THE REPUBLIC OF INDONESIA · As the 16th largest economy in the world, Indonesia is heavily reliant on bilateral trade for economic growth. Trade contributed 39.54% to the GDP, with

CTHE REPUBLIC OF INDONESIA = COUNTRY PROFILE

THE REPUBLIC OF INDONESIA

THE SOUTHEAST ASIA COUNTRY SERIES

2018

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THE REPUBLIC OF INDONESIA

2018

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ACKNOWLEDGEMENTS

Team Leader: Samir S. Amir

Lead Researcher: Mohammad Talal Yahya

DISCLAIMER

The findings, interpretations and conclusions expressed do not necessarily reflect the views of the Board of Directors and Members of The Pakistan Business Council or the companies they represent. Any conclusions and analysis based on data from ITC, UN Comtrade, World Bank, Doing Business and CIA World Factbook are the responsibility of the author(s) and do not necessarily reflect the opinion of the UN, WTO, World Bank, or CIA. Although every effort has been made to cross-check and verify the authenticity of the data, The Pakistan Business Council, or the author(s), do not guarantee the data included in this work. All data and statistics used are correct as of December 1st, 2018, and may be subject to change.

For any queries or feedback regarding this report, please contact [email protected] or [email protected]

iv

THE PAKISTAN BUSINESS COUNCIL:AN OVERVIEW

The Pakistan Business Council (PBC) is a business policy advocacy platform, established in 2005 by 14 (now 78) of Pakistan’s largest private-sector businesses and conglomerates, including multinationals. PBC businesses cover nearly all sectors of the formal economy. It is a professionally-run organization headed by a full-time chief executive officer.

The PBC is a not-for-profit entity, registered under Section 42 of the Companies Ordinance 1984. Though it is not required under the law to do so, the PBC follows to the greatest extent possible, the Code of Corporate Governance as applicable to listed companies.

The PBC is a pan-industry advocacy group. It is not a trade body nor does it advocate for any specific business sector. Rather, its key advocacy thrust is on easing barriers to allow Pakistani businesses to compete in regional and global arenas. The PBC conducts research and holds conferences and seminars to facilitate the flow of relevant information to all stakeholders in order to help create an informed view on the major issues faced by Pakistan.

The PBC works closely with the relevant government departments, ministries, regulators and institutions, as well as other stakeholders including professional bodies, to develop consensus on major issues which impact the conduct of business in and from Pakistan. The PBC has submitted key position papers and recommendations to the government on legislation and other government policies affecting businesses. It also serves on various taskforces and committees of the Government of Pakistan as well as those of the State Bank, SECP and other regulators with the objective to provide policy assistance on new initiatives and reforms.

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THE PBC’S FOUNDING OBJECTIVES

The major objectives of the PBC as stated in its founding documents are:

• To provide for the formation and exchange of views on any question connected with the conduct of business in and from Pakistan.

• To conduct, organize, set up, administer and manage campaigns, surveys, focus groups, workshops, seminars and field works for carrying out research and raising awareness in regard to matters affecting businesses in Pakistan.

• To acquire, collect, compile, analyze, publish and provide statistics, data analysis and other information relating to businesses of any kind, nature or description and on opportunities for such businesses within and outside Pakistan.

• To promote and facilitate the integration of businesses in Pakistan into the World economy and to encourage in the development and growth of Pakistani multinationals.

• To interact with governments in the economic development of Pakistan and to facilitate, foster and further the economic, social and human resource development of Pakistan.

More information on the PBC, its members, and its workings, can be found on its website: www.pbc.org.pk

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THE PBC’S MEMBER COMPANIES

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viii

Executive Summary

The Republic of Indonesia (Indonesia) is the world’s largest archipelago with more than 17,000 islands, located between the Indian and Pacific Oceans. It shares borders with Malaysia, Singapore, East Timor, Papua New Guinea, Vietnam, the Philippines, and Australia. The total land area of Indonesia is 1.91 million km2, in addition it has an Exclusive Economic Zone (EEZ) of 6.01 million km2. The country is rich in natural resources including; petroleum products, tin, natural gas, nickel, timber, bauxite, copper, coal, gold, silver, and a fertile soil. It has a total population of 263.99 million, of which 40.24% are of Javanese ethnicity. About 87.20% of the population are Muslims who mostly speak Bahasa Indonesia, English and the Dutch language. Indonesia has a young workforce; around 42.40% of the people are in the age group of 25-55 years, while only 15.59% people are more than 55 years old.

Indonesians are descendants of Austronesian people who are thought to have migrated from Taiwan around 2000 BCE. Early kingdoms in the region fought over the spice trade, control of waterways and land routes. These kingdoms brought Hinduism and Buddhism along with Javanese art and culture, which is depicted in ancient temples, to the Indonesian islands. Java was famous for nutmeg, cloves and cubeb pepper; this attracted Muslim traders who dominated the European markets. Muslim traders introduced Islam in the region and by the 16th century, Islam was widely followed.

Portuguese were the first Europeans who arrived in Java in search of spices. Later, the Dutch Parliament granted a trading licence to the Dutch East India Company (VOC) to set-up trading posts across the Indonesian archipelago. In no time, VOC conquered the smaller kingdoms and established its rule. Following bankruptcy, the VOC was formally dissolved in 1800, and the government of Netherlands established a colony called the Dutch East Indies. During World War II, the Japanese invasion and occupation of the Dutch East Indies ended Dutch rule. This encouraged a previously suppressed Indonesian independence movement to rekindle. When the Japanese surrendered in August 1945, nationalist leader – Sukarno – declared independence and became president. However, the Netherlands, through the United Nations, tried to re-establish its rule which resulted in an armed and diplomatic struggle that ended in December 1949 when the Netherlands recognized Indonesian independence.

Indonesia was the most affected country by the Asian Financial Crisis of 1997-99. The Indonesian Rupiah (IDR) depreciated significantly against the US Dollar (USD) which caused Foreign Direct Investment (FDI) outflows, hyperinflation and high unemployment. However, strong macroeconomic policies attracted foreign investments that revived economic growth and helped Indonesia become a trillion-dollar economy. In 2017, the Indonesian economy grew by 5.07% to a GDP of USD 1,015.54 billion. It registered an annual inflation rate of 3.81% and unemployment of 4.18%. Currently, the services sector is the largest contributor to GDP – 47.49%, followed by industry – 39.37%, and agriculture – 13.14%. The Indonesian government, through its national plan ‘Making Industry 4.0’, is focusing on pushing the country to the top-10 economies of the world by 2030. The ‘Making Industry 4.0’ entails digital transformation in various industries to improve high technology exports.

ixTHE REPUBLIC OF INDONESIA = COUNTRY PROFILE

In 2017, manufacturing, services and the mining sector attracted investments worth USD 13.10 billion, USD 13.00 billion and USD 4.40 billion, respectively. Top foreign investors in 2017 included Singapore – USD 8.40 billion, followed by Japan – USD 5.00 billion, and China – USD 3.40 billion. Through interest rate tax cuts for exporters, energy tariff cuts for labour-intensive industries, tax incentives for investments in special economic zones and a reduction in tax rates on property acquired by local real estate investment trusts, the government has managed to improve the business environment by reducing risk.

As the 16th largest economy in the world, Indonesia is heavily reliant on bilateral trade for economic growth. Trade contributed 39.54% to the GDP, with total exports of USD 168.81 billion versus imports of USD 156.93 billion – resulting in a trade surplus of USD 11.89 billion in 2017. Indonesia’s top three export partners were China, the USA and Japan which accounted for 34.74% of total exports, whereas top three import partners were China, Singapore and Japan which shared 43.27% in total imports. Top exports included palm oil, coal, petroleum gas, crude petroleum and rubber, while top imports were refined petroleum, crude petroleum, telephone sets, and vehicle parts.

The table below shows economic indicators for Indonesia and Pakistan for the year 2017. Both the countries have the same GDP growth rate (around 5%), unemployment (4%), and inflation (4%). Although Pakistan and Indonesia belong to the lower-middle income countries, Pakistan’s economy, with a GDP of USD 304.95 billion, is one-third of Indonesia’s economy. An Indonesian citizen has a higher purchasing power with a GDP per capita of USD 3,846.86, whereas a Pakistani consumer has a GDP per capita of USD 1,547.85. Pakistan’s foreign direct investment net inflows of USD 2.82 billion were around 10.00% of Indonesia’s net inflows of USD 22.08 billion. In 2017, Indonesia had a trade surplus of USD 11.89 billion, while Pakistan’s deteriorating trade deficit stood at USD 35.56 billion. In 2016, Indonesia’s high technology products accounted for 5.79% of manufactured exports while Pakistan lagged behind with 1.91% high technology exports as a percentage of manufactured exports.

Economic Indicators (2017) Country

Indonesia Pakistan

GDP (Current USD Billion) 1,015.54 304.95

GDP per capita (Current USD) 3,846.86 1,547.85

GDP growth (Annual %) 5.07 5.70

Inflation (Annual %) 3.81 4.09

Unemployment (% of total labor force) 4.18 4.04

Exchange rate (LCU per USD) 13,380.87 123.19

Population (Million) 263.99 197.02

Foreign Direct Investment (Net inflows, USD Billion) 22.08 2.82

Trade Balance (USD Billion) 11.89 -35.56

High Technology Exports (% of manufactured exports); (2016) 5.79 1.91

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As a founding member of ASEAN, Indonesia benefits from the ASEAN Free Trade Area (FTA) through Common Preferential Tariffs with member countries. It also enjoys the benefits of ASEAN’s free trade agreements with Australia, China, Japan, New Zealand, India and the Republic of Korea. Also, it has preferential trade alliances with the Group of Eight Developing (G-8) Countries and the Organization of Islamic Conference (OIC).

The figure below shows Indonesia’s trade with Pakistan over the period 2013-17. Since 2013, Indonesia’s trade surplus with Pakistan has improved to a new high of USD 2,156.98 million in 2017. This was a result of a rise in exports of palm oil, areca nuts, motor vehicles and coal. Since 2013, exports grew by 69.42% to USD 2,398.09 million against imports of USD 241.11 million in 2017. Top imports from Pakistan included; broken rice, fresh or dried mandarins, iron and steel products, paper and paperboard products, cotton, and textile articles.

1,415.44

2,045.29 1,989.56 2,018.23

2,398.09

168.74 159.39 174.51 157.26 241.11

1,246.70

1,885.90 1,815.05 1,860.98

2,156.98

-

500

1,000

1,500

2,000

2,500

3,000

2013 2014 2015 2016 2017

USD

Mill

ion

Indonesia's exports to Pakistan

Indonesia's imports from Pakistan

Indonesia's trade balance withPakistan

Indonesia's Trade Overview with Pakistan

At HS-06 level, top-25 high potential exports to Indonesia from Pakistan, which are currently worth USD 69.81 million, had an additional potential of USD 1,533.25 million in 2017. The products with the most export potential for Pakistan include; ‘Instruments and appliances used in medical, surgical or veterinary sciences, n.e.s.’ – USD 321.35 million, ‘Broken rice’ – USD 113.85 million, ‘Waste and scrap, of copper’ – USD 78.40 million, ‘Medicaments for therapeutic or prophylactic purposes’ – USD 70.76 million, ‘Woven fabrics of cotton, containing >= 85% cotton by weight and weighing <= 200 g/m²’ – USD 64.18 million.

Moreover, Pakistan has the potential to export textile and textile articles (including cotton, t-shirts and woven fabrics) worth USD 251.12 million to Indonesia while it currently exports textile goods valued at USD 29.30 million.

For its top-25 high potential exports to Pakistan which were worth USD 1,650.77 million in 2017, Indonesia had an additional potential of USD 3,770.13 million. Most potential lies in ‘Palm oil and its fractions’, ‘Motor cars and other motor vehicles with spark-ignition internal combustion reciprocating piston engine of a cylinder capacity > 1,000 cm³ but <= 1,500 cm³ ’, ‘Motor cars and other motor vehicles with spark-ignition internal combustion reciprocating piston engine of a cylinder capacity > 1,500 cm³ but <= 3,000 cm³ ’, ‘Medicaments for therapeutic or prophylactic

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purposes’, and ‘Staple fibres of viscose rayon, not carded, combed or otherwise processed for spinning.’

Indonesia has the potential to export motor vehicles, and parts and accessories of motor vehicles worth USD 840.69 million and USD 321.23 million, respectively.

According to the World Bank’s Doing Business Index which measures the relative ease of starting and running a business by a local in a country, Indonesia ranked 73rd in 2019 in comparison with 72nd in 2018. Major improvements for the local businessmen were in ‘starting a business’, ‘getting electricity’, ‘registering property’, ‘getting credit’, ‘paying taxes’, and ‘resolving insolvency’. However, there was a decline in ‘protecting minority investors’, ‘dealing with construction permits’, and ‘trading across borders.’

xii

TABLE OF CONTENTS

• Section 1: Geographic and Social Landscape ................................................................. 01

• Country name .................................................................................................. 02

• Capital .............................................................................................................. 02

• Time zone ......................................................................................................... 02

• Central Bank .................................................................................................... 02

• Currency ........................................................................................................... 02

• Geographic coordinates ................................................................................... 02

• Location ........................................................................................................... 02

• Area .................................................................................................................. 03

• Land boundaries ............................................................................................... 03

• Natural resources ............................................................................................. 03

• Land use ........................................................................................................... 03

• Population ........................................................................................................ 03

• Age structure .................................................................................................... 03

• Birth rate .......................................................................................................... 04

• Death rate ......................................................................................................... 04

• Life expectancy at birth .................................................................................... 04

• Literacy ............................................................................................................ 04

• Ethnic groups ................................................................................................... 04

• Languages ........................................................................................................ 05

• Religions ........................................................................................................... 05

• Climate ............................................................................................................. 05

• Administrative Divisions .................................................................................... 05

• Communications .............................................................................................. 06

• Transportation .................................................................................................. 06

• Section 2: History of Indonesia ...................................................................................... 09

• Section 3: Economic Outlook ......................................................................................... 13

• Economic Overview .......................................................................................... 14

• Sectors of the Economy .................................................................................... 15

• Economic Indicators ......................................................................................... 17

• Natural Resources ............................................................................................ 22

• Exclusive Economic Zone (EEZ) ........................................................................ 23

• Belt and Road Initiative (BRI) ............................................................................. 23

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• Section 4: Trade ............................................................................................................. 25

• Major Export Partners ....................................................................................... 27

• Major Exports ................................................................................................... 28

• Major Import Partners ....................................................................................... 30

• Major Imports ................................................................................................... 31

• Trade Alliances ................................................................................................. 33

• Trade with China ............................................................................................... 37

• Trade with Japan .............................................................................................. 42

• Trade with the USA ........................................................................................... 47

• Trade with India ................................................................................................ 52

• Trade with Pakistan .......................................................................................... 57

• Pakistan’s Potential Trade with Indonesia .......................................................... 62

• Section 5: Recent Concessions by Indonesia to Pakistan .............................................. 67

• Section 6: Analysis of Major Industries ........................................................................... 71

• Palm Oil Industry ............................................................................................... 72

• Automotive Industry ......................................................................................... 76

• Section 7: Doing Business .............................................................................................. 81

• Ease of Doing Business ..................................................................................... 82

• Embassy ........................................................................................................... 83

• Consulate ......................................................................................................... 83

• Section 8: Sources ......................................................................................................... 85

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LIST OF TABLES

• Table 1: Economic Indicators ............................................................................................. 14

• Table 2: Indonesia’s Top-10 Export Partners ....................................................................... 27

• Table 3: Top-10 Exports at HS-02 Level (2013-17) ................................................................ 28

• Table 4: Top-25 Exports at HS-06 Level (2013-17) ................................................................ 29

• Table 5: Indonesia’s Top-10 Import Partners ....................................................................... 30

• Table 6: Top-10 Imports at HS-02 Level (2013-17) ................................................................ 31

• Table 7: Top-25 Imports at HS-06 Level (2013-17) ................................................................ 32

• Table 8: Indonesia’s Trade Alliances ................................................................................... 33

• Table 9: Top-5 Exports to ASEAN at HS-02 Level (2013-17) .................................................. 35

• Table 10: Top-5 Exports to ASEAN at HS-06 Level (2013-17)................................................. 35

• Table 11: Top-5 Imports from ASEAN at HS-02 Level (2013-17) ............................................. 36

• Table 12: Top-5 Imports from ASEAN at HS-06 Level (2013-17) ............................................ 36

• Table 13: Top-10 Exports to China at HS-02 Level (2013-17) ................................................. 38

• Table 14: Top-25 Exports to China at HS-06 Level (2013-17) ................................................. 39

• Table 15: Top-10 Imports from China at HS-02 Level (2013-17) ............................................. 40

• Table 16: Top-25 Imports from China at HS-06 Level (2013-17) ............................................. 41

