession has affected the
Indian steel industry especially stainless steel, but the steel industry is trying to offset
the negative effect of the recession by focusing on transportation and construction
projects which are usually funded by the government. It is estimated that India's steel
consumption will grow at nearly 16% annually till 2013.
Regulatory environment in India is major market for steel and steel items include
USA, Canada, Indonesia, Italy, West Asia, Nepal, Taiwan, Thailand, Japan, Sri Lanka
and Belgium. The major steel items of export include HR coils, plates, CR and
galvanized products, pipes, stainless steel, wire rods and wires. With the fall in prices
along with depressed domestic demand, India has been increasing exports to overcome
the excess supply situation.
The general policy and procedures for export and import of iron and steel, ferro alloys
and Ferro scrap are at present decided by the Ministry of Commerce in consultation
with the Ministry of Steel.
Government initiate have been aimed at increasing investment in the steel industry in
India, various policy setting being prominent like Allowing private ownership and foreign
investment , Importing intellectual property laws , Deregulation of pricing and distribution
of iron and steel, Custom policy, Special Economic Zones (SEZs) and Special
investment regions.
Import/Export Policy for steel industry in Indonesia has doubled its import tariffs on
hot rolled plate and coils and cold rolled steel. The Indonesian Anti-Dumping Committee
(KADI) is now reviewing separate anti-dumping duties on hot rolled coil imports from
India, China, Russia and Ukraine.
The Industrial Policy has been progressively liberalized dispensing with the requirement
of industrial license in almost all sectors except a few retained under compulsory
licensing on public health safety and security considerations.
Many tax exemptions give rise to unnecessary distortions. Indonesia‘s VAT appears to
be generally well designed. It is levied at a single rate of 10% on domestic added value
and on imports. The exemptions create revenue losses, although the size of the losses
is hard to evaluate.
Import/Export Policy for steel industry in India, Iron and steel products are freely
importable as per the extent policy. In the past, India has been importing around 1.5
million tonnes annually. Advance Licensing Scheme allows duty free import of raw
material for exports. Similar to import policy for the iron and steel products, the exports
of these can also be done freely. Government introduced schemes under the Duty
Entitlement Pass Book Scheme (DEPB) to facilitate exports. Under this scheme,
exporters on the basis of notified entitlement rates, are granted due credits which entitle
them to import duty free goods in return.
Coming to the Tariff Barriers, The tariff is India‘s main trade policy measures. Most
imports enter India are subject to tariff which are accounted for 1,484 number of tariff
lines. Most imports are highly concentrated on tariff line between 10 -15 percent which
is amounted for US$1,651.8 million in 2007 or 39.3 percent of India‘s imports from the
world. Value of imports for the tariff above 50 percent is amounted for US$1,097.3
million or has taken 26.1 percent of India‘s imports from the world.
Trade barriers, Indonesian investment in India is rather low and ranks 36th in the FDI
inflow to India. Though there has been increasing participation by Indonesian groups
especially in West Bengal, the stringent regulatory climate in India is perceived as a
primary deterrent for Indonesian companies looking to invest in a big way.
The actions taken by Ministry of Steel have been to address concerns of domestic
steel industry. Some are boosting demand in the steel consuming sectors,
Reduction Power & Rail Tariffs, Duty on project imports and Reduction in input
costs.
Business Opportunities in future before Indian steel sector is that it has rich mineral
resources. It has abundance of iron ore, coal and many other raw materials required for
iron and steel making. Considering quality of work force, Indian steel industry has low
unit labor cost, commensurate with skill. The rapid expansion is expected in the east
region, Orissa because the availability of the superior raw material. It is estimated that
world steel consumption will double in next 25 years. Quality improvements of Indian
steel combined with its low cost advantage will definitely help in substantial gain in
export market.
Business opportunity in Gujarat Steel Industry, The Government has allowed Essar
Steel to surrender its sector-specific SEZ in Gujarat as the developer is facing an
exodus of units from the zone. Income Tax exemptions were the biggest attraction
among SEZ developers and unit holders. Essar had set up four units at the SEZ in
Hazira to consolidate steel exports, in view of buoyancy in the steel industry.
Business opportunity in Indonesia Steel Industry, After Indonesia had been nominated
as investment grade at the end of 2011, Foreign Direct Investment (FDI) flowed swiftly
into Indonesia and this momentum shall be utilized effectively to improve its greater role
in ASEAN and Global levels. Although the supply of basic materials in the form of iron
pellets becomes main obstacles because they are still imported, Indonesia still has
opportunity to develop this steel industry in view of low steel iron consumption per
capital in Indonesia if compared with steel iron consumption per capital of other ASEAN
countries. Therefore, the government is actively inviting domestic and foreign investors
to develop this sector.
Export Import Policies and Pharmaceutical Industry
Of
Indonesia
Indonesia is the largest archipelago country in the world. In Indonesia there are
more than 13000 Island. Indonesia have a 141 large seaports, 5 international and 100
traditional Harbours. Import export is very helpful to Indonesian economy to develop
itself Because it help them to earn foreign currency. With the help of that they can
purchase machinery and raw materials necessary for industrial production and growth.
During the 1980’s, 25% of domestic production was exported. And in that
export petroleum is very important export and other is agricultural product. On Other
side 70% of import as raw materials & auxiliary goods for industry growth.
GENERAL OBJECTIVES OF THE EXIM POLICY
Government control import of non -essential items through an import
policy. At the same time, all-out efforts are made to promote exports. Thus, there are
two aspects of trade policy; the import policy which is concerned with regulation and
management of imports and the export p o l i c y w h i c h i s c o n c e r n e d w i t h
e x p o r t s n o t o n l y p r o m o t i o n b u t a l s o regulation. The main objective of the
Government policy is to promote exports to the maximum extent. Exports should be
promoted in such a manner that the economy of the country is not affected by
unregulated exports of items specially needed within the country.
Export control is, therefore, exercised in respect of a limited n u m b e r o f i t e m s
whose supply position demands that their exports should be
r e g u l a t e d i n t h e l a r g e r i n t e r e s t s o f t h e c o u n t r y . I n o t h e r words, the
policy Aims at1(i) Promoting exports and augmenting foreign exchange earnings ;and
2 (ii) Regulating exports wherever it is necessary for the purposes of either avoiding
competition among the Indian exporters or ensuring d o m e s t i c a v a i l a b i l i t y o f
essential
items
of
mass
consumption
at
reasonable prices. T h e
government of India announced sweeping changes in the trade
policy during the year 1991. As a result, the new Export-Import policy came into
force from April I, 1992. This was an important step towards the economic reforms of
India. In order to bring stability and continuity the policy was made for the
duration of 5 years.
GENERAL PROVISIONS ON IMPORT & EXPORT
GENERAL PROVISION ON EXPORT
Decision of Minister for Industry and Trade No. 558/MPP/KEP/12/1998;
 Classification of goods for export:
i.
Regulated goods: can be exported only by Registered Exporter
ii.
Controlled goods: can be exported with approval from minister for trade
iii.
Prohibited goods
iv.
Other than a, b and c is free for export
GENERAL
PROVISION
ON
GOODS
FOR
EXPORT
(NO.
575/MPP/KEP/VIII/2002):
Regulated: Coffee, Textile and its products, veneer and plywood, sandal woods,
etc
Controlled: Cattles, particular life fish, oil and gas, sea sand etc
Prohibited: logs, selected life creatures, etc.
Free for export: including electronic goods
Exporter might a company or individual, but should registered as an exporter;
Procedure: Notify the Custom prior to exporting of goods
GENERAL PROVISIONS ON IMPORT
Decision of Minister for Industry and Trade No. 229/MPP/KEP/7/1997;
i.
Only can be conducted by a company poses Importer Identification
Number (API);
ii.
Imported goods must new ones;
iii.
Exemption for particular goods and procedures apply (determined by
ministry of trade)
EXPORT POLICIES OF INDONESIA
o EXPORT SUBSIDIES
o RESTRICTIONS ON EXPORTS
o AGRICULTURAL EXPORTS
IMPORT POLICIES OF INDONESIA
AGRICULTURAL IMPORTS
Indonesia’s most important non-food agricultural imports are textile fibres (17.5
percent) and animal feeds (7.5 percent).[73] Indonesia’s most important food imports
are rice (20.2 percent), other cereals (16.6 percent), oilseeds (6.4 percent) and sugar
(10.1 percent). Together, these products accounted for 78.2 percent of all agricultural
imports in 1998-2000.
The Indonesia’s Agreement tariff between 2009- 2012.
CHANGES IN 2009
(1) Reimposing the Import Tariff on Diary Products:(2) Reducing the Import Tariff on Sugar:(3) Offering the Import Tariff Reduction and Exemption to 11 Industries:(4) Maintaining Zero Export Tariff on Palm Oil
IMPORT POLICIES OF INDONESIA
&
FOREIGN MARKET ACCESS
The Trade law of 1934 is the basic law for the regulation of Indonesia trade
policies. Indonesia’s Department of Trade is in charge of trade affairs, whose
responsibilities are to make foreign trade policies, participate in the formulation of
trade-related regulations, classify management categories of imported and exported
products, process applications for import licenses, and appoint importers and allocate
quotas.
EXPORT ADMINISTRATION REGIME
The basic export administration regime of Indonesia is based on two decrees:
Ministerial Decree No. 558/MPP/Kep/12/1998 released by the Department of Industry
and Trade in 1988 and Ministerial Decree No.01/M-DAG/PER/1/2007 released by the
Department of Trade in 2007.
 The Indonesian Department of Trade Revised the Export Regulations of Raw
Rattan
 Letter of Credit is Obligatory for Export Products Basing on Natural
Resources
 The National Single Window System Was Established
EXPORT CREDIT INCENTIVES
INVESTMENT ADMINISTRATION REGIME AND ITS DEVELOPMENTS
According to the Investment Law of 2007, domestic and foreign investors may invest in
any business sectors except in the field of transportation, mining, communication and weapons.
These 4 fields are in close relation with the national stability and state secrets, so they are
exclusive to the investors. Moreover, foreign investors can only hold at most 45% of shares in
transportation-related companies and projects, and at most 20% of shares in the communication
sector
Trade and Investment Related Administration and Its Developments
Foreign Exchange Administration Foreign Market Access Report 2010
In accordance with the Law on Monitoring Foreign Exchange Flow of Banks and Non-bank
Financial Institutions drafted and enacted in 1999 by Bank Indonesia (BI), the central bank of
country, Indonesia has no foreign exchange controls. The currencies are freely convertible and
foreign companies are free to remit their profits back to their home countries
Tax Management System
 individual taxpayer under 21 years old （WPOP)
 foreigners who planned to live in Indonesia for one year but actually stayed less than 183
days;
 diplomatic envoys;
 representative officials of the international institutions;
 Indonesian citizens with foreign residential certificates;
 Muslin pilgrims;
 land transit passengers; and Indonesian workers with certificate of overseas workers .
The following people do not need SKBFLN certificate:
（1）foreign college students with recommendation letters from higher education institutions;
（2）foreigners doing research work in Indonesia;
（3）foreigners who are working in the islands of Batam, Bintan and Karimun;
（4） the disabled or patients who have been funded by charitable institutions to receive medical
treatment abroad and with one companion;
(5） members of the artist, cultural, sport and religious delegations;
(6） exchange students or members of students groups;
(7）Indonesian labor force except for the overseas labors（Tenaga Kerja IND）
PHARMACEUTICAL INDUSTRY
History of the Pharmaceutical Industry
The pharmaceutical industry is one of the leading industries in India, and is soon
becoming one of the most advanced countries of the world in terms of the growth of the
health sector and advancements in pharmaceutical equipments and production of bulk
pharmaceutical drugs. The import and export of pharmaceutical drugs and
pharmaceuticals are regulated through EXIM Policy.
The pharma EXIM policy initiatives taken by the Government recently have led to
quantitative and qualitative improvements in the Research & Development activities of
the industry. The National Pharmaceutical Policy (NPP)'s objective is to ensure
availability of lifesaving drugs at reasonable prices.
Pharmaceutical Industry
Many Indian companies are part of an agreement where major AIDS drugs based
on Lamivudine, Stavudine, Zidovudine, Nevirapine are supplied to Mozambique,
Rwanda, South Africa and Tanzania which have about 33% of all people living
with AIDS in Africa. Many US Schemes are sourcing Anti Retrovirals from Indian
companies whose products are already US FDA approved.
Many Indian companies have got various international regulatory approvals for their
plants, from agencies like USFDA, MHRA-UK, TGA-Australia, MCC-South Africa etc.
More of Indian companies are now seeking regulatory approvals in USA in
specialized segments like Anti-infectives, Cardiovasculars, CNS
group. Along with
Brazil & PR China, India has carved a niche for itself by being a top generic Pharma
player.
Global scenario
Global pharmaceutical market is highly dynamic and is characterized by greater levels
of R&D expenditure and extensive regulation of its products.
According to PricewaterhouseCoopers (PWC) in 2010, India joined among the league of
top 10 global pharmaceuticals markets in terms of sales by 2020 with value reaching
US$50 billion. Some of the major pharmaceutical firms include Sun Pharmaceutical,
Cadila Healthcare and Piramal Healthcare.
Exports of pharmaceuticals products from India increased from US$6.23 billion in 200607 to US$8.7 billion in 2008-09 a combined annual growth rate of 21.25%. According to
PricewaterhouseCoopers (PWC) in 2010, India joined among the league of top 10
global pharmaceuticals markets in terms of sales by 2020 with value reaching US$50
billion. Some of the major pharmaceutical firms include Sun Pharmaceutical, Cadila
Healthcare and Piramal Healthcare.
Challenges
All of these changes are ultimately good for the Indian pharmaceutical industry, which
suffered in the past from inadequate regulation and large quantities of spurious drugs.
They force the industry to reach a level necessary for global competitiveness.
The Asian Pharmaceutical Industry Outlook 2012
Asia is a key driving force of the current global pharmaceutical industry. In recent years,
healthcare demands among the region‘s populations have increased and its low
operating costs continue to attract pharmaceutical companies. And, it is emerging as a
powerhouse of pharmaceutical Research & Development (R&D) facilitated by the
availability of a vast patient population, quality data, lower costs and skilled manpower.
Evolution of pharmaceutical industry in India State of the economy
Economic growth decelerated in 2008-09 to 6.7 per cent. This represented a decline of
2.1 per cent from the average growth rate of 8.8 per cent in the previous five years
(2003-04 to 2007-08). The five years of high growth has raised the expectations of the
people.
Background analysis
The Indian Pharmaceutical Industry has come a long way from being almost nonexistent in the 1970‘s to being one of the largest and most advanced Pharmaceutical
industries in the world. The domestic Pharmaceutical output has increased at a CAGR
of 13.4.
Relevance for growth:
India has the highest number of manufacturing plants approved by US FDA, which is
next only to that in the US. More than 85% of the formulations produced in the country
are sold in the domestic market. India got a major boost with the signing of Trade
Related Intellectual Property Rights (TRIPS) under the General Agreement on Tariffs
and Trade (GATT) in January 2005 with which it began recognizing global patents.
Export profile:
Exports constitute a substantial part of the total production of Pharmaceutical in India.
The formulations contribute nearly 55% of the total exports and the rest 45% comes
from bulk drugs. Pharmaceutical exports clocked $7.2 billion in 2007-08, accounting for
six per cent of the country‘s total exports.
Foreign participation
Drugs and Pharmaceuticals ranks 8th in India‘s top 10 FDI-attracting sectors. The
government of India has allowed foreign direct investment up to 100% through the
automatic route in the drugs and Pharmaceuticals industry of the country, on the
condition, that the activity should not fall into the categories that require licensing.
Evolution of industry
In India, modern system of medicine is a 20th century phenomena, though the
traditional system of medicine has been in practice for many centuries. . Most domestic
manufacturers were engaged in repacking the formulations produced by the
multinationals and production was concentrated in the hands of the multinationals.
Labor force
India‘s greatest strengths lie in its people. India also boasts of well-educated, Englishspeaking labor force that is the base of its competitive advantage. Although molecular
biologists are in short supply, there are a number of talented chemists who are equally
as important in the discovery process.
Industry production
Thirty-five years of protection has enabled the Indian pharmaceutical industry to perfect
its scientific and manufacturing capabilities, allowing many of its leading companies to
move up the value added chain. India‘s pharmaceutical industry consists of large,
medium, and small companies and is one of the world‘s most price competitive.
Industry structure Mergers, acquisitions, and other alliances
The last 3 years have seen a significant rise in the number of consolidations, mergers &
acquisitions, and other types of alliances and tie-ins in the Indian pharmaceutical
industry.
The Indian Pharmaceutical Industry
India currently represents just U.S. $6 billion of the $550 billion global pharmaceutica
industry but its share is increasing at 10 percent a year, compared to 7 percent annua
growth for the world market overall. Also, while the Indian sector represents just 8 pe of
the global industry total by volume, putting it in fourth place worldwide, it accounts 13
percent by value,and its drug exports have been growing 30 percent annually.
The Key Players in the Indian Pharmaceutical Industry
Dr. Reddy
Aventis Pharma
Ranbaxy
Lupin
Cipla
Cadila Health
Sun Pharma
Novartis
Glaxo SmithKline
Alembic
Aarti Drugs
Elder Pharma
Ind Swift Lab
Nicholas Piramal
Pfizer
Wockhardt
Wyeth Ltd
Panacea Biotech
Aurobindo
Ajanta
PharmaPharma
Abbott India
Astrazeneca
Strides
PharmaArcolab
Torrent Pharma
Sterling Biotech
Ipca
Unichem
Lab
Laboratories
Orchid
Chemicals
Over-the-Counter Medicines
The Indian market for over-the-counter medicines (OTCs) is worth about $940 million
and is growing 20 percent a year, or double the rate for prescription medicines. The
government is keen to widen the availability of OTCs to outlets other than pharmacies,
and the Organization of Pharmaceutical Producers of India (OPPI) has called for them
to be sold in post offices.
India's long-established manufacturing base also offers a large, well-educated, Englishspeaking workforce, with 700,000 scientists and engineers graduating every year,
including 122,000 chemists and chemical engineers, with 1,500 PhDs. The industry
provides the highest intellectual capital per dollar worldwide, says OPPI.
Pharma Export promotion council
The Department had played a pivotal role in the formation of Pharmexcil
consequent to the recommendation from 9th Five Year Plan Working Group Report
on Drugs and Pharmaceuticals. In the light of this, the Department constantly interacts
with Pharmexcil in their work areas.
In addition to this Pharmexcil is concerned with giving export thrus to the various
products through visits of delegations to various markets abroad, organizing of
seminars workshops and exhibitions. As a major area of work Pharmexcil also holds
Buyers/Sellers
meets
and compiles detailed data base on pharma exports and
problems in exporting pharma products.
International cooperation/ export promotion of pharmaceuticals
1. Participation in 9th Session of India-Uzbek Inter-Governmental Commission on
Trade, Economic, Scientiic & Technological Cooperation held on 4-5 May, 2011 in
Tashkent.
2. Participation in the Meeting of Biotechnology and Life Sciences Working Group
under India-US High Technology Cooperation Group held in July, 2011 in New Delhi.
3. Participation in India Russia Forum on Trade and Investment held in November,
2011 in Moscow and the Roundtable on Pharmaceuticals.
4.
Participation
in
Seminars
organized
by
the Embassy of India, Jakarta in
cooperation with PT. Strategic Asia held in Jakarta, Indonesia
Future Prospects
The Indian pharmaceutical market has been forecast to grow to as much as US$ 25
billion by 2015 as per Organization of Pharmaceutical Producers of India (OPPI)
estimates. However, Espicom's market projections forecast more modest but stable
annual market growth of around 7.2 per cent, putting the market at US$ 11.6 billion
by 2013.
A new development in the area of outsourcing is that the outsourcing activities are
progressively moving out of U.S. and Europe to others, notably, China, India, Korea,
Russia and Taiwan. Over the years some of the premier companies in the U.S. such as
Albany Molecular research Inc, J-Star Research of New Jersey and many others have
seen a decline in revenues due to more companies going off-shore primarily due to
lower costs. For example, it has been reported that while the cost to a company of a
Ph.D. scientist in a CRO is $ 250,000 in U.S. the corresponding figures in these
countries will be between $ 45000 to 70,000.
Indian Pharma 2015- Prescribed growth
McKINSEY‘S just released report on the Indian pharmaceutical market says the industry
will treble in the next decade, and catapult the country into the top 10 markets in the
world by 2015, overtaking Mexico, Turkey and South Korea.
. The project was undertaken to assess the potential of the Indian pharmaceuticals
market, identify opportunities and understand the implications for industry and policy
makers.
The pharmaceutical market: Indonesia - review
Environmentally, Indonesia is particularly prone to natural disasters, as the recent
earthquakes, tsunamis and volcanic eruptions have illustrated. Politically, a dominant
feature of President Yudhoyono‘s presidency has been to curb the corruption that has
so frequently plagued Indonesia.Economically, Indonesia‘s economy is projected to
become the sixth largest in the Asia Pacific region by 2017, but if the rupiah continues
to devaluate against the dollar it could affect the Indonesian pharmaceutical market in
US dollar terms.
Legally, Indonesia remained on the USTR‘s Special 301 Priority Watch List in 2011, due
to the prevalence of counterfeit pharmaceuticals. Demographically, the population will
be the third largest in the Asia Pacific region by 2017 The Indonesian Pharmaceutical
Manufacturers Association (GP Farmasi) announced that 20 of its members had
increased the price of certain drugs by up to 10.0%, at the start of the 2011.
Indonesia
The Indonesian pharmaceutical market is projected to grow at a high single -digit CAGR
in US dollar terms during the forecast period, and it will be the sixth largest
pharmaceutical market in the Asia Pacific region by 2016.
Inexpensive production and labor, and increasing foreign investments are strengthening
the
Indonesian
Pharma
market,
despite
its
volatile
socio-political
system.
Environmentally, Indonesia is particularly prone to natural disasters, as the recent
earthquakes, tsunamis and volcanic eruptions have illustrated. Indonesia‘s economy is
projected to become the sixth largest in the Asia Pacific region by 2016, but if the rupiah
continues to devaluate against the dollar it could affect the Indonesian pharmaceutical
market in US dollar terms. Legally, Indonesia remains on the United States Trade
Representative‘s (USTR‘s) Special 301 Priority Watch List in 2011, due to the
prevalence of counterfeit pharmaceuticals. Demographically, the population will be the
third largest in the Asia Pacific region by 2016.
Trends in India-Indonesia Economic Relations
With an expanding economy and increasingly favourable investment climate, Indonesia
stands as a key economic entity in the ASEAN region. Its abundance of natural
resources and a flourishing manufacturing sector have ensured a successful
relationship with the booming Indian economy in areas of trade and investment.
In the area of investment, there are more than twenty major Indian manufacturing joint
ventures in Indonesia. Majority of these investments were undertaken in the 1970s and
80s mainly in textiles, synthetic fibre and steel industries with India being among the top
5 investors in Indonesia up to 1985. Major Indian companies that established
themselves in this phase included, the Lohia Group (Indorama Synthetics), Ispat Group
(Indo Ispat), Aditya Birla Group (having four units in textiles and yarns) and Tolaram
Group among others.
Recently, the two countries have been at logger heads over differences pertaining to the
India-ASEAN FTA. Indonesia has been pushing for greater access of its palm oil
exports to India while India wants a reworking of the negative list put forward by
Indonesia. Further, at a bilateral level, there are also issues pertaining to the Indian
demand for the removal of non-tariff barriers on its exports of meat and processed
foods. Though India is one of the largest exporters of halal bovine meat in the world,
Indonesia continues to ban India's bovine meat and milk products on the grounds that
India is not free from Foot and Mouth Disease (FMD).
EVOLUTION OF PHARMACEUTICAL INDUSTRY IN GUJARAT
There is no stopping the pharmaceutical and biotechnology industry in Gujarat, which
from its glorious past is racing ahead by meeting the needs of era of outsourcing that
has of late infused new life into the pharma and biotech industry world over.
Export & R&D
However, the strides that the Gujarat pharma industry, which was worth around US $4.4
billion in 2005-06, is making is not limited to contract research and manufacturing
services. The state is still batting as a major exporter of pharmaceuticals in the country
with recent expert estimates putting the state's export growth rate at 20 to 25 per cent,
at a time when the overall national export growth rate stands at 35 to 40 per cent.
Available figures indicate that the state's pharma export is worth Rs 5,000 crore, while
its total production stands at between Rs 12,000 and Rs 14,000 crore.
Rich opportunities Though the pharmaceutical industry in this jewel of the West is
faring well adopting to new and emerging business conditions and opportunities, all is
not well with the industry. There are certain issues to be addressed. "The
pharmaceutical industry has shown its strength in R&D at all levels, but unfortunately it
is facing crisis for the enough funds for R&D activities due to redundant drug price
control order (DPCO).
Gujarat - A leader in pharma machines
According to industry estimates, a great chunk --almost 40 per cent --of machinery used
in the pharmaceutical manufacturing in India is produced in Gujarat. This creates a very
good local and global opportunity for Gujarat in the manufacturing of pharmaceutical
machinery, given its strong and well established engineering sector, points out a recent
study titled Gujarat Pharma Industry-striding into the Future, KPMG, India The strong
growth prospects of the pharmaceutical exports segment and growing demand from the
domestic market, will further fuel growth in the pharmaceutical machinery sector.
However, Gujarat's engineering sector is highly fragmented, especially the pharma
machinery manufacturing segment.
Global Competitiveness of
Indian Pharmaceutical Industry:Trends and Strategies
In the process of industrialization, pharmaceuticals have been a favourite sector f
or policy makers in the developed as well inmany developing countries, including
India. This special policy preference has been due to the criticality of the pharma
ceuticalproducts for the health security of the populace as well as for developing
strategicadvantages in the knowledge‐basedeconomy.
The phenomenal progress made by the industry over the last three decades has instille
d a strong belief in the government and the pharmaceutical companies in India th
at the country has a competitive strength and it should be enhanced by suitable
policy measures and firmspecific actions with regard to export, innovation, strategic allia
nces and investment. The Pharmaceutical Policy 2002 echoes the same sentimen
t and has shifted the focus of the policy from selfreliance in drugs manufacturing to the
objective of enhancing global competitiveness.
These challenges require a change in emphasis in the current pharmaceutical policy an
d the need for new initiatives beyond those enumerated in the Drug Policy 1986, as mo
dified in 1994, so that policy inputs are directed more towards promoting acceler
ated growth of the pharmaceutical industry and towards making it moreinternation
ally competitive. The need for radically improving
the policy framework or knowledgebased industry has also been acknowledged by
the Government.
The Prime Minister‘s Advisory Council on Trade and Industry has made important
recommendations regardingKnowledgebased industry. The pharmaceutical industry
has been identified as one of the most important knowledge based industries in wh
ich India has a comparative advantage
Comparative Analysis of the Competitive Strength of the
Indian Pharmaceutical Industry
With the arrival of global patent regime and widespread liberalization measures a
t the individual country, bilateral, regional and multilateral levels, the issue of com
petitiveness is critical for understanding the strengths and weaknesses of a country in t
he global market place. The discussion in the previous section provides strong s
upport for the view that strategic government policies can have a longterm impact on th
e growth and structure of an industry.
Hence, a comparison of the level of innovation can also, to a certain extent, me
asure the competitive strength of the sector. The export market share and import
coverage of the export (i.e. import to export ratio)
are also important indicators of competitive strength. An industry doing very well in the i
nternational market suggests that it is scaling up its supplier position visàvis othe
rcompetitors and in fact possesses a strong comparative advantage in the produ
ct. The present section looks into the trends in above mentioned indicators to examine t
he global competitive strength of the Indian pharmaceutical industry.
CONTACTS WITH INDIA
India has age old cultural and civilizational ties with Indonesia. Around 1000 B.C., the
earliest migrants from the Indian sub-continent came to Indonesia. A continuous influx
of Indian settlers went on during the 1st to the 7th centuries A.D. Early trade relations
were established between South India and Indonesia. Sumatra was then named
―Swarna Dwipa‖ or the island of gold; the island of Java was called ―Java Dwipa‖ or the
rice island while the Hindu Kingdom on Borneo (Kalimantan) island was called Kutai.
Until the 15th century A.D.
The national language, Bahasa Indonesia, contains at least 3000 Sanskrit words in its
vocabulary. Gujarati and Arab traders and merchants laid the foundations for the
gradual spread of Islam in Indonesia. A series of small Islamic kingdoms sprouted up
and spread their roots but without destroying the underlying Hindu/Buddhist cultural
symbolism and matrix. The Hindu Kingdom of Majapahit in East Java just came under
Islamic rule (in the 16th century) followed by other parts of the country. The present day
Balinese are the descendents of Majapahit aristocrats, priests and other higher classes
who had retreated eastwards to the islands of Bali and Lombok which until today are
preserved as Hindu Pockets in a largely Muslim Country.