• Table 17: Top-10 Exports to Japan at HS-02 Level (2013-17) ................................................. 43

• Table 18: Top-25 Exports to Japan at HS-06 Level (2013-17) ................................................ 44

• Table 19: Top-10 Imports from Japan at HS-02 Level (2013-17) ............................................ 45

• Table 20: Top-25 Imports from Japan at HS-06 Level (2013-17) ........................................... 46

• Table 21: Top-10 Exports to the USA at HS-02 Level (2013-17) .............................................. 48

• Table 22: Top-25 Exports to the USA at HS-06 Level (2013-17) ............................................ 49

• Table 23: Top-10 Imports by the USA at HS-02 Level (2013-17)............................................. 50

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• Table 24: Top-25 Imports from the USA at HS-06 Level (2013-17) ........................................ 51

• Table 25: Top-10 Exports to India at HS-02 Level (2013-17) .................................................. 53

• Table 26: Top-25 Exports to India at HS-06 Level (2013-17).................................................. 54

• Table 27: Top-10 Imports from India at HS-02 Level (2013-17) .............................................. 55

• Table 28: Top-25 Imports from India at HS-06 Level (2013-17) ............................................. 56

• Table 29: Top-10 Exports to Pakistan at HS-02 Level (2013-17) ............................................ 58

• Table 30: Top-25 Exports to Pakistan at HS-06 Level (2013-17) ........................................... 59

• Table 31: Top-10 Imports from Pakistan at HS-02 Level (2013-17) ........................................ 60

• Table 32: Top-25 Imports from Pakistan at HS-06 Level (2013-17) ....................................... 61

• Table 33: Top-25 High Potential Pakistani Exports to Indonesia at HS-06 Level .................. 63

• Table 34: Top-25 High Potential Indonesian Exports to Pakistan at HS-06 Level ................. 65

• Table 35: List of Products Granted Duty-Free Access to Pakistan (2018) ............................. 69

• Table 36: Top-5 Export Destinations for Indonesian Palm Oil and its Products (2013-17) ...... 73

• Table 37: Indonesian Palm Oil Exports at HS-06 Level (2013-17) ........................................... 73

• Table 38: Total Area Harvested in Indonesia by Different Estates (2016) .............................. 74

• Table 39: Pakistan’s Top Import Partners for RBD Palm Oil (2013-17) .................................... 75

• Table 40: Pakistan’s Top Import Partners Palm Olein (2013-17) ............................................ 75

• Table 41: Sales and Production of Completely Built Up (CBU) Units in Indonesia (2013-17) .... 77

• Table 42: Top-10 Export Destinations of Indonesian Vehicles and Auto Parts (2015-17) ........ 77

• Table 43: Indonesian Exports of CBU units and CKD Units (2013-17) .................................... 78

• Table 44: Growth Indicators of Automotive Industry in Pakistani and Indonesian Market ..... 78

• Table 45: Ease of Doing Business in Indonesia (2019) .......................................................... 82

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LIST OF FIGURES

• Figure 1: Flag of Indonesia .................................................................................................. 02

• Figure 2: Map of Indonesia ................................................................................................. 02

• Figure 3: Age and Gender Wise Population Statistics ......................................................... 04

• Figure 4: Administrative Divisions of Indonesia .................................................................. 05

• Figure 5: GDP Composition ................................................................................................ 15

• Figure 6: GDP (Current USD Billion) ..................................................................................... 17

• Figure 7: GDP per Capita (Current USD) .............................................................................. 17

• Figure 8: GDP Growth (Annual %) ........................................................................................ 18

• Figure 9: Inflation (Annual %) .............................................................................................. 18

• Figure 10: Exchange Rate (Local Currency Unit per USD) .................................................... 19

• Figure 11: Population Growth (Annual %) ............................................................................. 19

• Figure 12: Foreign Direct Investment (Net inflows, USD Billion) ........................................... 20

• Figure 13: Unemployment (% of total labour force) .............................................................. 21

• Figure 14: Exclusive Economic Zone (EEZ) of Indonesia ...................................................... 23

• Figure 15: Determination of Exclusive Economic Zone (EEZ)............................................... 23

• Figure 16: Indonesia's Trade Overview ................................................................................ 26

• Figure 17: Indonesia’s Export Partners (2013-2017) .............................................................. 27

• Figure 18: Indonesia’s Import Partners (2013-2017) .............................................................. 30

• Figure 19: Indonesia’s Trade Overview with ASEAN ............................................................. 34

• Figure 20: Indonesia’s Trade Overview with China ............................................................... 37

• Figure 21: Indonesia’s Trade Overview with Japan............................................................... 42

• Figure 22: Indonesia’s Trade Overview with the USA ........................................................... 47

• Figure 23: Indonesia’s Trade Overview with India ................................................................ 52

• Figure 24: Indonesia’s Trade Overview with Pakistan .......................................................... 57

• Figure 25: Top-3 Exporters of Palm Oil and its Products in the World (2013-17) .................... 72

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LIST OF ACRONYMS

FTA – Free Trade Agreement

USD – United States Dollar

IDR – Indonesian Rupiah

GDP – Gross Domestic Product

ASEAN – Association of Southeast Asian Nations

EEZ –Exclusive Economic Zone

n.e.s. – not elsewhere specified

HS-Code – Harmonized System Code

USA – United States of America

UK – United Kingdom

CKD – Completely Knocked Down

CBU – Completely Built Up

CPO – Crude Palm Oil

PKO – Palm Kernel Oil

RBD Oil – Refined, Bleached, Deodorized Oil

OEM – Original Equipment Manufacturers

MFN – Most Favoured Nation

01THE REPUBLIC OF INDONESIA = COUNTRY PROFILE

S E C T I O N 1

GEOGRAPHIC AND SOCIAL LANDSCAPE

02

Country name The Republic of Indonesia (Indonesia)

CapitalJakarta

Time zoneUTC+7

Central Bank Bank Indonesia

CurrencyIndonesian Rupiah

Geographic coordinates 5.000°S 120.000°E

Location

World’s largest archipelago, Indonesia is located in Southeast Asia between the Indian and Pacific Oceans. It shares land borders with Malaysia, East Timor and Papua New Guinea, while it has maritime borders with Malaysia, Vietnam, Singapore, the Philippines, Australia, and Palau.

Figure 2: Map of Indonesia

Figure 1: Flag of Indonesia


Area

Total: 1,904,569 km2

Land: 1,811,569 km2

Water: 93,000 km2

Land boundaries

Total: 2,958 kmMalaysia – 1,881 km, Papua New Guinea – 824 km, Timor Leste – 253 km

Coastline: 54,716 km

Natural resources

Indonesia has large reserves of petroleum, tin, natural gas, nickel, timber, bauxite, copper, coal, gold, and silver.

Land use

Agricultural land: 31.2%Arable land – 13%; permanent crops – 12.1%; permanent pasture – 6.1%

Forest: 51.7%Other: 17.1% (2011 est.)Irrigated land: 67,220 km2 (2012)

Population

Total population: 263.99 millionPopulation growth rate: 0.86% (2017 est.)

Age structure

0-14 years: 25.02% (Male - 33,205,805/Female - 31,994,844)15-24 years: 16.99% (Male - 22,537,842/Female - 21,738,210)25-54 years: 42.4% (Male - 56,493,414/Female - 53,980,979)55-64 years: 8.58% (Male - 10,192,430/Female - 12,177,931)65 years and over: 7.01% (Male - 7,954,795/Female - 10,304,489) (2017 est.)

04

33.21

22.54

56.49

10.19

7.95

31.99

21.74

53.98

12.18

10.30

- 10 20 30 40 50 60

0-14

15-24

25-54

55-64

65+

Million People

Age

bra

cket Female

Male

Age and Gender wise Population Statistics - 2017

Figure 3: Age and Gender Wise Population Statistics

Birth rate

Total: 16.2 births/1,000 population (2017 est.)

Death rate

Total: 6.5 deaths/1,000 population (2017 est.)

Life expectancy at birth

Total population: 73 yearsMale: 70.4 yearsFemale: 75.7 years (2017 est.)

Literacy

Population of age 15 and above who can read and write

Total population: 95.4%Male: 97.2%Female: 93.6% (2016 est.)

Ethnic groups

Javanese – 40.1%Sundanese – 15.5%Malay – 3.7%Chinese – 1.2%Others – 39.4% (2010 est.)


Languages

Bahasa Indonesia, English, Dutch

Religions

Muslim – 87.2%Protestant – 7.0%Roman Catholic – 2.9%Hindu – 1.7%Others – 1.3% (2010 est.)

Climate

With a hot and tropical climate, Indonesia is divided by the equator. On average, temperatures vary across coastal plains, inland and in the mountainous areas. Coastal plains have an average temperature of 28°C, while the inland and mountain areas have an average temperature of 26°C. The country has relatively high humidity – between 70% to 90%. It receives monsoons from the North and East in June through September, and from the Northwest from December to March. Also, minor change in the length of daylight hours during the seasons is most favourable for agriculture throughout the year.

Administrative Divisions

Indonesia is divided into 34 provinces with 5 special provinces which includes; Aceh, Yogyakarta, Papua, West Papua, and Jakarta. Eight provinces have been created since 1999 while the rest gained their statuses later. Each province is subdivided into regencies and cities which have their own local government. A new government is elected through general elections for a five-year period.

Figure 4: Administrative Divisions of Indonesia

06

Communications

Telephones - fixed lines:Total subscriptions: 11.17 millionSubscriptions per 100 inhabitants: 4 (2017 est.)

Telephones - mobile cellular: Total subscriptions: 458.92 millionSubscriptions per 100 inhabitants: 176 (2017 est.)

Internet users: Total subscribers: 65.53 millionPercent of population: 25.4% (July 2016 est.)

Transportation

Airports: 673 (2013)- with paved runways: 186- with unpaved runways: 487

Heliports: 76 (2013)

Railways: 8,159 km

Roadways: 496,607 km

- paved: 283,102 km- unpaved: 213,505 km (2011)

Waterways: 21,579 km (2011)

Major seaports: Banjarmasin, Belawan, Kotabaru, Krueg Geukueh, Palembang, Panjang, Sungai Pakning, Tanjung Perak, Tanjung Priok


S E C T I O N 2

HISTORY OF INDONESIA

10

Ancient Era

Life on the Indonesian archipelago dates back to 0.5 to 2 million years. The fossils discovered in 1891 point to the early life of “Java Man” – the oldest human ancestor. Austronesian people are thought to have arrived in Indonesia from Taiwan around 2000 BCE. They brought techniques of wet-field rice cultivation, ritual buffalo sacrifice, bronze casting, megalithic practises, and ikat weaving methods with them.

By 8th century BCE, early Indonesians had mastered wet-field rice cultivation which allowed villages, towns, and small kingdoms to flourish. This was supported by Java’s hot and even temperature, volcanic soil and abundant rainfall all of which is most suitable for rice plantation.

Early Kingdoms and the Spread of Islam

From 7th to 15th centuries CE, early kingdoms fought to gain control over regional trade. The Medang Empire, based in Central Java, was ruled by the Sailendra dynasty. Hinduism was largely practiced throughout the region. Between 8th and 9th century, most temples reflected Javanese art while Javanese culture grew rapidly during this period. Later, civil war broke out which divided the empire into two, based on region and religion – Shivaist dynasty of Medang kingdom in Java, and Buddhist dynasty of Srivijaya kingdom in Sumatra. In 1006, Srivijaya kingdom defeated Shivaist dynasty to seize control of east Java.

Kingdom of Srivijaya flourished on trade through the Strait of Malacca, it regulated the Spice Route Traffic. Under Srivijaya, Malay culture spread in the area – promoting Hinduism and Buddhism, which attracted pilgrims from the rest of Asia. The kingdom influenced its control on the coastal areas and remained unchallenged until regional attacks from the Chola Empire weakened the Srivijayan power. This divided the cities into regional kingdoms. Also, conflicts with Javanese kingdoms – Singhasari and Majapahit – further pushed the Srivijayan empire into decline.

In 1290, Singhasari defeated Srivijaya, its leader Kertanagara was killed by a rebel from Jayakatwang. By the 15th century, Majapahit lost power to Muslim leaders of the Sultanate of Malacca.

Indonesian archipelago was already famous for precious spices among Muslim traders. As trade links were established with Muslim sailors, Islam entered through northern Sumatra in the 13th century and was widely adopted in Java by the end of 16th century, whereas Bali still had a Hindu majority.

Colonial Rule

During the early 16th century, Muslim merchants had monopolized the spice trade in Europe. Spices were considered of great value; they were not only used in medicines, but were essential for food preservation. Europeans, including the Dutch, Portuguese, Spanish and the English ventured to dominate the spice trade in India and Indonesia. Portuguese were the first Europeans to arrive in Indonesia in search of nutmeg – the then most valuable commodity, along


with cloves and cubeb pepper. With expertise in navigation and weaponry, they conquered the Strait of Malacca where local authorities helped them set-up trading posts.

In 1602, the Dutch Parliament granted the Dutch East India Company (VOC) an exclusive licence for trade and colonial activities in Indonesia. The VOC successfully conquered the smaller kingdoms, extending their rule within the region. Alongside, it gained complete control of the spice trade in Indonesia. By 1660, VOC had defeated the Portuguese to capture Malacca. Through local rulers, they expelled the British and took over the pepper trade. After the VOC was dissolved in 1800 following bankruptcy, the Dutch state took over its possessions in 1816. The colonial rule established two legal classes; Europeans and the natives, while Foreign Easterners were added later. These classes had a social and racial caste system. Moreover, the state developed local infrastructure to promote trade.

Indonesian Independence

Beginning 1908, the Dutch rulers suppressed nationalist movements during and after World War I. These movements led to widespread arrests and riots. In World War II, the Japanese invaded the Dutch East Indies in March 1942. Japanese relied on support from future Indonesian President, Sukarno, and Vice President, Mohammad Hatta. During the Japanese occupation, areas deemed important for the Japanese war effort suffered from war crimes; Japanese especially targeted people of Dutch-Indonesian decent. In March 1945, Investigating Committee for Preparatory Work for Independence (BPUPK) was formed by the Japanese to layout a framework for independence.

On Japan’s surrender in 1945, Sukarno unilaterally announced Indonesian independence on 17th August 1945. In December 1946, the United Nations proclaimed “Netherlands Indies” as a colony for which the Netherlands had a legal governing authority. This resulted in an armed and diplomatic struggle against the Dutch which ended on 27th December 1949 when the Dutch formally recognized Indonesian independence amid rising international pressure. In 1950, Sukarno declared the Dutch East Indies as the independent Republic of Indonesia.

Sukarno pushed the country away from democracy and towards a dictatorship, but lost power in 1965 to a military led coup by General Suharto. General Suharto was formally appointed president in March 1968 with support of the US government. Under his rule, he encouraged foreign direct investment in Indonesia which resulted in substantial economic growth. However, the Asian Financial Crisis of 1997 led to his resignation in 1998. Currently, President Joko Widodo is the Head of State with Jusuf Kalla as Vice President. Next presidential elections in Indonesia are scheduled for April, 2019.

12


S E C T I O N 3

ECONOMIC OUTLOOK

14

Economic Overview

The largest economy in Southeast Asia with the world’s biggest Muslim population, Indonesia is rich in natural resources including; fish, natural gas, rubber, a fertile soil, warm waters, palm, and iron ores. It plays a significant role in regional stability and economic co-operation as a founding member of ASEAN.

The Financial Crisis of the 1990s severely affected the country. The Indonesian Rupiah tumbled to its lowest value – IDR 10,013.621 per USD. The economy contracted due to a decline in the manufacturing and services sector, resulting in massive unemployment and hyperinflation. However, strong macroeconomic policies to overcome the crisis attracted foreign investment which helped revive economic growth, leading to Indonesia becoming a trillion-dollar economy.

Indonesia is low-middle income country with a GDP of USD 1,015.54 billion in 2017. It has a GDP per capita of USD 3,846.86 with an annual GDP growth rate of 5.07% and an inflation rate of 3.81%. Currently, the services sector dominates over the industrial and agricultural sectors. Indonesian government, through its national plan ‘Making Industry 4.0’, is focusing on pushing the country to the top-10 economies of the world by 2030. Under this policy, the industrial sector will incorporate digital transformation in various industries to improve high technology exports.

The country has a population of 263.99 million people, with a young work force of 121.02 million.2 The Indonesian middle class makes up the majority of the population which earns an average minimum wage of IDR 2,142,855 per month. Around 10.60% of the total population lives below the poverty line. In 2018, Indonesia ranked 116th on the Human Development Index (HDI).3

The following table displays Indonesia’s economic indicators for the period 2013 to 2017.