In 2007 bilateral trade reached US$6.55 billion or an increase 36.6% from the previous
year. However, there remains vast untapped potential for future growth. The net
balance of trade is in favour of Indonesia, as India is Indonesia‘s largest buyer of Crude
Palm Oil (CPO) and an importer of its mining (particularly coal and copper ore),
petroleum, rubber, pulp & paper and textile productss
Textile Industry
In the past two years, democracy has been further stabilized in to Indonesia. This
country remains the third largest democracy in the world after India and the United
States. Three consecutive free, fair and transparent elections in 1999, 2004, and 2009,
confirmed the incremental democratic changes. The re-election of the incumbent
President Susilo Bambang Yudhoyono (SBY) with a large majority in the first of two
possible electoral rounds further stabilized the political scene. Democratization has not
only been established in the national, but also at the regional level along with the
implementation of decentralized system. The human & civil rights situation has also
remained stable.
However, a further substantial deepening of democracy has not been reached in
recent years. SBY‘s related indecisive leading style, exacerbated by some frictions
within his party coalition in the House of Representatives, has become a serious
obstacle in policy-making processes. Widespread corruption still poses a main threat to
greater transparency and accountability and the efforts of the current administration
have often been proved ineffective. Indonesia‘s judiciary is still far away from being
professional and untradeable, inspirit of the relatively good performance of the
Constitutional Court. Although previously existing racial and religious conflicts have
been reduced significantly in recent years, there is growing orthodox Muslim influence in
politics, including several violent actions against religious minorities.
In terms of economics, Indonesia made remarkable development. In contrast to
other major economies, the country did not witness major economic setbacks as a
result of the global financial crisis. The impact was comparatively minimal because
macroeconomic preconditions were relatively good. Furthermore, the central bank took
decisive and swift actions at the beginning of the crisis. The Indonesian government
also passed an adequate economic stimulus package that favored accelerated
recovery. Another reason was the importance of the big domestic market, as domestic
demand accounts for two thirds of Indonesian GDP. A remarkable GDP increase and a
big increase in FDI‘s show the new good look of the Indonesian market. Being a
relatively stable democracy and an emerging market, therefore, Indonesia is now seen
much more positively by the international community than it was a decade before. In
spirit of all of these achievements, the road to a full-fledged democracy under the rule of
law and a sustainable market economy with socio-political safeguards is even now long.
Fossils and the remains of tools show that the Indonesian archipelago was
inhabited by Homo erectus, popularly known as the "Java Man", between 1.5 million
years ago and as recently as 35,000 years ago. Homo sapiens reached the region by
around 45,000 years ago. In 2011 evidence was uncovered in neighboring East Timor,
showing that 42,000 years ago these early settlers had high-level maritime skills, and by
implication the technology needed to make ocean crossings to reach Australia and
other islands, as they were catching and consuming large numbers of big bottomless
sea fish such as tuna.
Austronesia peoples, who form the majority of the modern population, migrated
to South East Asia from Taiwan. They arrived in Indonesia around 2000 BCE, and as
they spread through the archipelago, confined the native Melanesian peoples to the far
eastern regions. Ideal agricultural conditions, and the mastering of wet-field rice
cultivation as early as the 8th century BCE, allowed villages, towns, and small kingdoms
to flourish by the 1st century CE. Indonesia‘s strategic sea-lane position fostered interisland and international trade, including links with Indian kingdoms and China, which
were established several centuries BCE. Trade has since fundamentally shaped
Indonesian history.
From the 7th century, the powerful Srivijaya naval kingdom flourished as a result
of trade and the influences of Hinduism and Buddhism that were imported with it.
Between the 8th and 10th centuries, the agricultural Buddhist Sailendra and Hindu
Mataram dynasties thrived and declined in inland Java, leaving grand religious
monuments such as Sailendra's Borobudur and Mataram's Prambanan. The Hindu
Majapahit kingdom was founded in eastern Java in the late 13th century, and under
Gajah Mada, its influence stretched over much of Indonesia.
Although Muslim traders first traveled through South East Asia early in the
Islamic era, the earliest evidence of Islamized populations in Indonesia dates to the 13th
century in northern Sumatra. Other Indonesian areas gradually adopted Islam, and it
was the dominant religion in Java and Sumatra by the end of the 16th century. For the
most part, Islam overlay and mixed with existing cultural and religious influences, which
shaped the predominant form of Islam in Indonesia, particularly in Java The first regular
contact between Europeans and the peoples of Indonesia began in 1512, when
Portuguese traders, led by Francisco Serrão, sought to monopolize the sources of
nutmeg, cloves, and cubeb pepper in Maluku. Dutch and British traders followed. In
1602 the Dutch established the Dutch East India Company (VOC) and became the
dominant European power. Following bankruptcy, the VOC was formally dissolve in
1800, and the government of the Netherlands established the Dutch East Indies as a
nationalized colony.
1)
Computers
and Related Services:
The Indonesian IT market is estimated to grow at around 11 per cent
annually between 2007 and 2012. By 2011, the hardware-dominated IT market
will approach a value of US$5 billion as Indonesia is expected to achieve
faster
growth
than
many
ASEAN
neighbors.
With Information
and
Communication Technology (ICT) penetration of only around 20 per cent and
development restricted to richer areas such as Java, Indonesia's uneven
development (and resultant digital divide) is a barrier to still faster growth
within the potentially huge IT market.
2)
Telecommunications Services:
Indonesia
has
implemented
a
gradual
approach
to
enhance
telecommunications services, with the promotion of an anti-monopoly and procompetition environment. Now telecommunication services in Indonesia are
provided by multi operators and are open for foreign e q u i t y i n v e s t m e n t . The
Indonesia Telecommunication Regulatory Agency has adopt equal treatment
and ensure a level of playing field for all telecommunication operators
according to their license(s), not including any discrimination between foreign
operators and national operators.
Indonesia's telecommunications markets g r o w sharply and continue to
expand awaiting now. The number of fixed lines had risen to 18, 3 million as per
June 2008, equivalent to a ratio of eight lines per 100 people. By the end of
2007, the teledensity has reached 8.69 % in this local fixed telephony. Mobile
cellular telephony has surpassed fixed telephony.
The number of mobile
subscribers has increased from 30, 3 million in 2004 to 113, 2 million in june 2008,
equivalent to a teledensity of around 50.21 per cent.
3)
Financial
Services:
The traumatic economic emergency in Indonesia has resulted in compelling
fundamental changes in
the
Indonesian banking sector
which
has
gone
through a period of consolidation, restructuring, and increased effectiveness.
The Indonesian Bank Restructuring Agency (IBRA), under the auspices of the
Ministry of Finance, was established in January 1998 to free from the economic
crisis. Bank restructuring efforts by Bank Indonesia focused on achieving a
mandatory minimum capital requirement ratio (CAR) of 8 per cent (up from 4 per
cent), and a target of non-performing loans of 5 per cent initially, by the end of
2001. Since then there has been a stable reduction in non-performing assets
and simultaneous increase in profit of both state and private banks. Indonesia
currently has 127 banks, of which 47 banks have foreign shares. The top ten
banks control about 60.75% of assets in the sector. Four state- owned
(Bank
Mandiri,
BNI,
BRI,
BTN)
approximately 34.24 per cent of assets.
continue
to
control
the
sector
banks
with
4)
Audio visual
Services:
Indonesia is developing her film industry to international level. However,
unlike India, the audio-visual sector in Indonesia is extremely regulated. Indonesia
prohibits foreign film and videotape allocation from establishing branches and
subsidiaries. Indonesia would seek greater understanding of regulation and use
of technology in the production of films in India so as to developed its film
industry. Indonesia may learn from India on how to change Indonesia‘s audiovisual service sector into a active service sector and to support Indonesia‘s
development of creative services. In that case, India may share her experiences
in developing her worldwide film industry to Indonesia since there are lot of
socio-cultural setting similarities between the two countries. Indonesia is
interested in learning from India on the policy of film/audio-visual, regulation,
investment and other matters directed related to the film industry that India may
share.
5)
Distribution
Services:
Both countries have domestic sensitivities in opening up this sector.
However, they may consider for opening up in future keeping in view of the
potential and the opportunities which survive in this sector in both countries.
6) Educational services:
As per Law Number 20/2003 on National Education System, the Ministry
of National
Education (MoNE) Indonesia has determined the following
mission:
1. To expand educational contract to better quality of
education
2. To help and make easy the improvement the ability potential of society from the
early child education quality and efficiency, and expand community participation.
Therefore, the education policies should accommodate the rights and needs of
children, and take into account their growth and expansion
3. To improve the professionalism and the accountability of education institutions
as
centre of knowledge, skills, experiences, attitudes, and values, derived
from both national and global standard.
4. To authorize the community participation in providing education based on
the principles of decentralization within the unity in the republic of Indonesia
7) Health Related and Social Services:
Indonesia‘s health sector consists of the public and private providers. Most
providers are public hospitals and are situated in all provinces and districts as
well as townships. The association of private hospital has recently increased.
Private investment in this area is positive and contributes to the excellence of the
service to the peoples. International healthcare providers with joint partner are an
example of foreign investment in health care and health services provision.
Investment from neighboring countries is welcome. In terms of skilled health
personnel, the number of specialists in the country has increased because of the
high and increased demand for better medical services in entire country
8) Professional Services:
In order to open up different professional services such as legal, accounting,
auditing and book keeping, architectural, engineering and medical services etc.
both sides may regard as to work closely towards recognition of qualifications and
experiences of professionals.
9) Tourism and Travel Related Services:
Tourism generates one of the highest foreign earnings in Indonesia, earning
over $5 billion in 2007. International tourism is attractive increasingly important for
Indonesia, particularly for Bali, where one third of the economy depends straight on
tourists.
Nation-wide there were around 5.1 million visitors in 2001. In 2007, it increased
to5,5 million tourists and last year‘s figures rose to 6.4 million, thanks to
Indonesia‘s Visit Indonesia Year 2008.From 2005 to 2007 the number of tourist
from India to Indonesia increased by 53.2 %, (from 36,169 to 68,908), especially
since Indonesia issued VOA (visa on arrival) facilities for visitors from India. The
five main destinations for India tourists are Jakarta, Batam, Bali, East Java, and
North Sumatera.
10)
Transport Services:
Transport growth which consists of land, railway, sea, air and its supporting
services has generally reduced the inter-regional disparity, open the trade
opportunity, job opportunity and increase the social welfare.
The Indonesian narrow policy in transportation is under the control of
Ministry
of Transportation consisting of the land, air, sea, and railways
transportation.
1. Road transportation: The sub sectors for land transportation are taxi-cab,
passenger city bus, inter-city or inter- province bus, land rental service with is
closed for foreigners as mentioned in the free regulation. In the government
regulation,
land
transport service can be
Company,
Regional
State
Owned
provided by state Owned
Company,
and
Cooperative
in
transportation, national
investment is
private
company,
and
individuals.
Foreign
illegal in public transport (taxi and bus services). Ferry
(inland waterways transport) is
open for foreign investment with a most
foreign participation of 49 per cent.
2.
2. Air Transport: Since 1999 civil aviation in Indonesia has grown-up rapidly. In
2008, a total of 37,309,358 passengers were transported on domestic flights,
while the numbers of passengers transported on international flights were
4,084,875. Recently, they are served by 15 scheduled airlines operating domestic
and international routes, 6 of which only serve domestic routes. There are 27
(twenty seven) airports in Indonesia which serve international air transport.
Indonesian Law No. 1/2009 on Civil Aviation is a brandnew law to put up the
growth of civil aviation in Indonesia. Foreign investments are allowed on some of
Air Transport ancillary services and should be joint venture with Indonesian legal
entity and foreign equity is limited up to 49 per cent. One of them is the aircraft
repair and maintenance industry which is well-developed in Indonesia. Recently,
the aircraft repair and maintenance activity is carrying out by PT.
Garuda
Maintenance Facilities, PT. Merpati Maintenance Facilities, PT. IPTN and PT.
Aero Nusantara
Indonesia. They have been trusted to do repair and
maintenance of various national and foreign aircraft.
3. Maritime Transport: The recent Indonesian rule allow foreign participation in
certain port activities, as a joint venture with a local partner, as an Indonesian
legal
entity.
In the maritime cargo handling services foreign investors are
allowed only through Joint Venture Corporation and is allowed simply in the main
ports.
Foreigners can hold up to 49 per cent equity in in a joint venture with Indonesian
transport company.
services
to
and
Foreign
transport companies
operating
international
from Indonesian ports which is open for international trade
should assign an Indonesian transport company and ship agency company as a
general agent.
4. Rail Transport: Based on Law No.23 / 2007 on Railways, there are chance for
local or foreign company to advance in railways sector. The private sector can
build and control the new railways or to operate the off line tracks, management
railways, to control and maintenance infrastructure of railways but only as a joint
venture with local partner, as an Indonesia entity, or joint venture with state own
enterprise PT Kereta Api Indonesia.
11) Call Centre Industry:
A call centre or call center is a centralized office used for the purpose of
receiving or transmit a large volume of requests by telephone. An inbound call centre is
operate by a company to administer incoming product maintain or information inquiries
from consumers. Outbound call centers are operated for telemarketing, solicitation of
charitable or political donations and debt set. In addition to a call centre, collective
handling of letters, faxes, live chat, and e-mails at one position is known as a contact
centre.
A call centre is operated through an broad open workplace for call centre agents,
with work stations that include a computer for each agent, a telephone set/headset
connected to a telecom switch, and one or more supervisor stations. It can be
separately operated or networked with additional centers, often linked to a corporate
computer network, including mainframes, microcomputers and LANs. Increasingly, the
voice and data pathways into the centre are linked through a set of new technologies
called computer telephony integration (CTI).
12) Manufacturing Industry:
Manufacturing Industry Despite the huge size of the Indonesian market, low
labour costs and the potential of the ASEAN as a whole for pharmaceutical sales;
investors are still tired of the country. Recent changes in regulations have been viewed
as protectionist and mstly in favour of existing local companies which already dominate
the market. The sector is in need of a major increase in order to best serve the
population, particularly the poorest stratum that is being priced out of the market
because of the myriad of taxes and duties that keep Indonesia‘s pharmaceutical prices
among the highest in Asia, while being the least innovative.