Economic Indicator 2013 2014 2015 2016 2017

GDP (Current USD Billion) 912.52 890.81 860.85 932.26 1,015.54

GDP per capita (Current USD) 3,620.66 3,491.60 3,334.55 3,570.28 3,846.86

GDP growth (Annual %) 5.56 5.01 4.88 5.03 5.07

Inflation (Annual %) 6.41 6.39 6.36 3.53 3.81

Exchange rate (LCU per USD) 10,461.24 11,865.21 13,389.41 13,308.33 13,380.87

Population (Millions) 252.03 255.13 258.16 261.12 263.99

Foreign direct investment (Net inflows, USD Billion) 23.28 25.12 19.78 4.54 22.08

Trade Balance (USD Billion) -4.08 -2.14 7.67 8.84 11.89

Table 1: Economic Indicators

1 Source: World Bank2 Currently employed3 http://hdr.undp.org/en/2018-update


Sectors of the Economy

Indonesia has transformed itself from an agricultural country to a more developed, services-based economy. During the Asian Crisis 1997-99, the Indonesian economy underwent a major recession and suffered high levels of unemployment. This led the government to strengthen its financial sector, allowing it to be more resilient against future downturns. Due to prudent financial policies, Indonesia sailed smoothly through the global economic slump in 2008. With tax incentives, a low interest rate and low wages, foreign direct investment poured into the country which fuelled economic growth.

The Services sector is the largest contributor to the GDP – 47.49%, followed by industry – 39.37%, and agriculture – 13.14%. Since 1990, the services sector contribution in the GDP has increased by 8.42 percentage points while industrial sector’s share has remained constant. On the other hand, agricultural sector has declined by 6.75 percentage points in the same period.

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Figure 5: GDP Composition

Agricultural Sector

With a fertile soil, most suitable for growing tropical crops, Indonesia is a key producer of palm oil, rubber, cocoa, coffee, tea, cassava, rice, and tropical spices. Around 31.20% of total land area is dedicated to agriculture, out of which 13.00% is arable land while 12.10% is dedicated to permanent crops. Although agriculture sector’s contribution to the GDP has declined – from 21.55% in 1990 to 13.14% in 2017, it helped absorb the unemployed from the manufacturing and services sector during the financial crisis of 1997. Over time, employment in this sector has decreased due to low wages. Currently, the sector employs 29.68% of the total labour force – 36 million people; this includes 26 million farmers, 70% of whom are over the age of 45.4

4 https://www.indonesia-investments.com/culture/economy/general-economic-outline/agriculture/item378? https://en.wikipedia.org/wiki/Agriculture_in_Indonesia https://www.voanews.com/a/indonesia-food-sovereignty-remains-elusive/4649698.html

16

Industry & Manufacturing Sector

Industrial sector has been a driving force for the Indonesian economy. It employs 26.93 million people of which 17.01 million are working in the manufacturing sector, while another 1.39 million people serve in the mining sector. Mainly, this sector produces coal, footwear, oil, gold, textile products, paper products, automobiles, furniture and electronics. Its share in the GDP has remained nearly constant – 39.37% in 2017 versus 39.38% in 1990. Recently, the Indonesian government has imposed a ban on the mining of coal, gold and bauxite due to rising pollution levels, this has impacted the mining sector.

Manufacturing sector contributed 20.16% to the GDP in 2017 as compared to 19.89% in 1990. This sector now focuses on developing AI (Artificial Intelligence) industries to support economic growth and to generate employment in the country. Through technological advancements in artificial intelligence, human-machine interface, robot and sensor technology, and 3D printing under a new national plan called ‘Making Industry 4.0’, Indonesia is now aiming to be one of the top-10 economies in the world by 2030.5

Services Sector

The backbone of the Indonesian economy, the services sector employs most of the labour force. Around 58.17 million people work in this sector which is 48.06% of the total work force. Since the global economic crisis of 2008, this sector has been experiencing tremendous growth because of investment-friendly policies. The sub-sectors including: banking, insurance and finance, tourism, retail, food and beverages, media and entertainment, education, and health play a vital role.

According to the Travel and Tourism Competitiveness Report of 2017, Indonesia ranked as the 42nd top tourist destination out of 136 countries. In 2017, around 11.52 million people visited the country which generated USD 12.60 billion in international tourism receipts. Tourism industry contributed 7.51% in total exports for Indonesia versus 4.48% in 2012. The Central Bureau of Statistics (BPS) of Indonesia reported that around 1.97 million Chinese visited the country in 2017.

5 https://www.indonesia-investments.com/business/business-columns/widodo-launches-roadmap-for-industry-4.0-making-indonesia-4.0/item8711?

www.kemenperin.go.id/download/18384


Economic Indicators

GDP

Indonesia’s economy has expanded since 1990; it is now the largest economy of Southeast Asia. The financial crisis that hit the country in the late 1990s saw Indonesia’s GDP contracting by 13.13% to USD 95.45 billion in 1998. Soon after, the country recovered and was back on track. Since 1999, Indonesia’s GDP has grown by 625.39% to USD 1,015.54 billion in 2017.

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Figure 6: GDP (Current USD Billion)

GDP Per Capita

Indonesia has been successful in increasing its GDP per capita since the Asian monetary crisis in 1997. From USD 585.00 in 1990, GDP per capita grew to USD 3,846.86 in 2017. The country registered a GDP per capita of USD 2,254.45 during the global economic slump which depicted its economic stability.

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Figure 7: GDP per Capita (Current USD)

18

Economic Growth

Over the years, the Indonesian economy has slowed down – in comparison to a growth rate of 7.24% in 1990, it grew by only 5.07% in 2017. Major disruption in the economy occurred during the financial crisis (1997-99) when Indonesia witnessed a negative growth of 13.13%. After the crisis and general elections in 1999, the economy recovered with annual GDP growth of 0.79% in 1999.

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Figure 8: GDP Growth (Annual %)

Inflation

Indonesia was the most affected ASEAN country during the Asian Financial Crisis and from the El-Nino drought. Indonesian central government debt as a percentage of GDP grew from 23.92% in 1996 to 72.48% in 1997.6 Corporations and private investors had already lost confidence in the Indonesian Rupiah. As per the IMF bailout package conditions, the government ended food and fuel subsidies which further pushed up consumer prices, resulting in hyperinflation. The inflation rate jumped up from 6.23% in 1997 to 58.39% in 1998; however, with the president’s resignation and democratic elections in 1999, it normalized to 3.72% in 2000. In 2017, the country had an annual inflation rate of 3.81%.

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Figure 9: Inflation (Annual %)

6 Source: World Bank


Exchange Rate

Following the Asian Financial Crisis, the Indonesian Rupiah (IDR) significantly lost its value against the US dollar (USD). IDR was allowed to float in the open market. Consequently, the Rupiah fell; corporations who had borrowed money in USD, sold rupiah for USD to secure their investments. This further decreased IDR’s demand which depreciated by 244.18% - from IDR 2,909.38 per USD in 1997 to IDR 10,013.62 per USD in 1998. Since then, the IDR has dropped to IDR 13,380.87 per USD in 2017.

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Figure 10: Exchange Rate (Local Currency Unit per USD)

Population

Indonesia has a young working population. Out of 263.99 million people, about 42.40% are in the age bracket 25-54 years while only 15.59% of the total population is 55 years or above. The annual population growth rate has declined consistently; from 1.78% in 1990 to 1.10% in 2017.

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Figure 11: Population Growth (Annual %)

20

Foreign Direct Investment (FDI)

Between 1998 and 1999, depreciation of the Rupiah during the Asian Financial Crisis led to the loss of investor confidence which resulted in FDI outflows of USD 4.55 billion. Since then, FDI inflows into the country have followed an upward trend as investor confidence was restored after structural reforms brought political and economic stability. Inflows reached USD 25.12 billion in 2015, while low inflows in 2016 occurred due to imposition of tax on exchange of new, unused assets and because of Indonesian companies acquiring foreign-owned assets in Indonesia. As of 2017, FDI inflows stood at USD 22.08 billion.

According to the Indonesian Investment Coordinating Board (BKPM), top sectors that have attracted most of the investment in 2017 include; manufacturing (USD 13.1 billion), services (USD 13.0 billion), and the mining sector (USD 4.4 billion). In 2017, Singapore invested USD 8.4 billion in Indonesia, followed by Japan – USD 5.0 billion, and China – USD 3.4 billion. The government has improved the business environment by restructuring its investment policies (interest rate tax cuts for exporters, energy tariff cuts for labour-intensive industries, tax incentives for investment in special economic zones and reduction in tax rates on property acquired by local real estate investment trusts) all of which has reduced risk. However, the remaining obstacles for investors include; the prospect of rising interest rates, poor quality of infrastructure and high levels of corruption.7

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Figure 12: Foreign Direct Investment (Net inflows, USD Billion)

7 https://www.bkpm.go.id/images/uploads/file_siaran_pers/Paparan_Press_Release_TW_I_2018_-_EN.pdf


Unemployment

Overall, Indonesia has faced an increase in the unemployment rate in the period 1990 to 2017. In 2017, Indonesia had a total labour force of 127.11 million of which 4.28% remained unemployed.

According to Indonesia’s Bureau of Statistics, there were 289,632 registered job vacancies announced in 2017 which catered to 118,333 people. Average minimum wage per month in the year 2017 was IDR 2,142,855.

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Figure 13: Unemployment (% of total labour force)

22

Natural Resources

Mineral Resources

Indonesia is the world’s largest archipelago with 17,508 islands. These islands are magnificent in terms of bio-diversity and mineral resources. There are significant reserves of coal, tin, nickel, copper, gold, and bauxite in the country along with deep-water basins rich in crude petroleum and natural gas.

According to data from the Indonesian Central Bureau of Statistics (BPS), the country produced 42,698 tons of Tin ore, 419 million tons of Coal, 494,000 tons of Bauxite, 1.26 million tons of Nickle ore, 75,000 kg of Gold, and 2.69 million tons of Copper in 2016.

Oil

The largest oil producer in Southeast Asia, Indonesia has proven reserves of 3.3 billion barrels 8

of crude oil. With oil production of 773,572 barrels per day,9 it exported 768,000 barrels per day against imports of 907,900 barrels per day in 2016. However, to ease pressure on the Indonesian Rupiah by cutting oil imports, the government has ordered the oil producing companies to increase supply to the state-owned oil firm, Pertamina. 10

Indonesia’s oil sector is dominated by international oil companies including Chevron, BP, ConocoPhillips, ExxonMobil, and Total along with China’s state-owned companies like PetroChina and China National Offshore Oil Corporation (CNOOC). Twenty-two out of 60 basins across the country have been explored and exploited for oil. Chevron operates most of the important fields – Minas, Duri and Rokan – in Sumatra, while Exxon Mobil controls the Cepu field in Java.

Gas

Indonesia ranks as one of the top-10 producers of natural gas in the world with annual production of 86.94 billion m3. It has proven natural gas reserves of 2.87 trillion m3. Due to a huge number of islands, fuel transportation is difficult; hence, natural gas is supplied in liquefied form (LNG). Despite being a major producer of gas, Indonesia’s domestic demand for natural gas from industries remains unfulfilled. Recently, the Indonesian government has decided to cut gas exports and develop infrastructure to meet local demand.

Most prominent gas fields include the following:• Tangguh gas field in Bintuni Bay in West Papua Province, operated by BP (British

Petroleum)

• Arun gas field in Aceh, operated by ExxonMobil

• East Natuna gas field in Natuna Islands - South China Sea

• Banyu Urip gas field in the Cepu block in Bojonegoro Regency, East Java – controlled by Pertamina and ExxonMobil

• Abadi gas field in Masela block, the east of Timor Island, operated by Inpex and Shell

8 CIA Factbook9 Ministry of Energy and Natural Resources - Indonesia10 https://www.reuters.com/article/indonesia-oil/indonesias-pertamina-gets-extra-225000-bpd-crude-locally-as-govt-cuts-

imports-idUSL4N1V62KL


Exclusive Economic Zone (EEZ)

According to the United Nations Convention of the Law of the Sea, Indonesia has special rights for exploration and exploitation of marine resources in its Exclusive Economic Zone (EEZ) which is the area beyond the Indonesian Territorial Sea. The breadth of EEZ extends to 200 nautical miles.

The EEZ in the South-China Sea, around the Natuna Islands, has remained a disputed area between Indonesia and China.

Belt and Road Initiative (BRI)Belt and Road Initiative (BRI) is a network of roads, railways, oil pipelines, power grids, ports and infrastructure projects that focuses on linking China to 70 countries. Initiated in 2013 by the Chinese President, Xi Jinping, it focuses on building trade routes between China and Eurasian countries. The project is divided into a road and a sea network. Silk Road Economic Belt (SREB) is the land route which will connect China to Central Asia and then onwards to Europe. On the other hand, the Maritime Silk Road (MSR) joins China with Southeast Asia, Africa and Central Asia through a sea corridor.

China has invested heavily in Indonesian infrastructure projects under the BRI initiative. In April 2018, the two countries signed a USD 23 billion deal for five projects which includes two hydropower plants worth USD 20 billion, a USD 1.6 billion power plant in Bali, and a USD 1.2 billion steel smelter. In addition to this, China won the contract for Indonesia’s first high-speed railway project, a 140-km, USD 4.5 million railway line is being financed by Chinese banks. The project was due to be completed in 2019 but has been pushed to 2024 because of land clearance issues.11

Figure 14: Exclusive Economic Zone (EEZ) of Indonesia

Figure 15: Determination of Exclusive Economic Zone (EEZ)

11 https://www.scmp.com/week-asia/geopolitics/article/2169655/indonesia-review-chinas-belt-and-road-projects-if-prabowo

S E C T I O N 4

TRADE

26

Trade Overview

As the 16th largest economy of the world, Indonesia had a nominal GDP of 1.02 trillion in 2017. With trade as 39.54% of GDP, it exports palm oil, coal, petroleum gas, crude petroleum and rubber against imports of refined petroleum, crude petroleum, telephone sets, and vehicle parts (including planes, helicopters and spacecraft).

Its trade balance improved significantly during the period 2013-17; from a trade deficit of USD 4.08 billion in 2013, it clocked a trade surplus of USD 11.89 billion in 2017. This was a result of a 15.91% decrease in imports versus a fall of 7.53% in exports since 2013. A reduction in imports in 2016 can be attributed to a depreciation in the Indonesia Rupiah against the US dollar. In 2017, it exported goods worth USD 168.81 billion in comparison with imports of USD 156.93 billion.

182.55 176.04 150.37 144.49

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Indonesia's Trade Overview

Figure 16: Indonesia's Trade Overview


Major Export Partners

Indonesia’s top-10 export partners are displayed below. These contributed 70.77% in total exports. Top three export partners – China, the USA and Japan – accounted for 34.74% of total exports. Since 2013, exports to Japan, Singapore, Malaysia, Republic of Korea, and Taipei have reduced. On the contrary, exports to China, the USA, India, Philippines and Thailand have increased by 1.99%, 13.15%, 8.06%, 73.56% and 6.60%, respectively.

Top-10 Export Partners of IndonesiaAll values in USD Billion

2013 2014 2015 2016 2017

World 182.55 176.04 150.37 144.49 168.81

China 22.60 17.61 15.05 16.79 23.05

United States of America 15.74 16.56 16.27 16.17 17.81

Japan 27.09 23.13 18.02 16.10 17.79

India 13.03 12.25 11.73 10.09 14.08

Singapore 16.69 16.75 12.63 11.25 12.77

Malaysia 10.67 9.73 7.63 7.11 8.47

Korea, Republic of 11.42 10.61 7.66 7.01 8.19

Philippines 3.82 3.89 3.92 5.27 6.63

Thailand 6.06 5.78 5.51 5.39 6.46

Taipei, Chinese 5.86 6.43 5.04 3.65 4.22

Table 2: Indonesia’s Top-10 Export Partners

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Figure 17: Indonesia’s Export Partners (2013-2017)

28

Major Exports

At HS-02 level, top-10 Indonesian exports are shown in the table below. Mineral fuels, animal or vegetable fats and oils, and electrical machinery and equipment were the top three exports in 2017 with a value of USD 36.87 billion, USD 22.97 billion and USD 8.47 billion, respectively. From 2013 to 2017, exports of mineral fuels, electrical machinery and equipment, rubber, and machinery and mechanical appliances have fallen.