One of the major weaknesses in the sector is the lack of locally available raw materials
that leaves producers at the mercy of fluctuating global prices. High oil prices will
maintain the country‘s high drug costs that already stand at 25-30% higher than
average world prices, according to the Health Research and Development Agency. Like
many of the industries that make up the manufacturing sector, pharmaceutical
producers were hit hard by the industry electricity tariff increase in 2010 that raise prices
by 18%. In addition, the import tax of 5% imposed on raw materials under Minister of
Finance Regulation 240/2010 greatly impacts drug producers. It is estimated that
between 90-98% of all pharmaceutical raw materials have to be imported mainly from
China, and to a much lesser extent from America and India. The expensive price of
drugs in the country is therefore easily explained considering that on average, raw
materials and energy make up 35% of the total selling price for drug companies.
2) Manufacturing Industry:
Manufacturing Industry Despite the huge size of the Indonesian market, low
labour costs and the potential of the ASEAN as a whole for pharmaceutical sales;
investors are still tired of the country. Recent changes in regulations have been viewed
as protectionist and mstly in favour of existing local companies which already dominate
the market. The sector is in need of a major increase in order to best serve the
population, particularly the poorest stratum that is being priced out of the market
because of the myriad of taxes and duties that keep Indonesia‘s pharmaceutical prices
among the highest in Asia, while being the least innovative.
One of the major weaknesses in the sector is the lack of locally available raw materials
that leaves producers at the mercy of fluctuating global prices. High oil prices will
maintain the country‘s high drug costs that already stand at 25-30% higher than
average world prices, according to the Health Research and Development Agency. Like
many of the industries that make up the manufacturing sector, pharmaceutical
producers were hit hard by the industry electricity tariff increase in 2010 that raise prices
by 18%. In addition, the import tax of 5% imposed on raw materials under Minister of
Finance Regulation 240/2010 greatly impacts drug producers. It is estimated that
between 90-98% of all pharmaceutical raw materials have to be imported mainly from
China, and to a much lesser extent from America and India. The expensive price of
drugs in the country is therefore easily explained considering that on average, raw
materials and energy make up 35% of the total selling price for drug companies.
Fishing Industry:
According to a report Indonesian waters possess good quantity of fish stocks
because the country‘s marine fishing industry has not developed. Therefore, over
these new times, Vietnamese companies aim to operate fishing in Indonesian
special economic zones. These companies are facing strict challenges to operate in
Indonesi waters.
Rear Admiral Syahrin Abdurrahman from Ministry of Marine Affairs and Fisheries,
was speaking at the Investment Promotion Conference of Vietnam seafood
enterprises
held
by
Vietnam
Directorate
of
Fisheries.
He
said
that
currently,Indonesia wants to cooperate with countries having big experiences in
catching and processing operations like Vietnam to explore fish stocks at allowable
level.
He also added that Vietnamese companies need to use fleets with capacity of 100
MT lead by Indonesian captain, investing in local processing plants with contributed
capital of in any case 80 percent. According to Nguyen Tran Bien, representative of
Indonesia-based PT Papua Fishery Development, administrative procedures remain
the biggest obstacle of Vietnam companies when injecting funds in processing
plants
in
Indonesia.
Vietnamese companies are investing 80 percent of their capital in these efforts and
have to complete a various range of procedures to get need certificate. Moreover,
regarding to a new regulation of Indonesia Ministry of Finances taking effect in
December 2011, Vietnam operators are required to contribute 5 percent of ship
import duty for each fishing contract. However, Vietnam companies are only signing
one-year fishing contract with Indonesia and then receive fleet at the expiration of
contract.
13) Pharmaceutical Industry:
The potential of Indonesia's pharmaceutical market will be boosted by the authorities'
aim to provide universal health coverage from the start of 2014. However, the
Indonesian government must ensure that it calculates its financial ability to run the
national healthcare program, or risk the program failing according to Hotbonar Sinaga
of the University of Indonesia and Bambang Purwoko of the Pancasila University,
cited by the Jakarta Post. In the meantime, modern drug makers will continue to face
legislative and market access barriers in the country, although improvements are
expected in the coming years, partly due to outside insistence on the country's
compliance with international intellectual property (IP) and similar standards.
An at-a-glance perspective on latest regulatory developments, key forecast indicators
and major corporate developments, covering the prescription, OTC and generics
markets. The SWOT outlines strategic factors which affect Espicom's forecast analysis,
and taken together with Espicom's political, economic and business environment
SWOTS, it gives a complete overview of market climate.
Market Summary
photograph of key market characteristics, including total size of pharmaceuticals and
healthcare segments, development drivers, leading therapeutic areas and the
competitive landscape.
Regulatory Regime
Details of the industry regulatory framework and key legislation covering the licensing of
new products/services, pricing and reimbursements, intellectual property, taxation and
advertising, as well as an analysis of the overall regulatory load.
Industry Developments
Focus on government healthcare reform, epidemiological trends, company M&As,
product launches, market entries, FDI activity, R&D, biotechnology, clinical trials and
supply chain issues.
Espicom Industry Forecasts
Forecasts to end-2016 for all key industry indicators (see list below) supported by open
assumptions, plus analysis of key downside risks to the major estimate, including:
Healthcare: Total healthcare expenditure (US$bn), healthcare expenditure (% of
GDP), healthcare expenditure per capita (US$), hospital beds (per `000
population), doctors (per `000 population), birth and mortality rate (per `000
population)
Pharmaceutical market: Drug expenditure (US$bn), drug expenditure (% of
GDP), drug expenditure per capita (US$)
Patented drug market: Prescription drug sales (US$bn), prescription sales (%
of total sales), sales broken down by 14 therapeutic areas (cardiovascular, antiinfective etc.)
Generic drug market: Generic product sales (US$bn), generic sales (% of total
sales)
OTC drug market: OTC sales (US$bn), OTC sales (% of total sales), sales
broken down by product types (analgesics, skin treatments, vitamins and
minerals etc.)
Medical Devices: Medical device sales (US$bn), medical device sales (% of
total healthcare market)
Macroeconomic Forecasts: Nominal and real GDP, % real GDP growth, %
private consumption growth, % industrial output growth, % consumer price index,
% GDP price deflator, exports, imports, trade balance, current account balance,
foreign direct investment, exchange rate against US$, government expenditure,
external debt.
Competitive Landscape
The competitive landscape section provides relative company analyses and ranking
by US$ sales and % share of total sales - for the total pharmaceutical sector, as well
as the OTC, generics, and distribution sub-sectors.
The Textile Sector in India ranks next to Agriculture. Textile is one of India‘s oldest
industries and has a formidable presence in the national economy in as much as it
contributes to about 14 per cent of manufacturing value-addition, accounts for
around one-third of our gross export earnings and provides gainful employment to
millions of people. The textile industry occupies a unique place in our country. One
of the earliest to come into existence in India, it accounts for 14% of the total
Industrial production, contributes to nearly 30% of the total exports and is the
second largest employment generator after agriculture.
Textile Industry is providing one of the most basic needs of people and the holds
importance; maintaining sustained growth for improving quality of life. It has a
unique position as a self-reliant industry, from the production of raw materials to the
delivery of finished products, with substantial value-addition at each stage of
processing; it is a major contribution to the country's economy. This paper deals
with structure, growth and size of the Indian textile industry, role of textile industry in
economy, key advantages of the industry, textile industry export and global scenario
and strength, weakness, opportunities and treats of the Indian textile industry.
importance to cotton weaving. Textile is one of India‘s oldest industries and has a
formidable presence in the national economy inasmuch as it contributes to about 14
per cent of manufacturing value-addition, accounts for around one-third of our gross
export earnings and provides gainful employment to millions of people. They include
cotton and jute growers, artisans and weavers who are engaged in the organised as
well as decentralised and household sectors spread across the entire country.
Brief Introduction
Indian Textile Industry has earned a unique place in our country. It is among one
of the industries which were earliest to come into existence in India. It accounted
for 14% of the total Industrial production, contributes to nearly 30% of the total
exports and is the second largest employment generator after agriculture. This
industry provides one of the most basic needs of people and holds importance;
maintaining sustained growth for improving quality of life. It has an image of selfreliant industry, from the production of raw materials to the delivery of finished
products, with substantial value-addition at each stage of processing which forms
a major contribution to the country's economy. India textile industry is one of the
leading in the world. Currently the Indian Textile Industry is estimated to be
around US$ 52 billion and is also projected to be around US$ 115 billion by the
year 2012. The current Indian domestic market of textile is expected to be
increased to US$ 60 billion by 2012 from the current US$ 34.6 billion
Indian industry of Textiles can be divided into several segments, some of which
can be listed as below:
Cotton Textiles
Silk Textiles
Woollen Textiles
Readymade Garments
Hand-crafted Textiles
Jute and Coir
Today most of the international brands like Marks & Spencer, JC penny, Gap have
started procuring most of their fabrics from India. In fact, Wal-Mart, who had
procured textile worth $ 200 million last few year, intends to procure $ 3 billion
worth of textile in the years to follow.
Size of the industry
The Indian Textile Industry today has approximately 1200 medium to large scale
textile mills in India. 20%of these mills are located in Coimbatore (Tamilnadu).
The industry has 34 million cotton textile spindles for manufacturing cotton yarn
which account for 70 percent of India's textile exports. (China has 40 million cotton
spindles.)
Of the Indian textile yarn exports, almost 80 percent come from coarser yarns
(counts below 40's). Consequently, there is a need to upgrade the technology.
The domestic knitting industry is characterized by small scale units with facilities
for dyeing, processing and finishing. The industry is concentrated in Tirupur
(Tamilnadu) and Ludhiana (Punjab). Tirupur produces 60 percent of the country's
total knitwear exports.
Knitted garments account for almost 32 percent of all exported garments. The
major players include Nahar Spinning, Arun Processors and Jersey India.
Total contribution to the economy/ sales
Indian textile industry is one of largest Industries in Indian Economy. In 2000-01,
the textile and garment industries accounted for about 4% of GDP, 14%of
industrial output, 18% of industrial employment and 27% of export earnings. Indian
textile industry is significant in global context also, ranking second to China in the
production of both cotton yarn and fabric and fifth in the production of synthetic
fibers and yarns.
The Indian textile industry constitutes 14% to industrial production, 4% to the
country's gross domestic product (GDP) and 17% to the country's export earnings,
according to the Annual Report 2009-10 of the Ministry of Textiles.
Domestic and Export Share
According to the Indian Ministry of Textiles, the cumulative production of cloth
during April'09-March'10 has increased by 8.3 % when compared to the same
period of the previous year. The total Indian textile exports have increased to US$
18.6 billion during April'09-January'10, from US$ 17.7 billion during the same
period of the previous year, registering an increase of 4.95 % in rupee terms.
Gradually the share of textile exports in total exports has increased to 12.36%
during April'09-January'10, as per the Ministry of Textiles. During April-March
2009-10 textiles has registered a growth of 5.5% according to the Index of
Industrial Production the data released by the Central Statistical Organization
(CSO). Cotton, white wool, silk and man-made fibre textiles have registered a
growth of 8.2 % while textile products including apparel have earned a growth of
8.5%.
Top leading Companies
Some of the reputed names in the Textile companies in India are: Raymonds,
Arvind Mills, Reliance Textiles, Vardhaman Spinning, Welspun India, Morarjee
Mills, Century Textiles, Ginni Filaments Ltd, Mafatlal Textiles, S. Kumar Synfabs,
Bombay Dyeing Ltd, BSL Ltd, Banswara Syntex, Grasim Industries, Oswal Knit
India, Fabindia, Laksmi Mills, National Rayon Corp, Mysore Silk Factory and many
more.
Pollution
Indian Textile Industry comes under the category of 'Orange' which represents
marginally polluting units.
Latest developments
Indian Textile Industry covers 61 % of the international textile market and 22 % of
the global market
Indian Textile Industry is known to be the 3rd largest manufacturer of cotton
across the globe.
This industry of India claims to be the 2nd largest manufacturer as well as
provider of cotton yarn and textiles in the world
India holds around 25 % share in the cotton yarn industry across the globe
India Textile Industry contributes to around 12 %of the world's production of
cotton yarn and textiles
Size
of
the
Industry
scale textile mills in India
Geographical
distribution
Output
1200 medium to large
per
annum
TamilNadu,
AndhraPradesh, Punjab,
Karnataka, Maharashtra
16% per annum growth
rate and 1000 Million kg
per annum
Percentage in
7% share in the global
world market
market
Market
Capitalization
4% to the share of GDP
Current Facts on India Textile Industry
India retained its position as world‘s second highest cotton producer.
Acreage under cotton reduced about 1% during 2008-09.
The productivity of cotton which was growing up over the years has decreased in
2008-09.
Substantial increase of Minimum Support Prices (MSPs).
Cotton exports couldn't pick up owing to disparity in domestic and international
cotton prices.
Imports of cotton were limited to shortage in supply of Extra Long staple cottons
CURRENT POSSITION OF TEXTILE INDUSTRY IN INDIA
Textile constitutes the single largest industry in India. The segment of the industry
during the year 2000-01 has been positive. The production of cotton declined from
156 lakh bales in 1999-2000 to 1.40 lakh bales during 2000-01. Production of
man-made fibre increased from 835 million kgs in 1999-2000 to 904 million kgs
during the year 2000-01 registering a growth of 8.26%. The production of spun
yarn increased to 3160 million kgs during 2000-01 from 3046 million kgs during
1999-2000 registering a growth of 3.7%. The production of man-made filament
yarn registered a growth of 2.91% during the year 1999-2000 increasing from 894
million kgs to 920 million kgs. The production of fabric registered a growth of 2.7%
during the year 1999-2000 increasing from 39,208 million sq mtrs to 40,256 million
sq mtrs. The production of mill sector declined by 2.6% while production of
handloom, powerloom and hosiery sector increased by 2%, 2.7% and 5.1%
respectively. The exports of textiles and garments increased from Rs. 455048
million to Rs. 552424 million, registering a growth of 21%. Growth in the textile
industry in the year 2003-2004 was Rs. 1609 billion. And during 2004-05
production of fabrics touched a peak of 45,378 million squre meters. In the year
2005-06 up to November, production of fabrics registered a further growth of 9
percent over the corresponding period of the previous year.
With the growing awareness in the industry of its strengths and weakness and the
need for exploiting the opportunities and averting threats, the government has
initiated
many
policy
measures
as
follows.
The Technology Upgradation Fund Scheme (TUFS) was launched in April 99 to
provide easy access to capital for technological upgradation by various segments
of the Industry.
The Technology Mission on Cotton (TMC) was launched in February 2000 to
address issues relating to the core fibre of Cotton like low productivity,
contamination, obsolete ginning and pressing factories, lack of storage facilities
and
marketing
infrastructure
A New Long Term Textiles and Garments Export Entitlement (Quota) Policies
2000-2004 was announced for a period of five years with effect from 1.1.2000 to
31.12.2004
covering
the
remaining
period
of
the
quota
regime.
In the current year Budget 2006-2007 states the measures for Textile
Industry as follows
► Allocation to the Technology Upgradation Fund (TUF) enhanced from Rs4.4bn
to Rs 5.4bn.
► Provision for the interest subsidy on term loans to the handloom sector to be
increased from Rs2.0bn to Rs 2.4bn.
► Rs1.9 bn to be provided for the scheme for integrated Textiles Parks (launched
in October 2005 with the intention of creating 25 textile parks)
► Excise duty on all man-made fibre yarn and filament yarn to be reduced from
16% to 8%
► Import duty on all man-made fibers and yarns to be reduced from 15% to 10%.
FUTURE PROSPECTS:
The future outlook for the industry looks promising, rising income levels in both
urban and rural markets will ensure a rising market for the cotton fabrics
considered a basic need in the realm of new economic reforms (NER) proper
attention has been given to the development of the textiles industry in the Tenth
plan. Total outlay on the development of textile industry as envisaged in the tenth
plan is fixed at Rs.1980 crore. The production targets envisaged in the terminal
year of the Tenth plan are 45,500 million sq metres of cloth 4,150 million kg of
spun yarn and 1,450 million kg of manmade filament yarn. The per capita
availability of cloth would be 28.00 sq meters by 2006-2007 as compared to 23.19
sq meters in 2000-01 showing a growth of 3.19 percent. The export target of
textiles and apparel is placed at $32 billion by 2006-2007 and $50 billion by 2010.
NDIAN TEXTILE INDUSTRY STRUCTURE AND GROWTH
India‘s textile industry is one of the economy‘s largest. In 2000/01, the textile and
garment industries accounted for about 4 percent of GDP, 14 percent of industrial
output, 18 percent of industrial employment, and 27 percent of export earnings
(Hashim). India‘s textile industry is also significant in a global context, ranking
second to China in the production of both cotton yarn and fabric and fifth in the
production of synthetic fibers and yarns.
In contrast to other major textile-producing countries, mostly mostly small-scale,
nonintegrated spinning, weaving, cloth finishing, and apparel enterprises, many of
which use outdated technology, characterize India‘s textile sector. Some, mostly
larger, firms operate in the ―organized‖ sector where firms must comply with
numerous government labor and tax regulations. Most firms, however, operate in
the small-scale ―unorganized‖ sector where regulations are less stringent and more
easily evaded.
The unique structure of the Indian textile industry is due to the legacy of tax, labor,
and other regulatory policies that have favored small-scale, labor-intensive
enterprises, while discriminating against larger scale, more capital-intensive
operations. The structure is also due to the historical orientation towards meeting
the needs of India‘s predominately low income domestic consumers, rather than the
world market. Policy reforms, which began in the 1980s and continued into the
1990s, have led to significant gains in technical efficiency and international
competitiveness, particularly in the spinning sector. However, broad scope remains
for additional reforms that could enhance the efficiency and competitiveness of
India‘s weaving, fabric finishing, and apparel sectors.
Indonesia’s Textile Market
The global economic crisis hit Indonesia‘s apparel industry hard as demand from
traditional export markets significantly declined. The course of 2010 and 2011 has
seen a strong recovery from the sector with rising consumer purchasing power
resulting in increased opportunities for premium and greater added value products.
The crisis also provided Indonesia with a platform to reposition itself as an
alternative import source for key apparel markets such as the USA and Europe as
wages continue on an upward trend in China. In addition, the strengthening of the
Indonesian Rupiah against the US Dollar has served to bolster the recovery and
boosted industry performance.
Indonesia‘s garment and apparel sector is highly concentrated on the island of
Java, particularly that of West Java and the island of Batam which is a free trade
zone. The sector employs 1.3 million people as of 2011 making it one of the most
important elements of the country‘s manufacturing industry. Some 61% of
manufactured garments are exported to international markets as various leading
international apparel brands use Indonesia as a manufacturing base for their global
exports. Exports of textiles and garments rose by 19.7% yoy to $12.1 billion USD at
the end of 2011 (Ministry of Trade) with a target of $13-13.7 billion USD set for
2012. Despite the crisis, the USA remains Indonesia‘s largest market for garments
and textiles accounting for 36% of total exports followed by the EU with 16% and
Japan with 5%. The most popular export items from 2007-2011 were woven
clothing, underwear and knitted or crocheted clothing which together made up
nearly 60% of the total value of textile exports over the aforementioned period
(Source: ASEAN Quality Textiles and Garments). An interesting trend to note within
Indonesia‘s garment production has been the distinctive step towards increased
output in more value added items such as suits, jackets, dresses and trousers for
both men and women while more basic items such as shirts and vests have only
risen slightly or stagnated (Comtrade Statistics 2001-2008).
The textile and garment sector offers both challenges and opportunities as the
Indonesian government looks to the sector to be a major engine of growth to 2030
(See Challenges in Indonesia‘s FTG Industry). One of the sector‘s key strengths is
the rare presence of both an upstream and downstream industry; both of which are
well developed (See Overview of Fibre, Textiles & Garments). The vertical
integration as a result of this, from the raw materials to finishing creates highly
streamlined supply chains and a one stop solution for international buyers and
sourcers. Many of Indonesia‘s largest listed textile and garment manufacturers have
also been active in raising funds through the capital markets during 2011-2012 for
investment into new plants as well as for the acquisition of companies to
complement their upstream or downstream activities even further. In addition,
Indonesian textiles companies have been quick to align themselves with
international industry standards by making the necessary investments to achieve
certifications such as ISO 9001 as well as gain recognition for sustainable and
environmentally friendly business practices. This has enabled the market to attract
leading global fashion brands by assurances of quality, best practices and quick
response times.
Investment in Indonesia‘s textile and garment industry grew from 149.88 trillion RP
in 2010 to 151.77 trillion RP (16.54 billion USD) in 2011; investments mainly came
from local manufacturers as well as from the entrance of foreign players to the
Indonesian market. The number of textile companies also rose from 2,880 to 2,980,
a 3.5% increase (Indonesia Textile Association). The expansion of the sector and
the growth in investment signifies global confidence in the industry as numerous
textile
manufacturers have
come
to
select
Indonesia
as an
alternative
manufacturing and sourcing base to China. While still posing infrastructure and
logistics related challenges, Indonesia has proved itself to be a serious player within
the global textile and apparel industry. Efforts such as the government‘s program to
upgrade machinery coupled with the unique attributes that its labour force has to
offer being largely young, low cost and easily trained have not gone unnoticed by
international investors. Collectively in 2011, new training centres such as the
Indonesia German Textile Centre and the government‘s restructuring program have
created 61,000 new jobs, increased production capacity by 19%, boosted
productivity by 9% and increased energy efficiency by 22% (Indonesia Textiles
Association).
Labour strikes in the first quarter of 2012 which took place at industrial areas in the
Greater Jakarta area such as Tangerang and Bekasi as well as in Riau and Papua
raised alarm among investors. Industrial workers took to the streets and blockaded
toll road entrances causing lengthy traffic jams to bring the issue of the minimum
wage to the forefront of public attention. The matter was initially sparked by a
challenge from the Indonesia Employers Association (APINDO) to the decision to
raise the minimum wage in the West Java area by 20-30%. This issue highlighted
the need for restructuring of Indonesia‘s manpower laws that were last reformed in
2004 and which are often regarded as being too in favour of workers and unfriendly
to businesses. Yet, at the same time, such regulations are also seen as being
poorly enforced and thus offering little worker protection leading to ongoing disputes
and friction between employers and workers. The textile and garment industry as a
labour intensive industry was of course impacted by the labour unrest, however less
so than other industries as salaries in the sector rose by 13% in 2010 and again by
1.7% in 2011 (IFT). In addition, the strikes were mainly concentrated in the Greater
Jakarta area where living costs have risen considerably and manufacturing wages
in general have not kept pace with inflation. Many of the country‘s largest textile and
garment manufactures have already taken steps to hedge against the high
operational costs of Jakarta and established additional production centres in areas
such as Yogyakarta and the region of Central Java where workers unions are also
less active.
Having sustained the volatility in market demand as a result of the Asian Crisis in
1998 and the global financial crisis in 2008; Indonesia‘s garment and textile industry
has emerged as a more robust industry. The drop off in demand from traditional
export markets such as Europe saw the demise of weaker players in the sector that
had failed to reposition themselves in a changed economic landscape. Surviving
industry players boast international certifications, up to date technology at their
disposal and a highly competitive labour force in terms of cost and productivity. Key
issues continue to plague the sector such as weak infrastructure and unresolved
labour disputes which impact the manufacturing sector as a whole; yet the
industry‘s advantages of having both a developed upstream and downstream sector
compensate for this and illustrate the potential that the sector holds once the
government can fully tackle the infrastructure bottle necks and manpower
legislation.
INDONESIA PROFILE:
The archipelago of the republic of Indonesia — comprising 17,508 islands between
the Indian ocean and the pacific ocean, of which 6,000 are inhabited — has
experienced a number of transformative events within the last decade. the Asian
financial crisis of 1997-99, recent political shifts and the December 2004 tsunami —
which killed more than 100,000 people and caused more than us$4 billion in
damage — are among events that have left their mark on the republic and its textile
industry. with a strategy of restructuring, modernization and expansion to maximize
its competitiveness, Indonesia‘s textile industry is taking steps to ensure it can
weather the challenges of an ever-expanding global economy.
Industry Infrastructure
Indonesia‘s textile industry is vertically integrated and involved in almost every
sector of the textile supply chain — from the production of man-made fibers,
particularly polyester, nylon and rayon; man-made and cotton yarn spinning; and
weaving and knitting; to dyeing, printing and finishing; and apparel manufacturing.
According to the Indonesian Textile Association (API), based in the republic‘s
capital city of Jakarta, the textile and apparel sector consisted of 2,661 enterprises
in 2004. In that year, there were 28 companies in the man-made fiber subsector;
204 in spinning; 1,044 in weaving, knitting and finishing; and 861 in apparel
manufacturing. In 2005, a majority of those companies — 57 percent — were
located in the region of West Java, followed by Jakarta, 17 percent; Central Java,
14 percent; and East Java, 6 percent. Other regions with textile-related companies
were Bali, Sumatra and Yogyakarta.
As the largest employer in Indonesia‘s industrial and manufacturing sector, the
textile industry in 2005 employed 1.8 million workers in directly related large- and
small-scale operations and 3.7 million in indirectly related operations. Apparel
manufacturing — the fastest-growing segment, according to API — employed the
most workers, more than 353,000 in 2004; followed closely by the weaving, knitting
and finishing sector, with a total of nearly 344,000 workers. Textile industry workers
altogether comprised 1.9 percent of total employment in the republic.
According to the 2005 International Textile Machinery Shipment Statistics report of
the Switzerland-based International Textile Manufacturers Federation (ITMF), the
textile industry‘s installed spinning capacities in 2004 were 7.8 million short-staple
spindles, 103,000 long-staple spindles and 90,000 open-end rotors. When
comparing the republic to other industries in Asia and Oceania, Indonesia‘s shortstaple capacity in 2004 ranked fourth — behind mainland China, India and the
Philippines, in that order. The industry‘s long-staple and open-end capacities were
seventh and fifth, respectively.
In 2003 and 2004, the weaving segment‘s capacities numbered 29,000 shuttleless
looms, 197,000 shuttle looms and 34,000 filament weaving looms. In comparison to
other industries in Asia and Oceania, the republic‘s shuttleless capacity in 2004
ranked fourth — behind mainland China, Thailand and Taiwan, which ITMF
reported separately from mainland China — and the country‘s shuttle capacity
ranked third — behind China and Pakistan.
In the man-made fiber subsector, the Jakarta-based Indonesian Synthetic Fiber
Makers Association (APSyFI) reports total manufacturing capacities of 500,000 tons
for polyester staple fiber, 825,000 tons for polyester filament yarn and 30,000 tons
for nylon filament yarn. APSyFI represents 14 man-made fiber manufacturers in the
republic.
A majority of the goods produced along Indonesia‘s textile supply chain last year
were consumed domestically. API notes fiber production totaled 752,000 tons, with
559,621 tons and 192,379 tons going to domestic use and exports, respectively. Of
the 1.6 million tons of yarn produced in the spinning industry that year, 51 percent
was used domestically and 49 percent was exported. In the weaving and knitting
sector, 63 percent — or 591,451 tons — of goods produced was used domestically;
344,748 tons were exported. Finally, the apparel and other textile product segment
exported 63 percent of the 690,860 tons of goods it produced and found domestic
buyers for 273,238 tons of end-products. By far, most of the yarn and fabric
consumed in Indonesia was produced in the country.
Regarding industry imports, Indonesian spinners imported 98 percent of the cotton
they spun into yarn in 1995. The US International Trade Commission in its 2003
report, ―Textiles and Apparel: Assessment of the Competitiveness of Certain
Foreign Suppliers to the U.S. Market‖ notes that domestically produced cotton
accounted for less than 4 percent of the country‘s domestic consumption.
To be sure, Indonesia‘s textile industry continues to be economically relevant
domestically and globally. According to API, textile and apparel exports made up
$8.6 billion, or approximately 3 percent, of the republic‘s 2005 gross domestic
product, which totaled nearly $280 billion using the official exchange rate. That was
a 12.5-percent increase over 2004 and a 22.3-percent increase over 2003. Last
year, the industry had a trade surplus of $7 billion after importing goods worth $1.6
billion. Second only to the mining industry, the textile and apparel sector is one of
the largest net exporters in Indonesia.
Globally, Indonesia ranked 11th among leading textile exporters and captured 1.6
percent of total market share in 2004, according to API, which cited the World Trade
Organization (WTO). It also ranked ninth among top apparel exporters, with 1.7
percent of total market share. The republic also continues to be a leading textile and
apparel producer in the Association of Southeast Asian Nations (ASEAN) region.
The top four destinations for the industry‘s products in 2005 were the United States,
importing 36 percent of Indonesia‘s textile and apparel exports; the European Union
(EU), 16 percent; Japan, 5 percent; and the United Arab Emirates, 4 percent.