Top-10 products at HS-02 Level exported by IndonesiaAll values in USD Billion

2013 2014 2015 2016 2017

TOTAL All products 182.55 176.04 150.37 144.49 168.81

Code Product Description

27 Mineral fuels, mineral oils and products of their distillation

57.41 51.13 34.65 27.87 36.87

15 Animal or vegetable fats and oils and their cleavage products

19.22 21.06 18.66 18.23 22.97

85 Electrical machinery and equipment and parts thereof

10.44 9.75 8.56 8.15 8.47

40 Rubber and articles thereof 9.39 7.10 5.91 5.66 7.74

87 Vehicles other than railway or tramway rolling stock, and parts and accessories thereof

4.57 5.21 5.42 5.87 6.84

84 Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof

5.97 5.97 5.22 5.45 5.87

71 Natural or cultured pearls, precious or semi-precious stones

2.75 4.65 5.49 6.37 5.61

64 Footwear, gaiters and the like 3.86 4.11 4.51 4.64 4.91

62 Articles of apparel and clothing accessories, not knitted or crocheted

3.90 3.93 3.98 3.88 4.15

44 Wood and articles of wood; wood charcoal 3.63 4.07 4.01 3.86 4.00

Table 3: Top-10 Exports at HS-02 Level (2013-17)

Top-25 products exported by Indonesia at HS-06 level shown below contributed 49.88% to total exports. In 2017, top export was ‘palm oil and its fractions’ valued at USD 13.81 billion.

Top-25 products at HS-06 Level exported by IndonesiaAll values in USD Billion

2013 2014 2015 2016 2017



151190 Palm oil and its fractions, whether or not refined 10.86 13.26 11 11.06 13.81

270119 Coal, whether or not pulverised, non-agglomerated 10.44 9.29 7.5 6.53 10.48

270112 Bituminous coal, whether or not pulverised, non-agglomerated

12.31 9.4 7.22 6.37 7.38

271111 Natural gas, liquefied 12.93 11.7 7.36 5.15 6.19


All values in USD Billion

Code Product Description 2013 2014 2015 2016 2017

270900 Petroleum oils and oils obtained from bituminous minerals, crude

10.2 9.27 6.48 5.2 5.24

400122 Technically specified natural rubber “TSNR” 6.71 4.6 3.56 3.24 4.96

151110 Crude palm oil 4.98 4.21 4.39 3.31 4.7

260300 Copper ores and concentrates 3.01 1.68 3.28 3.48 3.44

271121 Natural gas in gaseous state 5.19 5.47 2.97 1.85 2.6

270210 Lignite, whether or not pulverised, non-agglomerated (excluding jet)

1.74 2.12 1.28 1.61 2.59

711319 Articles of jewellery and parts thereof 0.08 1.88 2.84 4.01 2.56

470329 Semi-bleached or bleached non-coniferous chemical wood pulp, soda or sulphate

1.84 1.72 1.73 1.56 2.29

710812 Gold, incl. gold plated with platinum, unwrought, for non-monetary purposes

1.56 1.02 0.83 1.19 1.84

151329 Palm kernel and babassu oil and their fractions 0.95 1.15 1.05 1.6 1.83

382319 Fatty acids, industrial, monocarboxylic; acid oils from refining

0.93 1.43 1.12 1.42 1.76

800110 Unwrought tin, not alloyed 1.96 1.57 1.15 1.12 1.57

030617 Frozen shrimps and prawns 1.18 1.53 1.19 1.26 1.4

640319 Sports footwear 1.37 1.21 1.16 1.06 1.34

720260 Ferro-nickel 0.23 0.29 0.33 0.57 1.33

401110 New pneumatic tyres, of rubber, of a kind used for motor cars

1.33 1.28 1.23 1.38 1.32

090111 Coffee (excluding roasted and decaffeinated) 1.17 1.03 1.19 1 1.18

870322

Motor cars and other motor vehicles with spark-ignition internal combustion reciprocating piston engine of a cylinder capacity > 1.000 cm³ but <= 1.500 cm³

0.7 0.97 1.17 1.13 1.15

441231 Plywood consisting solely of sheets of wood <= 6 mm thick

1.01 1.06 1.08 0.98 1.11

740311 Copper 0.52 0.76 0.55 0.78 1.08

844331Machines which perform two or more of the functions of printing, copying or facsimile transmission

1.09 1.13 1.02 1.03 1.06

Table 4: Top-25 Exports at HS-06 Level (2013-17)

30

Major Import Partners

The following table shows top-10 import partners of Indonesia; these accounted for 73.82% of total imports. Top three import partners – China, Singapore and Japan – shared 43.27% in total imports. Overall, imports have fallen from USD 186.63 billion in 2013 to USD 156.93 billion in 2017. Major decline was observed in imports from Singapore (-33.97%), Japan (-20.95%), Thailand (-13.27%), Malaysia (-33.93%), the USA (-10.24%), Republic of Korea (-29.94%), and Germany (-20.09%).

Top-10 Import Partners of IndonesiaAll values in USD Billion

2013 2014 2015 2016 2017

World 186.63 178.18 142.69 135.65 156.93

China 29.85 30.62 29.41 30.80 35.77

Singapore 25.58 25.19 18.02 14.55 16.89

Japan 19.28 17.01 13.26 12.98 15.24

Thailand 10.70 9.78 8.08 8.67 9.28

Malaysia 13.32 10.86 8.53 7.20 8.80

United States of America 9.08 8.19 7.62 7.32 8.15

Korea, Republic of 11.59 11.85 8.43 6.67 8.12

Australia 5.04 5.65 4.82 5.26 6.01

India 3.96 3.95 2.74 2.87 4.05

Germany 4.43 4.09 3.47 3.16 3.54

Table 5: Indonesia’s Top-10 Import Partners

29.85

35.77

25.58

16.89 19.28

15.24 10.70 9.28

-

5

10

15

20

25

30

35

40

2013 2014 2015 2016 2017

USD

Bill

ion

YearChina Singapore Japan

Thailand Malaysia United States of America

Korea, Republic of Australia India

Germany

Indonesia's Top Import Partners

Figure 18: Indonesia’s Import Partners (2013-2017)


Major Imports

Indonesia imports mineral fuels, machinery and mechanical appliances, and electrical machinery and equipment. From the top-10 imports at HS-02 level shown below, import of plastics and articles thereof has increased by 1.18% while the rest have fallen. These products contributed 64.78% in total imports.

Top-10 products at HS-02 Level imported by IndonesiaAll values in USD Billion

2013 2014 2015 2016 2017




45.54 43.95 25.05 19.25 25.44


27.29 25.83 22.38 21.07 21.77


18.2 17.23 15.52 15.43 17.93

72 Iron and steel 9.55 8.35 6.32 6.18 7.99

39 Plastics and articles thereof 7.64 7.79 6.83 7 7.73


7.91 6.25 5.34 5.3 6.69

29 Organic chemicals 7.01 7.08 5.72 4.79 5.9

10 Cereals 3.62 3.61 3.16 3.19 2.93

23 Residues and waste from the food industries; prepared animal fodder

3.04 3.27 2.73 2.48 2.65

73 Articles of iron or steel 4.75 4.29 3.72 2.93 2.63

Table 6: Top-10 Imports at HS-02 Level (2013-17)

32

The table below shows top-25 products at HS-06 level imported by Indonesia; these accounted for 30.87% of total imports, signifying a diverse import base. During the period 2013-17, imports of parts of telephone sets, wheat and meslin, raw cane sugar, gold, soya beans, copper, gear boxes, and polythene have increased.

Top-25 products at HS-06 Level imported by IndonesiaAll values in USD Billion

2013 2014 2015 2016 2017



271012 Light oils and preparations 16.39 16.43 9.17 6.77 9.27


13.59 13.07 8.06 6.73 7.06

271019 Medium oils and preparations 11.46 10.29 4.84 3.17 4.85

851770 Parts of telephone sets 1.44 0.73 1.45 2.87 3.51

100199 Wheat and meslin (excluding seed for sowing, and durum wheat)

2.36 2.35 2.04 2.32 2.64

170114 Raw cane sugar, in solid form 1.57 1.26 1.23 1.99 2.02

230400 Oilcake and other solid residues 1.93 2.19 1.81 1.57 1.64

271113 Butanes, liquefied (excluding of a purity of >= 95% of N-butane or isobutane)

1.68 1.61 1.07 0.91 1.43

520100 Cotton, neither carded nor combed 1.35 1.4 1.09 1.09 1.33

271112 Propane, liquefied 1.39 1.41 0.94 0.75 1.28

120190 Soya beans, whether or not broken (excluding seed for sowing)

1.1 1.18 1.03 0.96 1.15


0.02 0.02 0.7 0.83 1.03

852990 Parts suitable for use solely or principally with transmission and reception apparatus

1.05 1.09 0.84 0.74 0.98

847130 Data-processing machines 1.43 1.21 1.02 0.78 0.96

870899 Parts and accessories, for tractors, motor vehicles 1.08 0.88 0.87 0.81 0.87

390210 Polypropylene, in primary forms 0.94 1 0.74 0.76 0.86

310420 Potassium chloride for use as fertiliser 0.96 0.89 0.92 0.7 0.79

740311 Copper 0.67 0.77 0.73 0.62 0.77

870840 Gear boxes and parts thereof 0.55 0.52 0.41 0.55 0.72

854239 Electronic integrated circuits 1.1 1.1 0.96 0.99 0.72

290243 P-Xylene 1.09 1.17 0.76 0.42 0.69

842952 Self-propelled mechanical shovels, excavators and shovel loaders

0.5 0.42 0.21 0.27 0.67

290121 Ethylene 0.85 0.91 0.78 0.67 0.67

390110 Polyethylene 0.61 0.7 0.63 0.61 0.67

880330 Parts of aeroplanes or helicopters, n.e.s. (excluding those for gliders)

0.86 0.26 0.58 0.6 0.61

Table 7: Top-25 Imports at HS-06 Level (2013-17)


Trade Alliances

Through the Common Effective Preferential Tariff under ASEAN, Indonesia has duty-free access to ASEAN members and non-ASEAN countries including; Australia, China, Japan, New Zealand, India, and the Republic of Korea. Also, it has preferential trade alliances with the Organization of the Islamic Conference (OIC) and Group of Eight Developing (G-8) Countries.

The following table shows Indonesia’s trade alliances:

Free Trade Agreement (FTA) Status

ASEAN-Hong Kong, China Free Trade Agreement Signed but not yet In Effect

Indonesia-Chile Free Trade Agreement Signed but not yet In Effect

Trade Preferential System of the Organization of the Islamic Conference (OIC) Signed but not yet In Effect

ASEAN Free Trade Area Signed and In Effect

ASEAN - Australia and New Zealand Free Trade Agreement Signed and In Effect

ASEAN - India Comprehensive Economic Cooperation Agreement Signed and In Effect

ASEAN - Japan Comprehensive Economic Partnership Signed and In Effect

ASEAN - People’s Republic of China Comprehensive Economic Cooperation Agreement Signed and In Effect

ASEAN - Republic of Korea Comprehensive Economic Cooperation Agreement Signed and In Effect

Japan - Indonesia Economic Partnership Agreement Signed and In Effect

Pakistan - Indonesia Free Trade Agreement Signed and In Effect

Preferential Tariff Arrangement - Group of Eight Developing Countries Signed and In Effect

Table 8: Indonesia’s Trade Alliances

34

Regional Alliance

Association of South East Asian Nations (ASEAN)

The Association of the South East Asian Nations (ASEAN), headquartered in Jakarta - Indonesia, is a regional inter-governmental organization formed on 8th August 1967. It aims to promote political and economic cooperation, and regional stability between the current 10-member countries which include Malaysia, Thailand, Indonesia, Philippines, Singapore, Vietnam, Cambodia, Laos, Myanmar and Brunei.

As a founding member of ASEAN, Indonesia’s contribution to the Southeast Asian Zone of Peace, Freedom, and Neutrality (ZOPFAN) and the Southeast Asian Nuclear Free Zone (NFZ) have been enormous. Being a leading non-aligned power, Indonesia successfully reduced regional dependence on external military powers and helped integrate Vietnam, Cambodia, and Laos into Southeast Asia Nuclear-Weapon-Free Zone (SEANWFZ).

The figure below illustrates Indonesia’s trade with ASEAN. It has improved its trade balance with ASEAN – from a trade deficit of USD 13.40 billion in 2013, it achieved a trade surplus of USD 0.02 billion in 2017. This can be attributed to a drop in imports from USD 54.03 billion in 2013 to USD 39.30 billion in 2017.

40.63 39.70 33.58 33.20

39.32

54.03 50.90

38.91 34.82

39.30

-13.40 -11.21 -5.34 -1.61

0.02

-20

-10

0

10

20

30

40

50

60

2013 2014 2015 2016 2017

USD

Bill

ion

Indonesia's exports to ASEAN

Indonesia's imports from ASEAN

Indonesia's trade balance with ASEAN

Indonesia's Trade Overview with ASEAN

Figure 19: Indonesia’s Trade Overview with ASEAN


From top-5 exports to ASEAN are shown below, exports of mineral fuels, mineral oils and products ranked as the top export valued at USD 10.48 billion in 2017; this item alone accounted for 26.65% in total exports.

Top-5 Exports to ASEAN at HS-02 LevelAll values in USD Billion

2013 2014 2015 2016 2017



27 Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes

13.88 13.78 8.95 7.03 10.48


2.08 2.29 2.29 3.18 3.77


3.46 3.23 2.67 2.51 2.72

15Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal or vegetable waxes

1.8 2.18 2.25 2.09 2.49

71 Natural or cultured pearls, precious or semi-precious stones and articles thereof

0.66 1.03 1.77 2.17 2.41

Table 9: Top-5 Exports to ASEAN at HS-02 Level (2013-17)

Indonesia exports natural gas, coal, petroleum oils, bituminous coal, and gold to ASEAN countries. Export of natural gas has decreased from USD 5.19 billion in 2013 to USD 2.60 billion in 2017. Exports of coal and gold have increased by 88.41% and 313.89% to USD 2.28 billion and USD 1.49 billion in 2017, respectively.

Top-5 Exports to ASEAN at HS-06 LevelAll values in USD Billion

2013 2014 2015 2016 2017



271121 Natural gas in gaseous state 5.19 5.47 2.97 1.85 2.60

270119 Coal, whether or not pulverised, non-agglomerated (excluding anthracite and bituminous coal)

1.21 1.26 1.25 1.31 2.28


2.40 2.40 1.90 1.96 2.19


1.94 1.50 1.33 1.13 1.53


0.36 0.21 0.76 0.96 1.49

Table 10: Top-5 Exports to ASEAN at HS-06 Level (2013-17)

36

A major fall in imports from ASEAN countries (from USD 54.03 billion in 2013 to USD 39.30 billion in 2017) can be attributed to a decline in imports of mineral fuels. The top import – mineral fuel, which contributed 31.58% in total imports, decreased from USD 23.62 billion in 2013 to USD 12.41 billion in 2017.

Top-5 Imports from ASEAN at HS-02 LevelAll values in USD Billion

2013 2014 2015 2016 2017



27 Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes

23.62 21.03 12.83 9.63 12.41


4.40 4.53 4.09 4.13 4.42


5.37 5.21 4.02 3.92 3.76

39 Plastics and articles thereof 3.30 3.41 2.94 2.90 3.26


Table 11: Top-5 Imports from ASEAN at HS-02 Level (2013-17)

Light oils and preparations ranked as the top import from ASEAN at HS-06 level. Since 2013, the most promising import item was parts of telephone sets which climbed up from USD 0.09 billion in 2013 to USD 1.07 billion in 2017 – an increase of 1,088.89%.

Top-5 Imports from ASEAN at HS-06 LevelAll values in USD Billion

2013 2014 2015 2016 2017



271012 Light oils and preparations, of petroleum or bituminous minerals which >= 90% by volume

13.61 13.42 7.53 5.59 7.17


170114 Raw cane sugar, in solid form, not containing added flavouring or colouring matter

0.62 0.63 0.63 0.83 1.10

851770 Parts of telephone sets 0.09 0.08 0.69 1.10 1.07


1.49 1.45 1.81 1.22 0.99

Table 12: Top-5 Imports from ASEAN at HS-06 Level (2013-17)


Trade with China

After its independence in 1950, Indonesia was the first country in Southeast Asia to establish political relations with China. The two countries were in a close bond until the failed communist coup in 1965 resulted in suspension of all ties with the Chinese government. Indonesia believed that Communist China was partly responsible for the failed coup. However, diplomatic ties were restored in 1990 when top leaders from both countries signed an agreement to settle debt which improved bilateral relations.

In 2002, both countries signed ASEAN - China Free Trade Agreement (ACFTA). Since then, trade between them has increased. China is now the largest trade partner for Indonesia. Chinese investment in Indonesia has multiplied in various sectors including utility, transportation, industry, and tourism.

Trade Overview

Indonesia’s trade balance with China has deteriorated consistently – from negative USD 7.25 billion in 2013 it fell to negative USD 12.72 billion in 2017. This was due to a 19.83% rise in imports during 2013-17. In 2017, Indonesia exported goods worth USD 23.05 billion against imports of USD 35.77 billion. Indonesian exports to China include mineral fuels, iron and steel, and palm oil against imports of electrical machinery and equipment, mechanical appliances, and iron and steel.