According to API, Indonesia‘s textile exports to the United States have increased
from $2.4 billion in 2003 to $3.1 billion in 2005. Furthermore, the republic is the
United States‘ fifth-largest textile and apparel supplier in value terms, the office of
the US Trade Representative reports. In the US Department of Commerce Office of
Textiles and Apparel‘s Sept. 8, 2006, Major Shippers Report, Indonesia accounted
for 3.93 percent in million dollars and 2.96 percent in million square-meter
equivalents of total textile and apparel imports into the United States.
The textile industry is expected to remain as a major contributor to Indonesia‘s
economy. One of the leading reasons is that Indonesia still has a comparative
advantage for labor-intensive industries and the sizable domestic market, given the
nation‘s 220 million population. The Indonesian Government is taking measures as
fellows:
*Limiting the importation to protect local textile producers. The Ministry of Industry
and Trade has issued a decree to limit textile imports in an effort to help the local
industry, which has been severely hurt by massive quantities of cheap imports.
Decree No. 732/2002, which was signed by minister Rini MS Soewandi in 2002,
stipulates that the importation of textile products can only be done by local textile
producers.
* The government has asked the textile industry to lessen the importation of textile
raw materials, particularly cotton. Indonesia government warned that if Indonesia
over depend on cotton, that cannot be produced in Indonesia, for the textile raw
materials, this will further lessen our competitive ability in the international
marketplace. As compensation, the government is trying to urge the industry to
make use of local raw materials, such as flax and pineapple fiber. In order to the
government has been conducting a project to process flax into flax fibers that are
ready to be twined into textile, which is in an effort to improve the use of flax fiber.
This project, firstly developed in Wonosobo, Central Java, in 2003, has started to
show progress. Indonesia is encouraging the marketing of this product into the
international market.
*Collect fund to help firms to update their machinery. Indonesia government is
expecting the domestic textile industry to buy new machines and equipments so
that it would be modernized and more efficient. Many companies could not replace
their aging machinery as they had been saddled with huge debts and poor cash
flows. Now the government is trying to collect fund to support the replacement
program.
small and medium enterprises, draw the interest of many countries, not only in the
ASEAN region but also in the Middle East,
Indonesian thus need the government to push designers to create Moslem clothes
that could
penetrate foreign markets, even though there is a huge demand in the domestic
market.
High fashion ladies garments: Indonesia has a differential advantage in high fashion
ladies
garments. The availability of a wide variety of fabrics, garments accessories,
fashion schools,regular fashion shows, fashion models competitions and a
substantial domestic market (young and middle age Indonesian men and women
wear western dresses) are important factors in growth of high fashion garments
industry in Indonesia. Other developing countries may not be able to compete with
Indonesia in high fashion garments under free market mechanism.
The Indonesian Ministry of Environment has been encouraging the textile industry
to become environment-friendly since 2000, Mr. Arif Wibowo, deputy head of
environment-friendly technology standardization in the Ministry of Environment, said
on the sidelines of a workshop on Textile Industry and Eco-labeling in Surakarta.
He said the lack of commitment from top executives is hindering the transition of
Indonesian textile industry into clean and green industry.
He said being environment-friendly would mean saving lot of water and energy by
the textile industry, and recycling the waste generated and reducing the greenhouse
effect.
Speaking at the event, Mr. Liliek Setiawan, the head of Indonesian Textile
Association (API)-Central Java said the high cost of investment is a major hurdle in
implementing environment-friendly technologies in the textile industry, in the midst
of dwindling profit margins.
He said the Chinese textile industry registered the highest growth in the world, but
the race to decrease production cost to the minimum has resulted in damage to
environment and pollution of water and air, which have reached alarming levels.
The Indonesian textile industry is also growing at high rate and it should consider
using green technologies to avoid a China-like scenario, Mr. Setiawan said.
However, the transition to environment-friendly production processes is not easy, he
said, and urged the Government to provide incentives to companies that implement
them
Political and Legal system
Automobile Sector in Indonesia
Indonesia's political system is a constitutional democracy. The current system
is the result of various constitutional amendments after the fall of the
authoritarian President Soeharto in 1998. The president is now elected in a
general election every five years. The legislature is made up of two bodies:
the House of Representatives and the Regional Representatives' Assembly,
mandated to deal with regional affairs.
The supreme constitutional body is the People's Consultative Assembly,
consisting of both the DPR and DPD sitting together. It sat frequently until
2004, but is now expected to sit only once during a presidential term unless
the nation is confronted by a major political crisis. President Soeharto's rule
from 1967-98 was marked by economic development, political stability and
close relations with the West. It was, however, marred by human rights
abuses, centralized authoritarian rule.
Current President Yudhoyono faces similar challenges to those that
confronted his predecessors in the post-Soeharto era. If the representatives of
the political parties in Cabinet gave the impression that they supported the
President‘s policy initiatives. Yudhoyono has limited options to deal with this
situation as he still needs support from these political parties to find the
compromises necessary to ensure he leaves behind a credible legacy when
his presidency ends in 2014.
Political trends evident in 2011 will recur in 2012. The Joint Secretariat will
remain an unreliable coalition. Golkar, PKS, and to some extent the United
Development Party (PPP), will continue to play hardball on several unresolved
issues, particularly the corruption scandals surrounding former PD treasurer
M. Nazaruddin and the Bank Century case. These political risks will be
exploited by the opposition Indonesian Democratic Party of Struggle and by
members of Yudhoyono‘s coalition when they find it expedient to engineer
political instability, thereby further compromising PD‘s image among the
electorate.
Debates on election law reform, particularly the minimum parliamentary
threshold (PT), will be a major point of contention. While the big political
parties PD, Golkar, PDIP want to raise the minimum threshold to four to five
percent, PKS, the National Mandate Party ,the National Awakening Party, PPP
and other smaller parties want to retain the minimum threshold at three
percent to make it easier for them to contest. PD‘s actions will determine
whether loyalists like PAN would be forced to disengage from the current
coalition.
In 2012, more aspirants may announce their candidacy for the 2014
presidential election. Thus far, only Golkar Chair Aburizal Bakrie and PAN
Chair Hatta Rajasa (the Coordinating Minister for the Economy and President
Yudhoyono‘s in-law) have accepted their party‘s nomination . Beyond the
national political stage, there are a few key political developments in 2012 that
merit attention. The first is election in Jakarta and Aceh. The former is
important because it involves the election of leaders of the nation‘s capital,
receives wide media coverage, and is a national barometer of other local
elections.
Controversy surrounding the Aceh election was already evident in 2011. There
was political tension between the Aceh Party (Partai Aceh) and incumbent
Governor Irwandi Yusuf over a Constitutional Court decision.The second issue
is the performance of newly-elected commissioners of the Corruption
Eradication Commission, under its new head, Abraham Samad, who was not a
popular choice. It is rumoured that the DPR or Parliament chose him to
weaken the Commission.
The third issue is the selection of the new commissioners for the General
Election Commission who are to take charge of the 2014 presidential and
legislative elections. These commissioners must improve on the 2014 election
given the controversies surrounding the election.
President Yudhoyono not won decisively in 2009, a national crisis would have
arisen over the widespread allegations of election fraud. Political interests of
the elite will play a crucial role in the selection process, which is likely to be
complicated and challenging.
A. The Constitution.
The legal basis of the Indonesian state is the 1945 Constitution was
promulgated the day after the 17 August 1945 proclamation of independence.
The Constitution was essentially a draft instrument hurriedly crafted by the
Independence Preparatory Committee in the last weeks before the Japanese
surrender. It is important to note that the Constitution was the product of a
unitary republic. The Constitution was amended four times in the period from
1999 to 2002
B. The Legislative.
The body that can be categorized as the legislature in Indonesia is the House
of Representatives. The most significant distinction between the DPR of the
2004-2009 period and the DPRs of former periods is the recruitment of its
members. At this moment all DPR members are people who have been
directly chosen by the voters. In previous periods, some DPR members were
appointed by the President and some of them were appointed by parties.
C. The Executive.
The executive body in Indonesia is the Office of the President. The President
and Vice President hold their respective term. In the event that the President
dies, resigns, is impeached, or is unable to perform presidential duties as
required by the Constitution, then the President will be replaced by the Vicepresident.
D. The Judiciary
The judiciary in Indonesia consists of the Supreme Courtland all courts under
its jurisdiction and the Constitutional Court. The courts under the Supreme
Court include the General Courts, the Military Court, the Religious Court, and
the State Administrative Court.
E. Division of Power
The ‗separation of power‘ doctrine is not applied in Indonesia in preference to
the division of ‗power doctrine
2 . LEGAL SYSTEM
A. Legislation and Subsidiary Legislation
Hans Kaleen‘s hierarchy of norm theory and Hans Nawiasky‘s hierarchy of
legal norm theory can be used to explain the system of legal norms in
Indonesia. Both theories suggest that the legal norm is always structured in
tiers and is hierarchical in nature,
B. Civil Legal System
The basis for all private law applicable in the European group, and former
colonies of the European Group, has been the Dutch Civil Code of 1848.
Subsequent amendments to the Dutch Code were also incorporated into the
Codes for Indonesia as well based on the principle of concordance
C. Criminal Legal System
The criminal law is one of three systems of law in operation in the nation since
the nineteenth century, the other two being a system of European-derived
commercial codes and a civil law based on customary law (adat), which
included Islamic law (“syaria”).
D. Constitutional Law
One definition of Constitutional Law widely used in Indonesia is that
constitutional law is a set of rules that regulate and govern the organization,
relationship, and interaction of the institutions of the State both vertically and
horizontally.
However, alternative definition often noted in Indonesia is that of Oppenheim
and Van Volenhoven that is constitutional law as the law of States in hiatus
mode. As an organization Indonesia is a Republic based on the sovereignty of
its people.
E. Islamic Law
Islamic law is often stated to be universal in nature. This is because in part the
law constitutes a basic tenet of the religion.Theoretically, Islamic law by its
very nature should be applied to Muslims wherever they may reside and
irrespective of an nationality they may hold.
3. JUDICIAL SYSTEM
A. Supreme Court.
The existence of the Indonesian Supreme Court cannot be separated from the
Court‘s history because its function, its authority, and its position have
changed from time to time throughout that history. The Daendels Governorship
saw many changes to the Indonesia system of justice as established by the
Dutch throughout their colonization occur. In 1798, Raad van Justitie became
the Hooge Read.
B. Constitutional Court
The mandate for the Constitutional Court came as anamendment to the
Constitution. The Constitution was amended 4times in successive years after
the fall of former President Soeharto, the Constitutional Court amendments
were part of the third series of amendment that were enacted on 9 November
2001. The basis of the Court is contained in Article 24(2) and 24C of the
Constitution.
C. Court System
1. Commercial Court
2. Tax Court
3. Labour Court
4. Children Court
5. Human Right Court
6. Military Court
7. Religious Court
8. State Administrative Court .
D. Civil Procedure
The Indonesian judicial system comprises several types of courts under the
supervision of the Supreme Court .
4. LEGAL PROFESSIONS AND EDUCATION.
A. Judge.
During the colonial era, Judge (Hakim) in the Hoogrechtsthof and Raad van
Justitie were officials (pegawai) completely separate of the government.
Meanwhile, the colonial government established special courts for the
indigenous/native population known as Landraad.
B. Prosecutor .
The task of prosecuting a criminal case through the General Court (pengadilan
umum) system is the responsibility of public attorneys, public prosecutors, and
prosecutors (Jaksa). All prosecutors and prosecuting activities are to be
administered by the Kejaksaan Republik Indonesia (Public Prosecution
Services of the Republic of Indonesia or PPS).
C. Lawyer and Advocate .
The Indonesian legal profession can trace its roots back to the Dutch colonial
era and the two types of lawyer that practiced in the jurisdiction; namely,
pokrol bambu (zaakwarnemer or native/indigenous lawyer) and advocaat en
procureurs or advocate.
D. Notary .
Notaries in civil law countries have at least three principal functions, namely;
drafting important legal instruments, authenticating and certifying documents
that will serve a particular evidentiary function, and they act as an office of
public record.
E. Legal Education.
Law and legal education has occurred as a matter of necessity throughout the
history of humanity and not always in a structured or regular format. In this
regard Indonesia is no different from any other country with respect to the
development of legal education and as such has and continues to encounter
many of the issues encountered by others.
.
5. ALTERNATIVE DISPUTE RESOLUTION.
A. Arbitration.
Arbitration has existed in Indonesia since the time of the Dutch colonial
government. The Dutch brought arbitration to Indonesia along with other
elements of their national legal system in an attempt to govern its new colony.
B. Mediation Conciliation.
In arbitration, the arbiter is appointed by the parties to decide and make
decisions about the dispute, and the result is potentially a win-lose solution.
Nevertheless, some parties still prefer arbitration to adjudication as the parties
still maintain some control of the process. Clearly, any control the parties have
during mediation, conciliation, or arbitration is lost in the court based litigation
process .
Foreign Direct Investment
Country is demonstrated by the experiences of many developing nations. The
economic histories of South Korea, Malaysia, Thailand, China, and many other
countries show that the presence of foreign companies will boost economic
growth and generate jobs. Now, foreign direct investment in Indonesia is rising
significantly and quickly becoming a favorite destination for business,
manufacturing, and natural resource extraction.
FDI realization in Indonesia jumped to a new record high of $ 587.41 million in
the third quarter of this year, surging 22 percent compared to a year earlier.
This data was release by the Investment Coordinating Board of Indonesia.
Furthermore, the data showed that Indonesia, which is Southeast Asia‘s
largest economy, managed to accumulate Rs.164.2 trillion in FDI in the first
nine months of 2012, keeping it on track to achieve its annual target of Rs.
206.8 trillion.
Foreign direct investment in Indonesia jumped 22% in the third quarter from a
year earlier to another record, bolstering growth in Southeast Asia's largest
economy even as a high-profile dispute dents the country's image with
overseas investors. Investment in the country's mines and factories, as well as
purchases of Indonesian companies, hit 56.6 trillion rupiah ($5.9 billion) in the
July-September period, breaking the previous quarter's record of 56.1 trillion
rupiah, the government's Investment Coordinating Board said Monday. The
board forecasts FDI will rise 26% this year to 206.8 trillion rupiah.
INFRASTRUCTURE
Indonesia recorded total FDI of 175.3 trillion rupiah in 2011, rising 18 percent
from a year earlier. FDI was 107.6 trillion rupiah in the first half of this year.
Some analysts however warned that foreign investment could taper off if the
government did not improve basic infrastructure.
"Investments in Indonesia are still rather low and FDI has room to grow if the
government invests more in basic infrastructure," said Royal Bank of Scotland
economist Enrico Tanuwidjaja in Singapore."The road density hasn't been
growing
that
much.
It's
the
same
for
rail,
ports
and
other
infrastructure."Indonesia receives persistently bad scores in Transparency
International's corruption index. Labour unrest is also a problem.
Legislative branch
People's Consultative Assembly is the upper house; It consists of members of
the DPR and DPD and has role in inaugurating and impeaching the president
and in amending the constitution but does not formulate national policy;
The history of Indonesia dates back to the pre-historical ages. The
archeological excavation and researches have given evidence of the perhistoric people called the Java Man.
This south East Asian country played a major role in the trade and business
which was carried out in Asia during this time. The trade accounts and trade
contracts of the different countries of Asia mentions the name of Indonesia.
This commercial mingling had also influenced the culture and tradition of
Indonesia significantly.
The medieval history of Indonesia is also very significant. It is during this
period Islam began to influence the Indonesian people.
Within two centuries almost the whole island was converted to Islamism. After
the Muslim invasion all the relics of Hinduism was destroyed from the face of
this country and Indonesia was transformed to one of largest Islamic nations of
the world. Indonesia became famous in the western world especially Europe
when the Portuguese traders got to know about exotic spices in the sixteenth
century. The Dutch East Indian Company began to cultivate sugarcane and
coffee in this country which is still now major crops of Indonesia.
During the Second World War the country went under the possession of
Japan. After the end of the war Indonesia became independent and was
declared the Republic of Indonesia
Indonesia, a vast polyglot nation, grew an estimated 6.1% and 6.4% in 2010 and 2011,
respectively. The government made economic advances under the first administration
of President YUDHOYONO (2004-09), introducing significant reforms in the financial
sector, including tax and customs reforms, the use of Treasury bills, and capital market
development and supervision. During the global financial crisis, Indonesia outperformed
its regional neighbors and joined China and India as the only G20 members posting
growth in 2009.
The government has promoted fiscally conservative policies, resulting in a debt-to-GDP
ratio of less than 25%, a fiscal deficit below 3%, and historically low rates of inflation.
Fitch and Moody's upgraded Indonesia's credit rating to investment grade in December
2011.
Indonesia
still
struggles
with
poverty
and
unemployment,
inadequate
infrastructure, corruption, a complex regulatory environment, and unequal resource
distribution among regions. The government in 2013 faces the ongoing challenge of
improving Indonesia's insufficient infrastructure to remove impediments to economic
growth, labor unrest over wages, and reducing its fuel subsidy program in the face of
high oil prices.
Indonesia’s Automotive Investment News Domestic demand and global investment
drive automotive industry in Indonesia as one of the fastest-growing markets in the
world.Since Indonesia regains investment grade status from Fitch Rating, the
investments of many sectors are growing fast. A number of automakers including
Toyota, Honda, Daihatsu, Mitsubishi, General Motors, Ford and Tata have raised their
investment in Indonesia.
Those companies have announced plans for the construction of new assembly plants
that would roll out new models aimed at tapping the fast-growing Indonesian middle
class. Auto sales in Indonesia are expected to reach 1 million in 2012, making it one of
the world's largest markets. The Indonesia government also approved to hit an eco-car
project (Low Cost and Green Car). Indonesia would become a full-scale production
base for hybrid-powered vehicle by 2020. Indonesia serves as an important production
base for ASEAN and attracts as much investment as Thailand. The Indonesian auto
industry, like its Thai counterpart, is a production base for Japanese auto-makers, which
makes up 86 per cent of the market.
Indonesia is also becoming a more interesting destination for investors thanks to
various factors, including government support. In 2010, Indonesia emerged as the
largest ASEAN market for the first time with sales of 850,000 vehicles, while auto sales
in Thailand, which was affected by the massive flood crisis, reached just 795,000.
Indonesian government designated itself as a major automobile manufacturing base for
the ASEAN region. It plans to produce 1 million vehicles per year by 2013 and 2 million
vehicles per year by 2020. Indonesia is presently the second-largest auto producer in
the region, with its 700,000-vehicle production in 2011 being less than half of Thailand's
1.6 million.
Among the factors supporting Indonesia is its 240 million of population, who make up as
much as 40 per cent of the total ASEAN population. This reflects the growth
opportunities of the country's auto industry, supported by the fast economic growth that
drives up demand. There's more demand than supply for automobiles in Indonesia,
especially for vehicles with engines below 2.5-litres as well as for light trucks 10 tonnes
and under.
Moreover, the Indonesian government has offered tremendous investment promotions,
both in terms of auto production and consumption to cater to increasing demand and to
also lower the number of imported vehicles. They include corporate tax exemption for 510 years (plus 50-per-cent reduction for another two years) that was introduced in
August last year. This privilege is for investments of at least $117 million, with investors
being required to hold 10-per-cent of the investment amount in the Indonesian Central
Bank.
That was followed by exemption of VAT and import duty for goods in the raw
material/intermediate material, which benefits imports of auto parts for local assembly.
The import duty for passenger cars and commercial vehicles ranges from 0-50 per cent,
whiles the import duty for auto parts are 10 per cent, which is waived for ASEAN
members. This would also benefit Indonesian investors who depend on raw materials
from other ASEAN countries. Indonesia also lowered income tax for investors who
produce eco-friendly (22km/liter fuel economy, 80 per cent local content and Euro 3
emission) and low-priced vehicles.
The Indonesian government recently confirmed plans to become the leader of ASEAN.
It announced an eco-car project would hit the road this year and that the country would
become a full-scale production base for hybrid-powered vehicles by 2020. Indonesia
takes the lead as the largest automotive market in the Association of Southeast Asian
Nations region, with 2011 sales growing 16.4% from like-2010 to 890,410 units, an
analyst reports. Expansion plans at the national automotive industry has been realized
in Q1/2012 to reach U.S. $ 2.42 billion, entirely carried out by Japanese investors. Here
are automobile manufacturers in Indonesia that began to realize the investment
expansion plan. Currently, the process has begun construction of the plant gradually.
Suzuki Motor With the expansion, the volume of car production capacity of Indonesia
surged 66.67% in stages from a position of 900,000 units per year to about 1.5 million
units per year by 2014. Suzuki Motor through PT. Indomobil Suzuki Motor will invest
U.S. $ 782.63 million (Rp 7.13 trillion) for new production capacity of 100,000 units per
year. With that addition, Suzuki's total installed capacity in Indonesia reached 200,000
units per year. Investment is planned to be used to increase engine production capacity
and increase the number of new models that include multipurpose passenger vehicle
(MPV). Toyota Motor PT. Toyota Motor Manufacturing Indonesia has a mandate to
realize the expansion of Toyota Motor with value U.S. $ 534.4 million (Rp 4, 81 trillion)
to increase the capacity of 120,000 units per year
Honda Motor PT. Honda Prospect Motor will complete the construction of a new plant
in Indonesia valued at Rp 3,1 trillion (about 27 billion yen / U.S $ 329 million) to expand
its capacity three-fold to 180 000 units per year. Mitsubishi Motors. PT. Krama Yudha
Tiga Berlian (Mitsubishi Motor) realize an investment of U.S. $ 27.8 million (Rp250
billion) to increase the capacity of 12,000 units to 162,000 units per year.
Daihatsu Motor PT. Astra Daihatsu Motor racing to held the capacity of expansion to
add 100,000 units to 430,000 units per year. The new plant is targeted to commercial
production fastest at the end of this year. "In October this year, the new plant expansion
completed and began full production in 2013. Additional new capacity we can use it for
anything good for the production of Xenia and Avanza, including for low cost and green
car [LCGC) Nissan Motor Nissan Ups Investment in Indonesia. Nissan CEO Carlos
Ghosn announced a ramp up of investment in Indonesia, adding $400 million to
increase production capacity and sales. This follows $313 million pledged last July, part
of plans to triple sales growth in the ASEAN region.
GM and BMW GM is preparing to invest US$150 million to re-open its assembly plant
for a 7-seater van after seven years. According to GM, the plant would produce 40,000
vehicles per year for both the domestic and export markets, and BMW recently started
local production of one of its luxury sedan models.
Overview Different economic sectors of Indonesia
The biggest economy of South East Asia, Indonesia smoothly escaped the brunt of the
2008 global recession. Its diverse industrial portfolio contributes the major share of the
country‘s gross domestic product; at 47.1%.Indonesia‘s industry sectors provide
employment to 18.6% of the total workforce of the country. Some of the major industries
of Indonesia include petroleum and natural gas, textiles, apparel, footwear, mining,
cement, chemical fertilizers, plywood, rubber, food and tourism. However, the lack of
development in the health industry and in transportation, along with corruption, is the
biggest obstacle to the country‘s economic growth.Indonesia Industry Sectors: Major
Sectors
The major industry sectors in Indonesia are as follows:
Agriculture: With 42.1% of the total labor force engaged in agriculture, Indonesia can
be rightly considered an agrarian economy. The sector contributed 14.4% to the
country‘s GDP in 2009. Indonesia‘s agricultural sector can be categorized into food
crops, non-food crops, horticulture, animal products, fish products and forest products.
In 2006, the country yielded food crops worth 213,529,700 million rupiahs, which was
35% more than the 2003 level. Rice and coffee remain the major producer of the
country, making it the world‘s fourth biggest producer of these products.
Mining: According to the statistics provided by the energy and mines ministry,
investment in the country‘s mining sector increased from US$1.2 billion in 2007 to
US$1.6 billion in 2008. The fall in commodity prices in 2009, due to the global economic
downturn, resulted in several major mining companies putting their investment plans on
hold. However, the mining industry is expected to reach US$123 billion by 2014, with
yearly growth of 10%-11% from 2010 onwards. Increase in international interest can be
seen in the Indonesian coal sector, after the significant number of deals that took place
in the last quarter of 2009.
Textile and Apparel: The textile and apparel manufacturing industry of Indonesia ranks
14th in the world. In 2008, the value added by textiles and clothing manufacturing
dropped to 1.2%. Industry was hard hit by the global recession of the late 2000s.
Around 155 textile production companies went bankrupt in 2009 due to an increase in
the cost of production and enormous inflow of cheap stuff from China.
Tourism: Tourism is among the biggest economy boosters in Indonesia. This is
apparent in the fact that 6.45 million visitors came to the country in 2009, despite of
hotel bombings in Jakarta. Tourism contributes 3% to the GDP of the country. The
tourism growth plan for 2010 aims at 7 million foreign tourists. However, this is much
lower than that of its tiny neighbor Singapore, which was visited by 9.5 million people in
2009.
Indonesia’s auto industry on overdrive 26 May, 2012.
Apart from Myanmar, the other Asians country that is being closely watched is
Indonesia, due to its stronger role in regional politics and economics, as well as
noticeable policy implementations. A number of auto-makers including Toyota, General
Motors, Ford and Tata have raised their investment in Indonesia. These companies
have announced plans for the construction of new assembly plants that would roll out
new models aimed at tapping the fast-growing Indonesian middle class.
Toyota, for example, announced that it would raise production to 230,000 units per year
in 2014 while GM is preparing to invest US$150 million to re-open its assembly plant for
a 7-seater van after seven years. According to GM, the plant would produce 40,000
vehicles per year for both the domestic and export markets.
Auto sales in Indonesia are expected to reach 1 million in 2012, making it one of the
world's largest markets. Meanwhile, its low vehicle ownership rate means there is much
room for growth. Indonesia, in any case, is one of the fastest-growing markets in the
world. The Indonesian government recently confirmed plans to become the leader of
Asean. It announced an eco-car project would hit the road this year and that the country
would become a full-scale production base for hybrid-powered vehicles by 2020.At the
same time, the nation's motorcycle market is the third largest in the world after China
and India. Honda and Yamaha are the market leaders in the market, which is expected
to reach saturation by 2015.
The motorcycle ownership ratio in Indonesia is 2 people for 1 motorcycle, very much on
the opposite scale as demand for automobiles grows amid the country's strong
economic expansion.
Indonesian auto sales up 10.6%
Indonesian Automobile Industry Association vice chairman Johnny Darmawan said
249,589 vehicles were sold during the first quarter in Indonesia, up 10.6 per cent
compared to the same period last year. He said that auto sales are expected to reach
960,000 vehicles this year, up from 870,000 in 2011. Growth is expected to continue
although the government plans to raise the minimum down payment.The new policies
launched by the Indonesian Central Bank require vehicle buyers, who apply for car
loans at commercial banks, to place a 30-per-cent down payment.
The Indonesian Finance Ministry also introduced a new regulation requiring finance
companies to ask for a 25-per-cent down payment. Most buyers in Indonesia purchase
vehicles through auto loans from finance companies."We will not adjust our forecast
although the Indonesian government is likely to raise fuel prices," Darmawan said,
adding that his association is confident auto sales will remain at 80,000 vehicles per
month on average.
Overviews of Business and Trade at International Level
BMI remains bullish on growth in Indonesia's auto sector. Despite the introduction of
new regulations regarding minimum down payments on vehicle purchases in June 2012
and a further tightening of legislation in September 2012 to include Shariah lending as
well, Indonesia's total vehicle sales for September 2012 came in at 102,111 units. They
were close to the record high of 102,512 units reached in July 2012. Should this strong
pace of growth be maintained, it would take total 2012 vehicle sales beyond BMI's
forecast for 9.8% growth.
Given that sales picked up in September 2012, the market has somewhat digested this
new legislation for vehicle sales and we are maintaining our full year forecasts. Sales for
the first nine months of 2012 were strong with total sales up 24% year-on-year (y-o-y) to
816,337 units. September's sales were 28% higher than September 2011. BMI currently
expects vehicle sales to grow by an average of 10% per year between 2012 and 2016.
Carmakers share this upbeat view. Japan's Mazda Motor has announced that Indonesia
will play a pivotal role in its plan to sell 1.7mn units worldwide by 2016. Mazda President
and CEO Takashi Yamanouchi said 'the country is increasingly becoming an important
market for our strategic viewpoint'. Mazda is employing four strategies to meet its global
goal, one of which is to increase its operations in South East Asia. As the region's
biggest passenger car sales market, Indonesia is a prime target for growth and the
company plans to triple its sales in the country by 2015. This will involve an increase
from the 9,054 units sold in 2011 to 30,000 units. In 2012, Mazda is aiming for 12,000
units, which would be a 30% increase on 2011.