22.60

17.61 15.05

16.79

23.05

29.85 30.62 29.41 30.80 35.77

-7.25 -13.02 -14.36 -14.01 -12.72

-20

-10

0

10

20

30

40

2013 2014 2015 2016 2017

USD

Bill

ion

Indonesia's exports to China

Indonesia's imports from China

Indonesia's trade balance with China

Indonesia's Trade Overview with China

Figure 20: Indonesia’s Trade Overview with China

38

At HS-02 level, Indonesian exports of palm oil, iron and steel, pulp of wood, footwear and chemical products to China have increased. From the top-10 items below, mineral fuels were the top export valued at USD 7,019.10 million in 2017 which shared 30.45% in total exports to China.

Top-10 products at HS-02 Level exported by Indonesia to ChinaAll values in USD Million

2013 2014 2015 2016 2017

TOTAL All products 22,601.49 17,605.94 15,046.43 16,785.59 23,049.30



8,252.44 5,879.99 4,505.70 5,401.00 7,019.10


2,482.85 2,697.77 2,937.89 2,738.15 3,258.85

72 Iron and steel 6.49 51.57 300.92 928.53 2,034.76

47 Pulp of wood or of other fibrous cellulosic material

1,098.22 1,087.43 1,087.10 969.16 1,710.11

40 Rubber and articles thereof 1,550.90 803.07 507.20 530.23 1,243.58

38 Miscellaneous chemical products 752.36 1,388.30 567.35 723.89 811.89


26 Ores, slag and ash 3,657.29 609.12 462.16 607.43 749.93


64 Footwear, gaiters and the like; parts of such articles

144.32 220.44 311.18 391.62 480.68

Table 13: Top-10 Exports to China at HS-02 Level (2013-17)

At HS-06 level, top-25 products below contributed 71.78% to total exports to China. Lignite coal was the most exported item, followed by palm oil in 2017.

Top-25 products at HS-06 Level exported by Indonesia to ChinaAll values in USD Million

2013 2014 2015 2016 2017




1,618.35 2,028.12 1,180.82 1,534.30 2,397.35

151190 Palm oil and its fractions 1,766.10 1,789.20 2,038.85 1,632.53 2,068.90

470329Semi-bleached or bleached non-coniferous chemical wood pulp, soda or sulphate

1,098.10 1,087.43 1,086.89 969.16 1,628.43

270119Coal, whether or not pulverised, non-agglomerated (excluding anthracite and bituminous coal)

2,517.29 1,202.42 918.19 933.73 1,555.14


2,754.69 1,495.20 619.53 1,158.33 1,156.15


All values in USD Million


720260 Ferro-nickel 2.32 41.54 183.79 426.90 1,132.42

271111 Natural gas, liquefied 457.35 818.17 1,089.12 836.65 998.76

400122 Technically specified natural rubber “TSNR”

1,278.80 664.41 393.28 387.34 740.90

151329 Palm kernel and babassu oil and their fractions

211.56 309.10 405.72 548.59 582.83


225.89 226.30 631.20 763.88 543.66


400280 Mixtures of natural rubber, balata, gutta-percha, guayule, chicle

0 0 26.24 63.37 407.67

721891 Semi-finished products of stainless steel 0 0 0 30.18 355.19

442199 Articles of wood, n.e.s. 0 0 0 0 348.42

151790 Edible mixtures or preparations of animal or vegetable fats or oils

177.86 248.40 190.74 228.93 313.02

382370 Fatty alcohols, industrial 98.24 127.05 115.61 198.12 261.78


244.47 335.32 198.61 281.70 258.80

281820 Aluminium oxide (excluding artificial corundum)

0.02 0.01 0.85 103.95 235.46

270750 Aromatic hydrocarbon mixtures of which >= 65% by volume

0 0 0 93.91 175.53

721914 Flat-rolled products of stainless steel, of a width of >= 600 mm

0 0 0 0 163.60

440922 Tropical wood 0 0 0 0 163.24

480255 Uncoated paper and paperboard 46.78 56.76 98.97 92.73 153.56

520512 Single cotton yarn, of uncombed fibres, containing >= 85% cotton

93.69 101.73 108.18 114.67 152.67

640319 Sports footwear 67.62 77.24 84.90 79.26 150.30

260400 Nickel ores and concentrates 1,447.42 82.21 0 0 149.97

Table 14: Top-25 Exports to China at HS-06 Level (2013-17)

40

Electrical machinery and equipment, and machinery and mechanical appliances shared 43.16% in total imports from China in 2017. Among the top-10 products below at HS-02 level, imports of articles of iron or steel have fallen while imports of rest of the items have increased since 2013.

Top-10 products at HS-02 Level imported by Indonesia from ChinaAll values in USD Million

2013 2014 2015 2016 2017




6,779.55 6,831.48 6,318.39 6,402.70 7,869.40


7,186.86 7,133.58 7,193.11 7,297.75 7,568.63

72 Iron and steel 1,415.63 1,809.47 1,984.11 2,099.25 1,969.59

39 Plastics and articles thereof 985.97 1,014.78 993.05 1,157.85 1,354.45

29 Organic chemicals 1,108.64 1,136.98 1,020.62 1,088.64 1,250.80

54 Man-made filaments; strip and the like of man-made textile materials

509.47 551.29 545.04 685.94 807.12

73 Articles of iron or steel 1,179.65 1,247.41 1,105.42 819.81 702.81

87Vehicles other than railway or tramway rolling stock, and parts and accessories thereof

611.25 526.25 460.35 517.91 674.38

28 Inorganic chemicals; organic or inorganic compounds of precious metals

563.23 582.92 536.83 554.21 627.53

07 Edible vegetables and certain roots and tubers

423.95 424.74 426.14 511.29 606.25

Table 15: Top-10 Imports from China at HS-02 Level (2013-17)

The following table shows top-25 imports from China at HS-06 level; these accounted for 24.10% of total imports. Parts of telephone sets ranked as top import with a value of USD 2,271.43 million in 2017.

Top-25 products at HS-06 Level imported by Indonesia from ChinaAll values in USD Million

2013 2014 2015 2016 2017



851770 Parts of telephone sets 675.92 299.66 622.28 1,560.43 2,271.43

847130 Data-processing machines, automatic, portable, weighing <= 10 kg

1,114.10 1,034.53 940.77 756.10 937.97

852990 Parts suitable for transmission and reception apparatus

647.58 625.57 489.17 474.90 695.25

070320 Garlic, fresh or chilled 360.66 348.57 342.33 433.79 575.62

851762Machines for the reception, conversion and transmission or regeneration of voice, images or other data

591.66 419.80 192.89 223.98 279.91




851712 Telephones for cellular networks “mobile telephones” or for other wireless networks

1,595.12 1,899.64 1,475.82 494.95 269.69

722790Bars and rods of alloy steel other than stainless, hot-rolled, in irregularly wound coils

307.43 311.51 213.35 252.87 269.56

080810 Fresh apples 121.87 135.21 93.74 176.48 243.18

240120 Tobacco, partly or wholly stemmed or stripped, otherwise unmanufactured

181.66 167.79 156.16 182.12 222.91

740311 Copper 27.47 91.02 29.38 80.90 219.12

722530 Flat-rolled products of alloy steel other than stainless, of a width of >= 600 mm

10.02 9.12 38.35 74.62 205.82

847330 Parts and accessories of automatic data-processing machines

55.20 67.50 97.93 231.86 205.21

871410 Parts and accessories of motorcycles, incl. mopeds, n.e.s.

178.65 181.02 143.95 147.09 198.97

844391 Parts and accessories of printing machinery

233.47 238.33 225.58 212.13 198.86

690721 Ceramic flags and paving, hearth or wall tiles

0 0 0 0 192.67

720449 Waste and scrap of iron or steel 0 0 0.22 0 185.63

080830 Fresh pears 100.53 67.42 77.52 84.94 181.91

540761Woven fabrics of yarn containing >= 85% by weight of non-textured polyester filaments

82.63 83.99 80.66 165.83 178.85

847982Mixing, kneading, crushing, grinding, screening, sifting, homogenising, emulsifying or stirring machines

23.29 28.16 115.25 157.27 178.19

310311 Superphosphates containing by weight => 35 % of diphosphorus pentaoxide “P2O5”

0 0 0 0 167.47

850440 Static converters 106.19 110.49 115.82 107.08 154.23

848180 Appliances for pipes, boiler shells, tanks, vats or the like

153.13 157.36 152.70 137.05 151.17

890190Vessels for the transport of goods, and vessels for transporting both goods and persons

311.56 180.32 112.76 157.16 149.12



41.56 19.12 34.49 40.00 143.20

Table 16: Top-25 Imports from China at HS-06 Level (2013-17)

42

Trade with Japan

Japan is major trading partner for Indonesia after China and the USA. Both share historical, political and economic ties. After Japanese occupation ended with the end of World War II, 3,000 Japanese soldiers chose to fight alongside Indonesians against the Dutch colonists in the Indonesian National Revolution. Right after the revolution, they initiated diplomatic dialogue on war reparations. Bilateral relations between the two countries were established in April 1958.

In the 1970s, Japanese manufacturers of electronics, and automobiles established their factories in Indonesia. As of now, more than 1,500 Japanese business entities are running their operations in the country and have created 4.7 million jobs. These generate 18.1 percent of the country’s total exports, and support 53.4 million working population in the informal sector.12

Moreover, both countries are members of the G-20 (Group of Twenty) and The Asia-Pacific Economic Cooperation (APEC).

Trade Overview

The figure below shows Indonesia’s trade with Japan. Indonesia currently has a trade surplus with Japan which declined from USD 7.80 billion in 2013 to USD 2.55 billion in 2017. This was majorly due to a decline of 34.33% in exports in the last five years – driven by low exports of mineral fuels. Indonesia exported goods to Japan worth USD 17.79 billion against imports of USD 15.24 billion in 2017.

27.09

23.13

18.02 16.10

17.79 19.28

17.01

13.26 12.98 15.24

7.80 6.12

4.76 3.12 2.55

-

5

10

15

20

25

30

2013 2014 2015 2016 2017

USD

Bill

ion

Indonesia's exports to Japan

Indonesia's imports from Japan

Indonesia's trade balance with Japan

Indonesia's Trade Overview with Japan

Figure 21: Indonesia’s Trade Overview with Japan

12 Source:http://www.thejakartapost.com/news/2017/10/13/japanese-investments-create-4-7m-jobs-in-indonesia-ambassador.html


The following table shows top-10 products at HS-02 level exported by Indonesia to Japan. Mineral fuels were the top export worth USD 5,600.84 million which accounted for 31.48% of total exports to Japan. Top three exports to Japan include, mineral fuels; electrical machinery and equipment; and ores, slag and ash.

Top-10 products at HS-02 Level exported by Indonesia to JapanAll values in USD Million

2013 2014 2015 2016 2017




14,240.71 11,159.58 6,960.50 4,879.56 5,600.84


1,310.27 1,270.60 1,145.11 1,131.10 1,323.40

26 Ores, slag and ash 1,017.39 434.56 1,068.17 1,300.38 1,003.63

40 Rubber and articles thereof 1,336.88 963.39 793.50 751.97 997.66

71 Natural or cultured pearls, precious or semi-precious stones

630.53 866.71 671.78 736.33 917.71



778.79 794.25 674.07 601.73 672.40

75 Nickel and articles thereof 928.59 1,041.43 795.46 586.83 633.04


475.68 477.50 479.67 488.54 537.52

03 Fish and crustaceans, molluscs and other aquatic invertebrates

641.52 564.89 476.88 473.49 517.70

Table 17: Top-10 Exports to Japan at HS-02 Level (2013-17)

Top-25 exports to Japan contributed 68.17% to total exports. Exports to Japan have declined during the period 2013-17 – from USD 27,086.26 million in 2013 to USD 17,790.81 million in 2017. This can be attributed to a drop in exports of liquefied natural gas and bituminous coal.

Top-25 products at HS-06 Level exported by Indonesia to JapanAll values in USD Million

2013 2014 2015 2016 2017



271111 Natural gas, liquefied 6,487.51 5,004.27 3,175.59 2,097.62 2,481.06


2,292.94 1,774.90 1,442.22 1,569.81 1,935.73

260300 Copper ores and concentrates 902.04 432.01 1,066.41 1,297.05 998.98

711299 Waste and scrap of silver 619.34 856.53 654.06 717.71 902.21


1,072.23 715.88 590.32 537.62 766.92

44



854430 Ignition wiring sets and other wiring sets for vehicles, aircraft or ships

429.72 423.87 443.29 533.61 676.71

750110 Nickel mattes 921.89 1,038.07 789.75 584.14 629.33


4,223.63 3,365.42 1,646.13 787.69 610.87


932.20 818.59 591.50 410.34 568.97


544.99 506.59 392.34 384.23 385.71



844331 Machines for printing, copying or facsimile transmission

313.01 334.37 255.17 224.69 228.72


870870 Road wheels and parts and accessories thereof, for tractors, motor vehicles

177.03 172.07 176.26 153.13 164.81

151190 Palm oil and its fractions 68.87 64.84 55.05 106.94 136.43

870322


136.59 127.34 114.46 114.23 134.28

441294 Laminated wood as blockboard, laminboard or battenboard

129.11 121.07 114.23 109.93 121.02

392321 Sacks and bags 111.21 124.52 112.86 105.61 109.88


137.65 124.67 92.95 102.12 105.93

940360 Wooden furniture (excluding for offices, kitchens and bedrooms, and seats)

125.12 115.80 95.11 97.48 97.05

640411 Sports footwear 25.72 35.35 53.52 79.26 83.01

090111 Coffee (excluding roasted and decaffeinated)

102.91 101.35 104.95 86.50 82.40

140490 Vegetable products n.e.s 8.15 8.54 20.44 35.56 79.40


20.12 44.88 33.36 57.81 76.37

Table 18: Top-25 Exports to Japan at HS-06 Level (2013-17)

Overall, imports from Japan have declined by 20.97% to USD 15,241.42 million in 2017. The table below shows top-10 imports from Japan at HS-02 level. Top three products include machinery


and mechanical appliances, vehicles, and electrical machinery and equipment worth USD 3,809.15 million, USD 2,218.32 million and USD 1,732.84 million, respectively.

Top-10 products at HS-02 Level imported by Indonesia from JapanAll values in USD Million

2013 2014 2015 2016 2017




5,736.21 5,179.83 3,674.23 3,352.44 3,809.15


2,199.20 1,811.25 1,679.63 1,612.19 2,218.32


1,843.20 1,674.51 1,393.91 1,528.32 1,732.84

72 Iron and steel 2,108.74 1,775.75 1,472.39 1,445.41 1,642.45


73 Articles of iron or steel 890.24 791.35 620.83 604.77 701.41


99 Commodities not elsewhere specified 1,326.64 944.07 342.63 322.42 534.82


90Optical, photographic, cinematographic, medical or surgical instruments and apparatus

426.34 410.19 351.59 371.26 383.05

Table 19: Top-10 Imports from Japan at HS-02 Level (2013-17)

Top-25 products below contributed 32.46% to total imports which shows that Indonesia has a diverse import base for imports from Japan. Top three imports from Japan at HS-06 level include; gear boxes, commodities, and motor cars and other motor vehicles valued at USD 547.46 million, USD 534.82 million and USD 340.37 million, respectively.

Top-25 products at HS-06 Level imported by Indonesia from JapanAll values in USD Million

2013 2014 2015 2016 2017



870840 Gear boxes and parts thereof, for tractors, motor vehicles

439.74 400.24 352.39 473.21 547.46

999999 Commodities not elsewhere specified 1,326.64 944.07 342.63 322.42 534.82

870323


477.29 340.39 410.88 262.05 340.37

870899 Parts and accessories, for tractors, motor vehicles

365.99 285.11 290.22 281.44 319.52

870410 Dumpers for off-highway use 101.19 106.63 61.72 9.42 238.58

46



844391 Parts and accessories of printing machinery

139.08 226.94 181.18 205.73 228.98

870850 Drive-axles with differential 180.13 128.65 120.79 129.65 196.81


79.24 82.67 51.11 63.57 185.98

740311 Copper 383.71 346.90 216.48 183.97 183.15

840999 Parts suitable for compression-ignition internal combustion piston

322.77 264.48 146.42 133.99 181.52


44.66 72.34 71.59 94.86 175.00

401180New pneumatic tyres, of rubber, of a kind used on construction, mining or industrial handling

0 0 0 0 169.27

853690 Electrical apparatus for switching electrical circuits

198.96 201.16 172.13 164.49 167.54

843149 Parts of machinery 216.87 160.45 105.67 108.51 166.35

840991 Parts suitable for spark-ignition internal combustion piston

351.66 301.86 174.85 140.33 160.37

841330 Fuel, lubricating or cooling medium pumps for internal combustion piston engine

108.05 156.93 106.91 106.63 149.82

720839 Flat-rolled products of iron or non-alloy steel, of a width of >= 600 mm

163.83 142.29 170.19 146.82 127.80

870829 Parts and accessories of bodies for tractors, motor vehicles

79.76 104.12 64.41 100.00 121.23

731815 Threaded screws and bolts, of iron or steel 129.15 114.46 92.84 111.28 114.96

844399 Parts and accessories of printers, copying machines and facsimile machines, n.e.s.

95.04 133.56 137.61 91.16 112.68


157.47 143.92 123.96 131.85 111.59


10.18 8.88 7.58 9.53 111.36


136.06 115.59 82.32 85.47 108.04

722830 Bars and rods of alloy steel other than stainless

115.25 106.25 84.60 90.22 100.29

848310 Transmission shafts, incl. cam shafts and crank shafts, and cranks

188.77 159.85 83.54 71.57 93.85

Table 20: Top-25 Imports from Japan at HS-06 Level (2013-17)


Trade with the USA

The USA was one of the first countries to establish diplomatic relations with Indonesia following its independence. In 2010, both the countries initiated a Comprehensive Partnership to improve democracy and civil society, education, security, climate, maritime, energy, and trade issues. Later, they formed the U.S - Indonesia Strategic Partnership, extending co-operation in regional and global issues.

Since 1950, the US government has aided Indonesia through its agencies including the Inter-Governmental Group on Indonesia, the Consultative Group on Indonesia, and U.S. Agency for International Development (USAID). USAID has assisted Indonesia in economic growth, health, water, food, and the environment.

Both countries are members of the United Nations, ASEAN Regional Forum, the East Asia Summit, Asia-Pacific Economic Cooperation (APEC), G-20 and World Trade Organization.13

Trade Overview

Over the last five years, Indonesia has seen a trade surplus with the USA. Trade between them has improved substantially, with exports rising from USD 15.74 billion in 2013 to USD 17.81 billion in 2017. On the other hand, imports from the USA decreased from USD 9.08 billion in 2013 to USD 8.15 billion in 2017.

15.74 16.56 16.27 16.17

17.81

9.08 8.19 7.62 7.32 8.15

6.66

8.37 8.65 8.85 9.66

-

2

4

6

8

10

12

14

16

18

20

2013 2014 2015 2016 2017

USD

Bill

ion

Indonesia's exports to the USA

Indonesia's imports from the USA

Indonesia's trade balance with the USA

Indonesia's Trade Overview with the USA

Figure 22: Indonesia’s Trade Overview with the USA

13 https://www.state.gov/r/pa/ei/bgn/2748.htm; https://en.wikipedia.org/wiki/Indonesia%E2%80%93United_States_relations

48

Indonesian exports to the USA include; articles of apparel, rubber, fish, footwear, animal or vegetable fats or oils, electrical machinery and equipment, mineral fuels, and furniture. Exports grew by 13.15% in the period 2013-17 to USD 17,810.36 million in 2017. From top-10 products at HS-02 level below, articles of apparel and clothing accessories – not knitted or crocheted – ranked as the top export worth USD 2,128.71 million.

Top-10 products at HS-02 Level exported by Indonesia to the USAAll values in USD Million

2013 2014 2015 2016 2017




1,914.20 1,863.81 1,985.92 1,934.10 2,128.71

61 Articles of apparel and clothing accessories, knitted or crocheted

1,907.09 1,847.05 1,716.37 1,679.77 1,996.89

40 Rubber and articles thereof 2,184.78 1,691.70 1,653.59 1,637.41 1,836.84


925.23 1,306.26 994.85 1,143.66 1,405.58

64 Footwear, gaiters and the like; parts of such articles

1,032.80 1,120.64 1,267.28 1,296.99 1,333.66


463.91 635.24 641.69 962.16 1,246.38


1,183.32 1,292.17 1,231.19 1,230.58 1,021.64


683.64 752.96 977.59 484.15 692.84

94 Furniture 653.02 655.36 675.76 623.84 687.25


614.57 682.32 636.43 602.53 674.29

Table 21: Top-10 Exports to the USA at HS-02 Level (2013-17)

Top-25 exports at HS-06 level below make up 49.35% of total exports to the USA. Technically specified natural rubber ‘TSNR’ was the most exported item to the USA valued at USD 980.64 million.

Top-25 products at HS-06 Level exported by Indonesia to the USAAll values in USD Million

2013 2014 2015 2016 2017




1,540.28 1,060.93 861.34 729.25 980.64



474.52 453.00 607.11 728.33 628.14





544.81 637.24 931.98 454.97 622.28

151190Palm oil and its fractions, whether or not refined (excluding chemically modified and crude)

297.44 300.99 332.75 458.32 584.97

844331 Machines for printing, copying or facsimile transmission

341.69 396.88 387.06 379.21 420.83

640319 Sports footwear 435.88 375.42 348.19 301.76 381.84

611020Jerseys, pullovers, cardigans, waistcoats and similar articles, of cotton, knitted or crocheted

394.19 333.26 243.67 260.40 356.07


55.12 92.81 124.10 240.77 353.78

940360 Wooden furniture (excluding for offices, kitchens and bedrooms, and seats)

290.86 300.23 323.86 286.16 328.52

640399 Footwear 136.83 177.34 217.49 239.87 289.05

180400 Cocoa butter, fat and oil 113.69 236.34 235.38 217.46 278.25

090111 Coffee (excluding roasted and decaffeinated)

207.04 295.90 281.08 269.90 256.40

640419 Footwear with outer soles of rubber or plastics and uppers of textile materials

141.90 136.76 141.53 197.26 240.94

620640 Women’s or girls’ blouses, shirts and shirt-blouses of man-made fibres

204.60 215.91 211.50 196.89 239.21

620520 Men’s or boys’ shirts of cotton 212.09 222.87 203.71 223.38 228.09

640411 Sports footwear 106.61 139.13 306.73 345.16 226.99


149.56 146.18 214.36 166.96 197.69

620462 Women’s or girls’ trousers, bib and brace overalls, breeches and shorts of cotton

289.22 249.30 246.24 207.92 195.71

621210 Brassieres of all types of textile materials, whether or not elasticated

158.10 138.47 181.77 148.33 181.20

160521 Shrimps and prawns 173.56 222.24 159.80 174.47 181.09

611030 Jerseys, pullovers, cardigans, waistcoats and similar articles, of man-made fibres

151.29 164.48 125.88 137.38 166.90

760611 Plates, sheets and strip, of non-alloy aluminium, of a thickness of > 0,2 mm

125.57 142.55 147.07 79.95 160.13

852871 Reception apparatus for television 243.39 200.32 218.99 286.13 158.47

160510 Crab, prepared or preserved (excluding smoked)

146.68 213.34 204.04 214.79 152.67

Table 22: Top-25 Exports to the USA at HS-06 Level (2013-17)

50

From 2013 to 2017, imports from the USA declined by 10.27% to USD 8,149.43 million in 2017. Major cause behind this was fall in imports of machinery and mechanical appliances, electrical machinery and equipment, and plastics and articles thereof. Top import was oil seeds and oleaginous fruits; miscellaneous grains, seeds and fruit - industrial or medicinal; straw and fodder.

Top-10 products at HS-02 Level imported by Indonesia from the USAAll values in USD Million

2013 2014 2015 2016 2017



12Oil seeds and oleaginous fruits; miscellaneous grains, seeds and fruit; industrial or medicinal; straw and fodder

1,024.98 1,127.47 1,016.72 954.76 1,140.51


1,607.02 1,328.56 1,368.61 1,348.22 949.33


567.15 530.53 465.17 446.98 558.81

52 Cotton 265.80 336.80 350.06 308.16 513.74


197.88 72.00 45.61 100.79 433.33

47 Pulp of wood or of other fibrous cellulosic material

157.93 202.46 238.24 298.13 356.91


543.07 549.34 565.73 319.08 349.49

10 Cereals 208.31 377.92 139.65 303.64 332.84

88 Aircraft, spacecraft, and parts thereof 270.15 175.98 236.84 179.29 328.10


Table 23: Top-10 Imports by the USA at HS-02 Level (2013-17)

The table below shows top-25 products at HS-06 level imported by Indonesia from the USA; these shared 50.96% in total imports. Most imported item from the USA was soya bean with a value of USD 1,133.86 million.

Top-25 products at HS-06 Level imported by Indonesia from the USAAll values in USD Million

2013 2014 2015 2016 2017



120190 Soya beans 1,013.11 1,120.80 1,006.21 947.23 1,133.86


100199 Wheat and meslin (excluding seed for sowing, and durum wheat)

196.19 340.38 118.98 230.88 277.11

230990 Preparations of a kind used in animal feeding

183.10 210.39 183.35 211.78 231.28




271112 Propane, liquefied 0 0 0 22.07 186.51

271113 Butanes, liquefied (excluding of a purity of >= 95% of N-butane or isobutane)

0 0 0 34.09 181.09

880330 Parts of aeroplanes or helicopters, n.e.s. (excluding those for gliders)

142.37 73.05 134.39 132.62 176.09

230310 Residues of starch manufacture and similar residues

173.07 153.01 108.94 114.11 146.27

283620 Disodium carbonate 138.89 150.30 160.40 133.20 143.51

470200 Chemical wood pulp, dissolving grades 1.71 3.07 64.10 101.73 138.16

230330 Brewing or distilling dregs and waste 76.05 79.94 62.60 68.94 110.92

880212 Helicopters of an unladen weight > 2000 kg 10.85 14.78 23.49 0 106.00

470321 Semi-bleached or bleached coniferous chemical wood pulp, soda or sulphate

67.46 106.72 95.18 101.47 105.30

210690 Food preparations, n.e.s. 108.73 101.19 115.70 76.90 82.14

040210 Milk and cream in solid forms, of a fat content by weight of <= 1,5%

213.99 195.96 92.95 92.31 71.25

300490 Medicaments for therapeutic or prophylactic purposes

29.35 46.80 53.99 56.41 71.03

390810 Polyamides-6, -11, -12, -6,6, -6,9, -6,10 or -6,12, in primary forms

96.01 84.01 61.11 51.54 57.79


51.61 41.74 41.75 57.79 55.51

470710 Recovered “waste and scrap” paper or paperboard

30.36 32.56 27.21 44.62 55.15

381121Prepared additives for oil lubricants containing petroleum oil or bituminous mineral oil

114.58 92.84 88.24 80.43 53.30

890520 Floating or submersible drilling or production platforms

0.00 0 0 0 53.00

843143 Parts for boring or sinking machinery 114.21 95.28 98.31 48.15 51.82

760200 Waste and scrap, of aluminium 30.99 24.18 37.09 35.55 51.59

080810 Fresh apples 44.61 57.44 35.01 61.59 51.12

550210 Artificial filament tow 0 0 0 0 49.56

Table 24: Top-25 Imports from the USA at HS-06 Level (2013-17)

52

Trade with India

Both India and Indonesia are among the largest democracies in the world. They are member states of the G-20, the E7 (countries), the Non-aligned Movement, and the United Nations. Not only they are closely knit in historical and political ties, over the years they have further developed bilateral relations to improve trade.

In Asia, India is the largest export market for Indonesia. Currently, Indonesian-Indian business and economic cooperation covers at least six sectors: mining, infrastructure, manufacturing, pharmaceuticals, the digital economy and services. In manufacturing, the two countries have been cooperating in investment and trade in the textile and automotive industries. 14

Trade Overview

From the figure below, Indonesia’s trade balance with India has remained positive throughout the last five years. The trade surplus increased from USD 9.07 billion in 2013 to USD 10.04 billion in 2017. Due to a fall in exports in 2016, the trade surplus fell to USD 7.22 billion. Since 2013, exports have increased by 8.07% to USD 14.08 billion versus imports of USD 4.05 billion in 2017. Currently, Indonesia exports palm oil, mineral fuels and rubber to India against imports of meat, nuts, iron and steel, and vehicles.

13.03 12.25 11.73

10.09

14.08

3.96 3.95 2.74 2.87

4.05

9.07 8.30

8.99

7.22

10.04

-

2

4

6

8

10

12

14

16

2013 2014 2015 2016 2017

USD

Bill

ion

Indonesia's exports to India

Indonesia's imports from India

Indonesia's trade balance with India

Indonesia's Trade Overview with India

Figure 23: Indonesia’s Trade Overview with India

14 http://www.thejakartapost.com/news/2018/05/18/industry-group-seeks-to-enhance-trade-with-india.html


At HS-02 level, Indonesia’s top exports to India in 2017 were animal or vegetable fats and oils – USD 4,981.25 million and mineral fuels – USD 4,860.47 million; these contributed 69.88% to total exports. Since 2013, exports of iron and steel, and copper have increased by 1,089.72% and 1,328.59%, respectively.

Top-10 products at HS-02 Level exported by Indonesia to IndiaAll values in USD Million

2013 2014 2015 2016 2017




4,709.83 3,776.67 3,357.04 3,492.57 4,981.25


5,548.39 5,703.99 4,799.73 3,474.42 4,860.47

26 Ores, slag and ash 759.57 339.96 802.89 532.39 700.51


38 Miscellaneous chemical products 101.63 203.59 161.08 225.13 334.38

72 Iron and steel 23.16 102.25 148.39 166.91 275.54


48 Paper and paperboard; articles of paper pulp, of paper or of paperboard

87.23 121.59 122.85 167.08 223.37

74 Copper and articles thereof 13.50 26.42 73.08 121.93 192.86


74.12 103.61 111.38 120.38 143.27

Table 25: Top-10 Exports to India at HS-02 Level (2013-17)

Top Indonesian exports to India at HS-06 level includes coal and crude palm oil worth USD 3,379.38 million and USD 3,068.29 million. The products below accounted for 86.68% of total exports to India.

Top-25 products at HS-06 Level exported by Indonesia to IndiaAll values in USD Million

2013 2014 2015 2016 2017




3,575.56 3,852.79 2,837.36 2,050.36 3,379.38

151110 Crude palm oil 2,331.77 2,101.74 2,112.62 1,868.49 3,068.29

151190Palm oil and its fractions, whether or not refined (excluding chemically modified and crude)

1,949.82 1,533.61 1,104.42 1,570.12 1,826.91


1,875.17 1,751.37 1,814.02 1,244.93 1,330.97


54




334.11 322.99 257.17 274.82 416.87


50.69 114.68 92.58 146.92 218.25


470329Semi-bleached or bleached non-coniferous chemical wood pulp, soda or sulphate

128.38 82.15 89.42 102.87 116.10

740811 Wire of refined copper, with a maximum cross-sectional dimension of > 6 mm

13.29 13.85 43.43 72.13 112.48

720260 Ferro-nickel 0 3.54 23.58 51.85 99.55

720712Semi-finished products of iron or non-alloy steel containing, by weight, < 0,25% of carbon

0 65.59 49.40 57.27 86.31


740819 Wire of refined copper, with a maximum cross-sectional dimension of <= 6 mm

0 11.63 27.72 46.52 76.14

320190 Tanning extracts of vegetable origin 32.33 28.44 28.76 45.28 75.46


0 0 0 0 73.46

151321 Crude palm kernel and babassu oil 141.39 61.61 118.07 32.30 63.83


271311 Petroleum coke, non-calcined 17.23 21.10 33.66 29.84 52.88

291590 Saturated acyclic monocarboxylic acids 15.32 16.91 22.91 37.02 48.24

440922 Tropical wood 0 0 0 0 47.22


720851 Flat-rolled products of iron or non-alloy steel, of a width >= 600 mm

0 3.05 30.99 7.65 40.19

300220 Vaccines for human medicine 70.93 76.34 77.74 44.26 39.74

271111 Natural gas, liquefied 0 0 92.98 0 39.41

Table 26: Top-25 Exports to India at HS-06 Level (2013-17)

The table below shows top-10 products at HS-02 level imported by Indonesia from India; these shared 72.27% in total imports. Top imports include iron and steel worth USD 561.76 million.

Top-10 products at HS-02 Level imported by Indonesia from IndiaAll values in USD Million

2013 2014 2015 2016 2017



72 Iron and steel 198.29 249.13 140.35 203.84 561.76


180.65 292.04 268.02 233.67 461.21






325.48 408.78 357.48 337.76 366.16


212.61 399.03 87.23 43.12 265.35

12Oil seeds and oleaginous fruits; miscellaneous grains, seeds and fruit; industrial or medicinal; straw and fodder

276.44 232.13 165.25 182.82 241.61

02 Meat and edible meat offal 0 0 0 141.46 166.10

52 Cotton 104.55 143.49 96.94 120.41 152.61


407.69 148.99 150.76 128.09 145.78

32 Tanning or dyeing extracts 95.36 113.49 96.47 109.65 112.10

Table 27: Top-10 Imports from India at HS-02 Level (2013-17)

From top-25 imports at HS-06 level, groundnuts were top import from India valued at USD 211.08 million. The top 25 import products contributed 49.05% to total imports, indicating a diverse import base.