India's Tata Motors announced in September that it would start selling vehicles in
Indonesia in 2013 through its local wholly owned subsidiary. Tata plans to start off with
only 10-15 dealerships. However, the company aims to expand operations to 60 fullservice dealerships, 100 workshops and 300 spare parts retailers in the space of just
three years. We also believe that Tata could potentially benefit from new laws currently
in place to promote research and development in the development of green and energy
efficient cars.
Present Trade Relations and Business Volume of different products with India
HYDERABAD, MAY 31:
The bilateral trade between India and Indonesia is poised for a major boost and
expected to top $45 billion by 2015 up from $20 billion in 2010, according to Lt. General
(R) Andhi M.Ghalib, Indonesian Ambassador to India. He said that opportunities abound
for cooperation as was demonstrated by the signing up of 33 memorandums of
understanding (MoU) for cooperation including business to business. Of this, 18 MoUs
have been linked by business entities. They entail a total investment commitment of
over $16 billion in Indonesia.
For Indonesia, China and India are two attractive investment partners. Already
companies like GVK group, have taken up the development of two airport projects in
Indonesia and Reliance Industries had committed investment of about $5 billion there,
he said. The cooperation in the automotive sector has grown significantly with several
Indian companies such as TVS Motors, Bajaj, Tata Motors and Minda Group either
setting up their bases or planning to set them up.
The Indonesian automotive companies are keen to take part in the Indian automotive
growth story. The trade agreement with Asean is also expected to boost automotive
business between the two countries. The availability of huge natural resources,
including thermal coal has attracted several Indian power companies. Already coal is
supplied to more than 1200 mw of generation capacity.India and Indonesia set up a joint
feasibility study of a Comprehensive Economic Cooperation Agreement (CECA)
between the two countries in 2007. The Joint Study Group has submitted its Report in
September, 2009.
Introduction of the automobile Company and its role in the economy of Indonesia.
I. Introduction
Automobile industry is a symbol of technical marvel by human kind. Being one of the
fastest growing sectors in the world its dynamic growth phases are explained by nature
of competition, product life cycle and consumer demand. Today, the global automobile
industry is concerned with consumer demands for styling, safety, and comfort; and with
labor relations and manufacturing efficiency. The industry is at the crossroads with
global mergers and relocation of production centers to emerging developing economies.
Due to its deep forward and backward linkages with several key segments of the
economy, the automobile industry is having a strong multiplier effect on the growth of a
country and hence is capable of being the driver of economic growth. It plays a major
catalytic role in developing transport sector in one hand and help industrial sector on the
other to grow faster and thereby generate a significant employment opportunities. Also
as many countries are opening the land border for trade and developing international
road links, the contribution of automobile sector in increasing exports and imports will be
significantly high.
As automobile industry is becoming more and more standardized, the level of
competition is increasing and production base of most of auto-giant companies are
being shifted from the developed countries to developing countries to take the
advantage of low cost of production. Thus, many developing countries are making
serious efforts to grab these opportunities which include many Asian countries such as
Thailand, China, India and Indonesia.
The rising competition and increasing global trade are the major factors in improving the
global distribution system and has forced many auto-giants such as General Motors,
Ford, Toyota, Honda, Volkswagen, and Daimler Chrysler, to shift their production bases
in different developing countries which help them operate efficiently in a globally
competitive marketplace.
During the second half of the 1990's, the globalization of the automotive industry has
greatly accelerated due to the construction of important overseas facilities and
establishment of mergers between giant multinational automobile manufacturers. Over
the years, it is being observed that Asia is emerging as a global automotive hub.
Exports of automobiles including components from Asia are also increasing by leaps
and bounds. Asia has become the major consumer as well as supplier of automobiles.
The Indonesian automotive industry is essentially an assembly industry, dominated by
the major Japanese car manufacturers is also coming up in post-liberalization period
and increasing its exports. Japan and Korea Rep already have developed automobile
industry. Hence, comparison with these two countries may not be worthwhile. Selected
four are developing countries and making an effort to develop the automobile sector
through different paths. The paper will compare the alternative strategies for the growth
of automobile industry in these selected countries.
Economic Role in Indonesia
Economic forces in Indonesia
Economic is the social science that deals with the production, distribution, and
consumption of goods and services and with the theory and management of economies
or economic systems (Economics, 2010). In Indonesia, the economic force which is
Gross National Income. Gross National Income is the value of all final good and
services produced within a nation in a given year.
The marketing in Indonesia may be affected by the number of people in the country,
growth rate, and the local cost of living. When the population in Indonesia is more, the
production needs to produce more quantity to satisfy their needs and wants. If the
growth rate in Indonesia is lower than the population that mean the standards of living is
rising. The purchasing of the power parity may also affect the marketing, when the
gross domestic product is adjusted, the value of production will increase and it will
cause the cost of living increase.
Indonesia‘s automakers are investing heavily in increasing and diversifying production
to keep pace with rising demand in what is now South-east Asia‘s largest vehicle
market.
Last year, Indonesia overtook Thailand to achieve the highest vehicle sales among
ASEAN member states. More than 894,000 units were sold, according to Jongkie
Sugiarto, the first deputy chairman of the Association of Indonesian Motor Vehicles
Industry (Gaikindo). The medium-term outlook for the industry is excellent – sales are
forecast to reach 1.2m units in 2016, according to IHS Automotive, an analysis and
consulting company focusing on the sector.
This gives a lot of scope for continued increases in sales, particularly given economic
growth, which topped 6% in 2011 and looks set to do so again in 2012. Rising average
income levels are creating a burgeoning middle class who aspire to car ownership, and
increasingly are able to achieve it, while the development of the industrial and mining
sectors is stimulating demand for commercial vehicles. Interest rates and inflation,
currently historically low and stable, are further strengthening the environment.
In September Japanese automaker Toyota, which with its affiliate Daihatsu has a
market share of around 65%, announced it would be investing $143m to boost its
manufacturing capacity in Indonesia by more than 60% to meet growing demand. The
construction of a new plant at Karawang will raise the company‘s output to 180,000
vehicles from the current level of 110,000, and is due to be completed by mid-2013.
Toyota is certainly not the only automaker looking to capitalise on the growth of the
Indonesian market and the country‘s competitive advantages as a manufacturing
centre. In early January, Japanese rival Suzuki announced it would be investing
$769.86m in capacity increases in Indonesia. Of this, some $513.42m will be allocated
to build a new engine plant, tripling the firm‘s production of engines in the country to
150,000 per year. The new factory, located east of Jakarta, should open in 2014.
The remaining $256.62m will be invested in existing car assembly lines to increase
annual output capacity to 120,000 per year, from around 80,000 at present, with the
view to raising production to 150,000 over the longer term if required. Though
Japanese-owned firms dominate the Indonesian market, accounting for around 90% of
vehicle sales, other international rivals are increasing their presence in the country, both
in manufacturing and sales.
BMW, meanwhile, announced last May that it is also set to double its production
capacity by investing some Rp100bn ($11.15m), as well as increase the number of
vehicle models it produces locally.
One of the most important factors in the development of a country‘s automotive industry
is a strong supply chain. Vehicle makers like to locate factories near component
suppliers where possible – which can be a chicken-and-egg issue for countries new to
automotive production, as component makers also prefer to be close to their customers.
Indonesia has reached the stage at which a positive multiplier seems to be developing,
with a substantial base of local suppliers making the country an even more attractive
place to manufacture, and thus complete-unit manufacturers are now expanding
production, stimulating the further growth of the components industry.
While the pace of vehicle sales growth is showing signs of slowing, this is to be
expected as penetration increases and the market matures. The uncertain global
economy and tighter regulation of vehicle loans means that growth may cool somewhat
in 2012. But Indonesia remains a huge market with an excellent long-term sales
outlook. Combined with the advantages of local production, Indonesia‘s automotive
sector is flourishing, and may be entering an exciting new era.
Development of Automotive Industry in Indonesia
The impact of the global financial crisis that struck in 2008 has affected the performance
of the country's automotive industry especially in 2009. Based on a report from the
Association of Indonesian Motor Vehicle Industries (Gaikindo) car production and sales
in 2009 dropped form the previous year. The production shrank to 464,815 units in 2009
from 600,628 units in 2008 or a decline of 22.6%.
Meanwhile, sales fell 19.9% from 603,774 units in 2008 to 483,548 units in 2009
although exceeding the target set by Gaikindo of 450,000 units. Sales in 2008 were the
highest in five years. The decline followed the falling value of the rupiah that resulted in
an increase in prices. The price hikes forced consumers to postpone plan to purchase
new cars.
In addition, high interest rate set by banks and financing firms as a result of the global
financial woes discouraged people from buying new cars. However, sales of some
major brands like Toyota, Daihatsu and Mitsubishi grew in 2009.
Meanwhile, exports also dropped contributing to the decline in total sales of cars in
2009. Exports of cars in completely built-up (CBU) form totaled 56,669 units in 2009 or
down 43.8% from 100,982 units in the previous year. Among the sole agents and car
makers succeeded in exporting cars are PT. Astra Daihatsu Motor (ADM). The
assembler for Daihatsu cars exported 31,450 units of cars in 2009. ADM's main export
products are Gran Max and Terios which were exported to Japan, South Africa and
Middle East.Car sales on the domestic market are dominated still by Multi Purpose
Vehicle (MPV). In this segment, Toyota's main products Avanza and Inova led in
market share putting competitors behind like Xenia of Daihatsu and APV of Suzuki.
In 2010, the car market began to revive to follow the world's economic trend which is
heading toward recovery. The country's auto industry, however, will face new challenge
in 2010 with the implementation of the Asean China Free Trade Area (ACFTA), which
became effect on 1 January 2010. It is feared that Chinese car makers would be more
aggressive in their penetration of the domestic market. A number of Chinese car makers
already have their agents importing cars from that country in completely knocked down
(CKD) form and built production facilities in the country.
Structure of Motor Vehicle Industry
Characteristics of Motor Vehicle Industry in Indonesia Motor vehicle industry began
to grow since the operation of brand holding sole agents (ATPM) early the 1970s‘ under
a decision of the industry minister No. 295/1982 and No. 428/1987. ATPMs were
licensed to assemble, produce and distribute their products in Indonesia. ATPM
operates as sole agents selling cars in the country and as car makers. In the beginning
the government of Indonesia hoped that ATPM would become the embryo for auto
industry through transfer of technology to produce cars with high local content.
However, after 30 years, there was no significant progress made toward developing the
assembling industry to manufacturing industry with high dependence on imports for
components. As a result the prices of cars remain high.
In 1999, the government's deregulation measure killed the idea of developing full
manufacturing industry in the automotive sector. The policy allowed import of cars in
CBU form. The role of ATPM became insignificant as non ATPM also were allowed to
import any brand of cars .
Foreign principals, therefore, decided to take over the production operations of their car
products allowing the ATPM only to serve as the distributors.
Toyota Motor Corp. took over the manufacturing division of PT. Toyota Astra Motor
(TAM) and made TAM as a distributor of Toyota cars in 2003. The manufacturing sector
is operated by PT. Toyota Manufacturing Indonesia (TMMIN), which is 95% owned by
Toyota Motor Corp. Meanwhile, Suzuki Motor Corporation took over control of the
manufacturing operation of PT Indomobil Suzuki International and increased its share
to 90%
from 40% earlier.
The remaining 10% is held by Indomobil Sukses
International. Distribution of its cars is handled by PT Indomobil Niaga International
Brand holding sole agents (ATPM)
Astra and Indomobil are two largest groups of automotive companies in Indonesia
cooperating with a number of foreign principals and serve as ATPM selling cars in
Indonesia. Astra is agent for Asian and European cars including Toyota, Daihatsu,
Isuzu, Nissan Diesel and Peugeot. Indomobil Group is sole agent for Suzuki, Volvo,
Audi, Nissan, Ssangyong, Mazda, Hino, Renault and VW Caravelle. There are also
other smaller ATPM to operate as agents for a number of brands like PT Garuda
Mataram Motor ATPM for Audi and VW Caravelle, PT Nasional Motor Company for
Mazda and Hino ; PT Daimler Chrysler Indonesia for Mercedes, Chrysler and Jeep,
and PT Grandauto Dinamika for Bentley, Daimler, Jaguar and Roll Royce.
Sales of VW Caravelle, product of Volkswagen, is handled by PT Garuda Mataram
Motor instead of PT Car & Cars Indonesia, which is the ATPM for Volkswagen in
Indonesia as it was already registered by PT Garuda Mataram Motor when it was first
imported to the country for use in the APEX summit in 1992. Currently PT Car & Cars
Indonesia is agent for only Volkswagen passenger cars/sedans.
Automotive products in Indonesia are divided into two categories passenger cars and
commercial cars. Passenger cars include sedans, MPV 4x2 and SUV 4x4 that consist
of a number of types by engine capacity.
Commercial cars include Bus, Pick Up/Truck and Dou Double Cabin 4x2/4x4 which
consist a number of types by gross vehicle weight.
Production Capacity
There are still a number of ATPMs operating both as a producer and distributor, but
other operate only as distributors as manufacturing divisions have been taken over by
principals such as in the case of PT Toyota Astra Motor (TAM). Now TAM operates only
as a distributor. Its manufacturing facility was already taken over in July 2003, by PT
Toyota Motor Manufacturing Indonesia (TMMIN), which is 95% owned by Toyota Motor
Corporation and 5% by PT Astra Internasional.
Suzuki Motor Corporation has also increased its control of PT Indomobil Suzuki
International as the ATPM for Suzuki in Indonesia. PT Indomobil Suzuki International
now operates only its manufacturing facility and sales or distribution is handled by PT
Indomobil Niaga International as a sole distributor.
A number of other ATPM have no assembling plant or manufacturing facility such as
PT Tjahja Sakti Motor as the agent for BMW cars, PT Astra France Motor agent for
Peugeot, PT Pantja Motor agent for Isuzu cars, etc. Assembling of their cars is handled
by other companies such as PT Gaya Motor, which is not an ATPM or other ATPM
such as in the case of Ssangyong, the assembling of which is handled by PT Nissan
Motor Indonesia. This belongs to the same group, the Indomobil Group.
Toyota Manufacturing Indonesia (TMMIN) has the largest production capacity among
the car makers in the country. It has an annual production capacity of 170,000 units per
year. Meanwhile, Mitsubishi car maker the Krama Judha Group , which earlier had the
second largest capacity with two assembling plants - PT Krama Yudha Ratu Motors for
commercial cars and PT Krama Yudha Kesuma Motors for passenger cars - stopped
the operation of PT Krama Yudha Kesuma Motors in 2005 resulting in cut in its
production capacity and a decline in its sales of passenger cars in Indonesia.