Top-25 products at HS-06 Level imported by Indonesia from IndiaAll values in USD Million

2013 2014 2015 2016 2017



120242 Groundnuts, shelled, whether or not broken

159.45 134.08 93.49 126.71 211.08

020230 Frozen, boneless meat of bovine animals 0 0 0 141.46 166.10

870322


52.33 28.47 14.09 30.55 155.37




870410 Dumpers for off-highway use 27.12 78.63 101.44 54.51 121.05

290243 P-Xylene 243.56 366.36 289.68 155.37 118.47

290220 Benzene 39.04 12.00 8.32 11.75 68.38

720720Semi-finished products of iron or non-alloy steel containing, by weight, >= 0,25% of carbon

0.29 0.16 0 0.01 64.32


5.58 0 0 1.60 62.66

760110 Aluminium, not alloyed, unwrought 7.16 4.29 53.77 33.18 60.72

56




28.90 40.17 38.28 46.95 60.61

740311 Copper 0 0 0 28.65 54.53


0.21 0.89 0.02 0.98 52.11


63.80 35.05 20.52 38.62 49.77


0 0 0 10.85 48.41


22.57 17.06 25.62 41.56 46.58

300220 Vaccines for human medicine 0 0.16 1.56 6.88 44.41

790111 Unwrought zinc, not alloyed, containing by weight >= 99,99% of zinc

20.51 26.90 22.57 27.11 44.22

090421 Fruits of the genus Capsicum or of the genus Pimenta

15.23 17.91 21.84 26.70 40.55


32.30 53.26 36.63 41.78 39.41

720230 Ferro-silico-manganese 9.82 14.80 12.01 9.41 34.26

290241 O-Xylene 38.48 29.99 15.67 25.09 30.94

320416 Synthetic organic reactive dyes 23.18 31.51 23.74 29.46 30.78

Table 28: Top-25 Imports from India at HS-06 Level (2013-17)


Trade with Pakistan

Indonesia and Pakistan share strong religious and political ties.

Pakistan mainly exports rice to Indonesia in exchange for coal and palm oil. Through a preferential trade agreement, Indonesia offers market access to Pakistan on 232 tariff lines. Out of these 232 tariff lines, 103 are zero rated which include; fresh fruits, cotton yarn, cotton fabrics, readymade garments, fans, sports goods, leather goods and other industrial products. On the other hand, Pakistan offers market access on 313 tariff lines at preferential rate. Out of these 313 tariff lines, 82 are zero rated which includes; sugar confectionary, cocoa product, consumer goods, chemicals, tableware, kitchenware, rubber, wood, glassware and electronic products.15

On a recent visit of Indonesian President Joko Widodo to Pakistan in January 2018, four MOUs for co-operation in energy, trade, training and education sectors were signed.16

Trade Overview

Indonesia has had a healthy trade surplus with Pakistan as can be seen from the figure below. From USD 1,246.70 million in 2013, the trade surplus increased to USD 2,156.98 million in 2017 – an increase of 73.02%. This increment was due to a rise in the exports of palm oil, areca nuts, motor vehicles and coal. Since 2013, exports grew by 69.42% to USD 2,398.09 million against imports of USD 241.11 million in 2017.

1,415.44

2,045.29 1,989.56 2,018.23

2,398.09

168.74 159.39 174.51 157.26 241.11

1,246.70

1,885.90 1,815.05 1,860.98

2,156.98

-

500

1,000

1,500

2,000

2,500

3,000

2013 2014 2015 2016 2017

USD

Mill

ion

Indonesia's exports to Pakistan

Indonesia's imports from Pakistan

Indonesia's trade balance with Pakistan

Indonesia's Trade Overview with Pakistan

Figure 24: Indonesia’s Trade Overview with Pakistan

15 http://thefortress.com.pk/pakistan-indonesia-historic-relations/16 https://www.thenews.com.pk/latest/273726-pakistan-indonesia-sign-mous-for-bilateral-cooperation

58

Since 2013, following Indonesian exports to Pakistan have increased; animal or vegetable fats and oils (76.42%), vehicles (733.83%), edible fruits and nuts (65.40%), mineral fuels (38.55%), paper and paperboard (32.78%), machinery and mechanical appliances (277.84%), soap (29.90%), and rubber and articles thereof (101.71%). In 2017, animal or vegetable fats worth USD 1,482.63 million ranked as the most exported item.

Top-10 products at HS-02 Level exported by Indonesia to PakistanAll values in USD Million

2013 2014 2015 2016 2017




840.40 1,374.85 1,327.01 1,310.17 1,482.63


20.22 44.88 33.91 66.70 168.60

08 Edible fruit and nuts; peel of citrus fruit or melons

71.96 93.60 103.36 137.15 119.02


78.41 79.72 68.57 73.92 108.64

55 Man-made staple fibres 112.87 119.98 113.61 96.61 104.92


75.32 85.21 91.33 94.85 100.01


34 Soap 19.63 27.53 28.90 25.01 25.50

09 Coffee, tea, maté and spices 23.42 34.14 22.11 18.22 21.47


5.28 10.21 8.01 9.50 19.95

Table 29: Top-10 Exports to Pakistan at HS-02 Level (2013-17)

The following table shows top-25 Indonesian exports to Pakistan at HS-06 level; these accounted for 89.21% of total exports. Under this category, palm oil was the top export valued at USD 1,459.74 million.

Top-25 products at HS-06 Level exported by Indonesia to PakistanAll values in USD Million

2013 2014 2015 2016 2017



151190 Palm oil and its fractions 778.23 1,350.53 1,290.97 1,289.45 1,459.74

080280 Fresh or dried areca nuts 67.85 91.64 97.94 133.76 113.90


21.73 28.84 41.15 52.62 85.54

870321

Motor cars and other motor vehicles with spark-ignition internal combustion reciprocating piston engine of a cylinder capacity <= 1.000 cm³

0.19 5.46 0.07 0 72.44




550410 Staple fibres of viscose rayon 57.12 53.19 47.87 48.72 69.44

870840 Gear boxes and parts thereof, for tractors, motor vehicles

12.51 9.99 10.34 14.57 44.97



9.57 9.86 9.19 15.48 37.21


1.72 1.89 2.05 1.83 17.42

481029 Paper and paperboard 12.12 15.41 15.39 13.66 17.30

550951 Yarn containing predominantly, but < 85% polyester staple fibres by weight

10.90 18.62 22.11 20.05 17.11


7.29 12.59 6.40 12.16 14.94


56.21 50.88 27.40 21.28 14.74


340111 Soap and organic surface-active products and preparations

16.77 24.05 22.05 15.26 13.95

230660 Oilcake and other solid residues 6.30 10.47 6.39 9.24 13.75

870322


1.78 0.61 0.30 36.75 12.83

300220 Vaccines for human medicine 3.61 0.01 3.18 0 12.35

481014 Paper and paperboard 8.77 15.63 11.22 12.81 11.14


0 0.08 0.72 1.73 10.09

550921 Single yarn containing >= 85% polyester staple fibres by weight

29.17 28.51 19.07 13.54 10.04

090240 Black fermented tea and partly fermented tea

17.20 12.96 10.82 8.11 9.44

380891 Insecticides 5.50 4.15 4.18 4.19 9.22


0 0 0 0 8.23

960310 Brooms and brushes 1.68 2.32 4.75 6.14 8.00

Table 30: Top-25 Exports to Pakistan at HS-06 Level (2013-17)

Indonesia mainly imported edible fruits and nuts – USD 59.01 million, cotton – USD 42.01 million, cereals – USD 34.79 million, iron and steel – USD 25.88 million, paper and paperboard – USD 25.74 million, and fish – USD 10.59 million from Pakistan in 2017. During 2013-17, imports of the following products increased; edible fruits and nuts (1,738.22%), iron and steel (86,166.67%), paper and paperboard (128,600.00%), and articles of cotton – knitted or crocheted (132.00%), not knitted or crocheted (17.97%). Moreover, it can be observed from the table below that cotton imports have declined (21.00%) whereas imports of finished articles of apparel have increased.

60

Top-10 products at HS-02 Level imported by Indonesia from PakistanAll values in USD Million

2013 2014 2015 2016 2017



08 Edible fruit and nuts; peel of citrus fruit or melons

3.21 19.32 23.03 20.44 59.01

52 Cotton 53.18 69.31 41.00 21.10 42.01

10 Cereals 31.93 23.91 62.95 49.12 34.79

72 Iron and steel 0.03 0.11 0.03 0.71 25.88


0.02 0.18 0.40 22.95 25.74


7.30 8.63 6.85 5.54 10.95

41 Raw hides and skins (other than furskins) and leather

10.20 13.31 8.20 9.07 9.78


4.34 4.07 5.48 4.23 5.12

61 Articles of apparel and clothing accessories, knitted or crocheted

1.50 2.17 2.46 2.68 3.48


3.44 0.72 1.96 0.71 2.48

Table 31: Top-10 Imports from Pakistan at HS-02 Level (2013-17)

At HS-06 level, top-25 imports from Pakistan shown below contributed 90.04% to total imports. In 2017, top three imports were broken rice – USD 34.79 million, fresh or dried mandarins – USD 34.07 million, and paper and paperboard – USD 25.45 million.

Top-25 products at HS-06 Level imported by Indonesia from PakistanAll values in USD Million

2013 2014 2015 2016 2017



100640 Broken rice 29.97 23.91 62.95 49.12 34.79

080521 Fresh or dried mandarins 0 0 0 0 34.07

481159 Paper and paperboard 0 0.02 0.38 22.91 25.45



0 0 0 0 22.47

080520 Fresh or dried mandarins 3.21 19.32 23.03 20.44 17.94

030353 Frozen sardines 6.17 7.56 6.16 5.08 9.67

520939Woven fabrics of cotton, containing >= 85% cotton by weight and weighing > 200 g/m², dyed

6.35 6.30 6.72 7.63 7.66

080529 Fresh or dried wilkings and similar citrus hybrids

0 0 0 0 6.97




720720Semi-finished products of iron or non-alloy steel containing, by weight, >= 0,25% of carbon

0 0 0 0 3.41

620342 Men’s or boys’ trousers, bib and brace overalls, breeches and shorts, of cotton

2.70 2.10 3.07 2.22 3.00

410792 Grain splits leather 0.16 0.08 1.52 0.81 2.95

310210 Urea 0 0 0 0 2.32

740400 Waste and scrap, of copper 25.54 1.81 2.85 3.93 2.30

411310 Leather further prepared after tanning or crusting

2.67 3.53 2.14 2.57 2.11

520932Woven fabrics of cotton, containing >= 85% cotton by weight and weighing > 200 g/m²

0.03 0.18 0 0.11 2.06

560121 Wadding of cotton and articles thereof 0 0 0 0.35 1.95

230120Flours, meals and pellets of fish or crustaceans, molluscs or other aquatic invertebrates

3.44 0.72 0 0.33 1.82


0.47 0.91 0.18 0.01 1.81

620462 Women’s or girls’ trousers, bib and brace overalls, breeches and shorts of cotton

1.11 1.20 2.15 1.72 1.81

410799Leather of the portions, strips or sheets of hides and skins of bovine “incl. buffalo” or equine animals

1.08 1.42 1.31 1.42 1.62

551329 Woven fabrics containing predominantly, but < 85% synthetic staple fibres by weight

0.09 0.41 1.74 2.14 1.56

410719 Leather 4.81 7.80 2.61 3.11 1.51

600290 Knitted or crocheted fabrics, of a width of <= 30 cm, containing >= 5% by weight

5.12 2.07 5.39 3.82 1.48

520819Woven fabrics of cotton, containing >= 85% cotton by weight and weighing <= 200 g/m²

3.25 0.63 1.63 1.55 1.20

Table 32: Top-25 Imports from Pakistan at HS-06 Level (2013-17)

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Pakistan’s Potential Trade with Indonesia

Export Potential

Pakistan’s export potential for any product to be exported to Indonesia is calculated by subtracting Pakistan’s actual exports for a product to Indonesia from the minimum of Pakistan’s exports to the world or Indonesia’s imports from the world for that product.

Export Potential = Min (Pakistan’s exports to the world of X, Indonesia’s imports from the world of X) – Pakistan’s current exports to Indonesia of X

High potential Pakistani exports at HS-06 level have been shown below. The table shows Pakistan’s exports to Indonesia, Indonesia’s imports from the world, Pakistan’s exports to the world and Pakistan’s potential exports to Indonesia for the top-25 high potential items. Pakistan exported USD 69.81 million of these products to Indonesia while it had a potential to export USD 1,533.25 million worth of such goods in 2017. The products with most potential include; ‘Instruments and appliances used in medical, surgical or veterinary sciences, n.e.s.’ – USD 321.35 million, ‘Broken rice’ – USD 113.85 million, ‘Waste and scrap, of copper’ – USD 78.40 million, ‘Medicaments for therapeutic or prophylactic purposes’ – USD 70.76 million, ‘Woven fabrics of cotton, containing >= 85% cotton by weight and weighing <= 200 g/m²’ – USD 64.18 million.

Pakistan has the potential to export textile and textile articles (including cotton, t-shirts and woven fabrics) worth USD 251.12 million to Indonesia while it currently exports textile goods valued at only USD 29.30 million.

Pakistan’s High Potential Exports to Indonesia at HS-06 LevelAll values in USD Million

Code Product DescriptionPakistan's exports to Indonesia

Indonesia's imports

from world

Pakistan's exports to

world

Potential exports to Indonesia

901890 Instruments and appliances used in medical, surgical or veterinary sciences, n.e.s.

0.69 322.04 360.58 321.35

100640 Broken rice 18.95 132.80 182.57 113.85

740400 Waste and scrap, of copper 1.47 79.87 85.88 78.40


0.02 464.58 70.79 70.76

520819 Woven fabrics of cotton, containing >= 85% cotton by weight and weighing <= 200 g/m²

0.30 82.46 64.48 64.18

481159 Paper and paperboard 17.64 140.34 81.07 63.43

390761 “Polyethylene terephthalate", in primary forms, having a viscosity number of >= 78 ml/g

0 59.64 134.58 59.64

170199 Cane or beet sugar and chemically pure sucrose, in solid form

0.12 54.01 342.90 53.89

080410 Fresh or dried dates 0 53.63 107.49 53.63

170490 Sugar confectionery not containing cocoa 0 52.72 61.78 52.72



Code Product DescriptionPakistan's exports to Indonesia

Indonesia's imports

from world

Pakistan's exports to

world

Potential exports to Indonesia

640399 Footwear 0.02 51.41 68.99 51.38

250100 Salts 0 83.60 50.63 50.63

261000 Chromium ores and concentrates 0 47.48 104.30 47.48

410792 Grain splits leather 1.59 48.24 50.70 46.64

521011 Plain woven fabrics of cotton, containing predominantly, but < 85% cotton by weight

0.25 45.04 86.65 44.79

841199 Parts of gas turbines, n.e.s. 0 140.79 43.86 43.86

170230 Glucose in solid form and glucose syrup 0.00 59.94 43.74 43.74

610910 T-shirts, singlets and other vests of cotton, knitted or crocheted

0.31 42.35 197.76 42.04

390769 “Polyethylene terephthalate", in primary forms, having a viscosity number of < 78 ml/g

0 147.92 37.54 37.54

620342 Men's or boys' trousers, bib and brace overalls, breeches and shorts, of cotton

0.37 34.76 410.42 34.39

520100 Cotton, neither carded nor combed 28.05 1,325.17 60.95 32.90

521031 Plain woven fabrics of cotton, containing predominantly, but < 85% cotton by weight

0.02 32.84 57.79 32.82

300439 Medicaments containing hormones or steroids used as hormones but not antibiotics

0 31.27 48.65 31.27


0 234.61 31.18 31.18

851712 Telephones for cellular networks "mobile telephones" or for other wireless networks

0 416.72 30.75 30.75

Total Top-25 High Potential Products at HS-06 Level 69.81 4,184.19 2,816.02 1,533.25

Table 33: Top-25 High Potential Pakistani Exports to Indonesia at HS-06 Level

Import Potential

Import potential for a product is calculated by subtracting Pakistan’s actual imports for a product from Indonesia from the minimum of Pakistan’s imports from the world and Indonesia’s exports to the world for that product.

Import Potential = Min (Pakistan’s imports from the world of X, Indonesia’s exports to the world of X) – Indonesia’s current exports to Pakistan of X

The following table has been sorted according to high potential Indonesian exports to Pakistan. It shows Indonesia’s exports to Pakistan, Pakistan’s imports from the world, Indonesia’s exports to the world and Pakistan’s potential imports from Indonesia at HS-06 level. For its top-25 high potential exports to Pakistan worth USD 1,650.77 million in 2017, Indonesia had an additional potential of USD 3,770.13 million. Most potential lies in ‘Palm oil and its fractions’, ‘Motor cars and other motor vehicles with spark-ignition internal combustion reciprocating piston engine of a cylinder capacity > 1,000 cm³ but <= 1,500 cm³ ’, ‘Motor cars and other motor vehicles with

64

spark-ignition internal combustion reciprocating piston engine of a cylinder capacity > 1,500 cm³ but <= 3,000 cm³ ’, ‘Medicaments for therapeutic or prophylactic purposes’, and ‘Staple fibres of viscose rayon, not carded, combed or otherwise processed for spinning’.

Furthermore, Indonesia has the potential to export motor vehicles, and parts and accessories of motor vehicles worth USD 840.69 million and USD 321.23 million, respectively. In 2017, it exported motor vehicles valued at USD 88.79 million and parts and accessories worth USD 12.01 million to Pakistan.

Indonesia’s High Potential Exports to Pakistan at HS-06 LevelAll values in USD Million

Code Product DescriptionIndonesia’s exports to Pakistan

Pakistan’s imports

from world

Indonesia’s exports to

world

Potential imports

from Indonesia

151190 Palm oil and its fractions 1,459.74 2,011.89 13,814.90 552.15

870322


12.83 362.70 1,150.25 349.87

870323


3.52 340.75 720.71 337.23


0.20 368.14 274.58 274.37

550410 Staple fibres of viscose rayon, not carded, combed or otherwise processed for spinning

69.44 292.89 310.42 223.45

540233 Textured filament yarn of polyester 1.39 172.01 161.76 160.36

870321

Motor cars and other motor vehicles with spark-ignition internal combustion reciprocating piston engine of a cylinder capacity <= 1.000 cm³

72.44 575.19 226.02 153.59

850440 Static converters - 133.90 368.33 133.90

853710 Boards, cabinets and apparatus for electric control or the distribution of electricity

0.01 132.21 133.77 132.20

840991 Parts suitable for spark-ignition internal combustion piston

1.86 128.61 211.14 126.75

871120Motorcycles, incl. mopeds, with reciprocating internal combustion piston engine of a cylinder capacity > 50 cm³ but <= 250 cm³

0.00 104.03 601.64 104.02

961900 Sanitary towels (pads) and tampons, napkins and napkin liners for babies

0.01 105.25 100.96 100.95


10.09 109.34 303.37 99.25

740311 Copper - 95.69 1,078.42 95.69

840999 Parts suitable for compression-ignition internal combustion

0.06 95.28 193.96 95.23

901890 Instruments and appliances used in medical, surgical or veterinary sciences, n.e.s.

0.12 115.69 86.38 86.27

854449 Electric conductors, for a voltage <= 1.000 V 0.20 85.38 107.96 85.18

851770 Parts of telephone sets - 84.77 106.17 84.77



Code Product DescriptionIndonesia’s exports to Pakistan

Pakistan’s imports

from world

Indonesia’s exports to

world

Potential imports

from Indonesia

151110 Crude palm oil 0.03 84.34 4,698.23 84.31

291736 Terephthalic acid and its salts - 92.45 83.87 83.87

290121 Ethylene 2.97 86.83 132.29 83.86

841480 Air pumps, air or other gas compressors and ventilating or recycling hoods

2.82 85.65 198.19 82.83

851712 Telephones for cellular networks “mobile telephones” or for other wireless networks

- 760.26 80.26 80.26

300220 Vaccines for human medicine 12.35 208.24 92.56 80.21

293499 Nucleic acids and their salts 0.68 80.25 94.06 79.57

Total Top-25 High Potential Products at HS-06 Level 1,650.77 6,711.73 25,330.18 3,770.13

Table 34: Top-25 High Potential Indonesian Exports to Pakistan at HS-06 Level

S E C T I O N 5

RECENT CONCESSIONS BY INDONESIA TO PAKISTAN

68

Recent Concessions by Indonesia to Pakistan

In order to secure around USD 1.50 billion palm oil exports to Pakistan, Indonesia recently provided concessions on twenty tariff lines which had an import duty that ranged between 7.50% to 30.00%.

For these 20 tariff lines, table below shows Pakistan’s exports to Indonesia in 2017, Pakistan’s potential exports to Indonesia, MFN rate and offer to Pakistan for twenty products on which Indonesia awarded duty free access. Pakistan’s exports of these products to Indonesia were valued at USD 24.44 million in 2017. These items had an additional potential of USD 316.53 million. On an annualized basis, these tariff relaxations can lead to an increase Pakistan’s exports to Indonesia by USD 320 million.17

Twenty Products with Recent Concessions

Sr.# HS Code Description

Pakistan’s Exports to Indonesia (2017) USD

Million

Pakistan’s Potential

Exports to Indonesia (2017) USD

Million

MFN rate Offer to Pakistan

1 08045020 Mangoes 0.00 - 20% 0%

2 10064010 Broken rice - used for animal feed

18.90 113.90 Rp. 450/kg 0%

3 10064090 Broken rice - others - -

4 22071000Undenatured ethyl alcohol of alcoholic strength by vol of 80% or more (ltr)

- 4.11 30% 0%

5 22072090 Denatured ethyl alcohol and other spirits of any strength

- 0.00 30% 0%

6 24011010 Tobacco, not stemmed/stripped -Virginia type

- 2.56 5% 0%

7 24012010Tobacco, partly wholly stemmed/stripped-Virginia type

1.69 24.60 5% 0%

8 42031000

Articles of apparel and clothing accessories of leather or of composition leather

0.00 2.25 15% 0%

9 52051200Single yarn; of uncombed fibres (192.31<measuring<232)

1.83 - 7.50% 0%

10 52052300 Single yarn; of combed fibres (192.31<measuring<232)

0.30 20.90 7.50% 0%

12 52114200Woven fabric of cotton containing than 85% by weight cotton-Denim

0.14 8.05 10% 0%

17 https://www.thenews.com.pk/print/400221-indonesia-abolishes-up-to-30-import-duties-on-pakistani-products


Sr.# HS Code Description

Pakistan’s Exports to Indonesia (2017) USD

Million

Pakistan’s Potential

Exports to Indonesia (2017) USD

Million

MFN rate Offer to Pakistan

13 61091020T-shirts Women; singlets & other vests; knitted/crocheted

0.31 18.60 25% 0%

14 61099020T-shirts Men/boys; singlets & others vests knitted/crocheted

0.08 18.69 25% 0%

15 61099030 T-shirt; singlets & other vest; knitted/crocheted; of other

- -

16 61102000Jerseys; pullovers; cardigans; waistcoat of cotton

0.01 11.80 25% 0%

17 62034290 Men/boys trousers of cotton 0.37 34.37 25% 0%

18 62046200Women's or girls' trousers, bib and brace overalls, breeches and shorts of cotton

0.07 26.58 25% 0%

19 63022100 Bed linen; printed of cotton - 1.10 25% 0%

20 63026000Toilet linen and kitchen linen, of terry towelling or similar terry fabrics of cotton

- 5.26 25% 0%

Total 24.44 316.53

Table 35: List of Products Granted Duty-Free Access to Pakistan (2018)

S E C T I O N 6

ANALYSIS OF MAJOR INDUSTRIES

72

Palm Oil Industry

Oil Palm, also known as Elaeis guineensis, is an ancient plant from the West African tropical forest which was brought to Indonesia in 1848 by the Dutch tobacco planters. This plant produces two types of oil – Crude Palm Oil (CPO), which is used in food products including cooking oil and margarines, while Palm Kernel Oil (PKO) is used in non-food products like soaps, detergents, cosmetics, toiletries and candles. Biomass from the Palm Oil is used to produce Biodiesel.

Indonesia is the largest exporter of Palm Oil and its products. With exports of USD 18.51 billion, it has 54.19% of world’s share of the palm oil industry, followed by Malaysia – 28.27% with exports of USD 9.66 billion.

Top-3 Exporters of Palm Oil and its Products

Indonesia Malaysia Netherlands

15,838.8517,464.91

15,385.2814,365.42

18,513.12

12,288.95 11,994.81

9,501.15 9,064.299,659.65

1,529.69 1,391.42 1,075.76 1,072.01 1,209.90

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2013 2014 2015 2016 2017

USD

Mill

ion

Figure 25: Top-3 Exporters of Palm Oil and its Products in the World (2013-17)

Indonesian exports of palm oil have been rising consistently, from USD 15.84 billion in 2013, they sharply rose to USD 18.51 billion in 2017. Top three export destinations of Indonesian Palm Oil and its products were; India – USD 4.90 billion, China – USD 2.07 billion, and Pakistan – USD 1.46 billion. Crude Palm Oil and its products make up most of the total Indonesian Palm Oil exports. The country exported 6.40 million tons of Crude Palm Oil worth USD 4.70 billion in 2017 as compared to 6.58 million tons of oil worth USD 4.98 billion in 2013. In contrast, export of other palm oil products weighing 16.48 million tons were valued at USD 13.81 billion in 2017 versus 13.99 million tons with a value of USD 10.86 billion in 2013. Altogether, Crude Palm Oil exports remained constant while other products of palm oil saw growth during 2013-17.


Top-5 Export Destinations for Indonesian Palm Oil and its ProductsAll values in USD Billion

2013 2014 2015 2016 2017

World 15.84 17.46 15.39 14.37 18.51

India 4.28 3.64 3.22 3.44 4.90

China 1.79 1.79 2.05 1.64 2.07

Pakistan 0.81 1.35 1.31 1.29 1.46

Spain 0.46 0.67 0.57 0.69 0.92

Bangladesh 0.50 0.80 0.67 0.58 0.82

Table 36: Top-5 Export Destinations for Indonesian Palm Oil and its Products (2013-17)

Indonesian Palm Oil Exports at HS-06 Level

2013 2014 2015 2016 2017


Net

wei

ght

(Mill

ion

Ton)

Trad

e Va

lue

(USD

Bill

ion)

Net

wei

ght

(Mill

ion

Ton)

Trad

e Va

lue

(USD

Bill

ion)

Net

wei

ght

(Mill

ion

Ton)

Trad

e Va

lue

(USD

Bill

ion)

Net

wei

ght

(Mill

ion

Ton)

Trad

e Va

lue

(USD

Bill

ion)

Net

wei

ght

(Mill

ion

Ton)

Trad

e Va

lue

(USD

Bill

ion)

151110 Crude Palm Oil 6.58 4.98 5.73 4.21 7.79 4.39 5.28 3.31 6.40 4.70

151190Other Palm Oil Products

13.99 10.86 17.17 13.26 18.68 11.00 17.48 11.06 16.48 13.81

151321 Crude Oil of Kernel Oil 0.45 0.35 0.40 0.39 0.61 0.52 0.27 0.31 0.29 0.38

151329Other Palm Kernel Oil Products

1.19 0.95 1.08 1.15 1.21 1.05 1.31 1.60 1.19 1.83

Table 37: Indonesian Palm Oil Exports at HS-06 Level (2013-17)

Plantation of Oil Palm trees requires high rainfall (minimum 1600 mm/year) with a tropical climate found within 10° of the Equator. This makes Indonesia a most suitable region for Oil Palm trees. Since 2000, total harvested area has increased from 4.16 million hectares to 11.12 million hectares in 2016. In 2016, government estates harvested 0.71 million hectares of land which is far less than private estates and small holder farms that harvested 5.75 million hectares and 4.66 million hectares, respectively. Usually, a small-holder farm covers 25 hectares, whereas a private estate has an area over and above 500 hectares. According to USDA Foreign Agricultural Service report, an average palm tree has a life of 25 years. Farmers in Indonesia use around 200 seeds per hectare. Although mature area has doubled since 2008 – from 5 million to 11 million hectares, small-holder farmers lose out due to poor incentives and high seed prices. As a result, in 2011 government imposed a moratorium on large holder farms which has allowed small farmers to expand their area until 2030. Also, this ban followed criticism from the European Union on increasing palm oil plantations. The Indonesian government has enforced 20% blending of biodiesel in diesel fuel from September 2018. This decision came

74

when government ended fuel subsidies which raised diesel prices. To minimize the ever-expanding current account deficit, the government has encouraged the use of biofuel which would ultimately increase the use of palm oil. Through its Crude Palm Oil (CPO) Fund and mandatory biodiesel program – B-20 Biodiesel, the Indonesian government has successfully regulated palm oil prices.18

Harvested Area by Different EstatesAll values in Million Hectares

Year Government Estates Private Estates Small holder

Farms Total Area

2000 0.59 2.4 1.17 4.16

2005 0.68 2.92 2.36 5.95

2010 0.66 4.5 3.39 8.55

2015 0.74 5.98 4.54 11.26

2016* 0.71 5.75 4.66 11.12

Table 38: Total Area Harvested in Indonesia by Different Estates (2016)* Preliminary Figures

Despite all the efforts from the government to sustain palm oil plantations, palm oil prices remain vulnerable to crude oil prices, El-Nino drought, soybean oil prices, and harsh weather conditions.

Pakistan, being one of the largest consumers of palm oil, imports refined, bleached and deodorized (RBD) Palm Oil and Palm Olein from Indonesia and Malaysia. Palm Olein is the liquid fraction obtained from crystallization at controlled temperatures. It is used for shortening, Vanaspati and other food products. While RBD Palm Oil, derived from crude palm oil, is used as cooking oil.

During the period 2013 to 2017, RBD Palm Oil imports climbed up from USD 758.56 million in 2013 to USD 796.74 million in 2017 – an increase of 5.03%. Imports from Indonesia have increased by 30.40% to USD 746.82 million which makes up 93.73% of total RBD Palm Oil imports, while imports from Malaysia decreased by 73.19% to USD 49.71 million in 2017.

On the other hand, Pakistan imported Palm Olein worth USD 1,160.78 million in 2017, of which 70.72% was imported from Indonesia versus 29.26% from Malaysia. Overall, Palm Olein imports from Indonesia have greatly increased; since 2013, imports grew by 1,861.95% to USD 820.88 million in 2017 as opposed to a 55.64% decline in imports from Malaysia. Such huge rise in palm oil imports was due to Pakistan – Indonesia Preferential Trade Agreement under which Indonesia enjoys a tariff on imports into Pakistan which is between 6.42% to 7.66%.

18 Sources:https://www.reuters.com/article/us-indonesia-biodiesel/indonesia-to-make-biodiesel-use-compulsory-from-september-1-official-idUSKBN1KM4WK

https://www.straitstimes.com/asia/se-asia/indonesia-halts-new-palm-oil-plantation-development https://www.indonesia-investments.com/news/todays-headlines/widodo-signs-moratorium-on-new-palm-oil-plantations-in-

indonesia/item8978?


Pakistan’s Import Partners of HS-15119020: RBD Palm OilAll values in USD Million

2013 2014 2015 2016 2017

World 758.56 944.27 664.66 674.84 796.74

Indonesia 572.71 858.90 627.28 622.57 746.82

Malaysia 185.43 83.13 36.72 52.08 49.71

Table 39: Pakistan’s Top Import Partners for RBD Palm Oil (2013-17)

Pakistan’s Import Partners of HS-15119030: Palm OleinAll values in USD Million

2013 2014 2015 2016 2017

World 808.64 870.75 861.43 901.20 1,160.78

Indonesia 41.84 494.10 693.95 675.87 820.88

Malaysia 765.65 375.61 166.47 225.32 339.63

Table 40: Pakistan’s Top Import Partners Palm Olein (2013-17)

76

Automotive Industry

Indonesia is the second largest producer of motor vehicles in the ASEAN region after Thailand. Foreign companies, particularly from Japan, have established car manufacturing plants in the country. These include; Toyota Motor Manufacturing Indonesia, Astra Daihatsu Motors, Isuzu Astra Motors Indonesia, Honda Prospect Motors, Suzuki Indomobil Motors, Mitsubishi Motors Corporation, Wuling Motors, Nissan Motors Indonesia, Hino Motors Manufacturing Indonesia, Gaya Motors, Fuso-Mitsubishi Motors, and Mercedes Benz Indonesia. Altogether, they have a total production capacity of 1.93 million vehicles per annum. Most Japanese brands were attracted to the country due to low per capita-car ownership, low labour cost and an increasing young population.

With a rising population and an expanding middle class, Indonesia has become the biggest car market in Southeast Asia and accounts for about one-third of total car sales in ASEAN. In 2017, ASEAN auto sales soared to 3.33 million vehicles while Indonesia contributed 1.08 million in these sales. The country has a young workforce with first-time buyers which allows for growth in car sales. Moreover, the mining sector and Small and Medium Enterprises (SMEs) have fuelled the demand for commercial vehicles.

Japanese Original Equipment Manufacturers (OEMs), mainly Toyota, are leading the car industry. They have local plants which saves them from 30% tax on import of Completely Built Up (CBU) units. Also, these firms focus on producing models that fit local needs – with smaller and fuel-efficient engines to allow tax incentives. They have a wide-spread dealership network which is convenient for spare parts availability and maintenance. Such companies have government support through trade agreements (ASEAN – Japan FTA and ASEAN – China FTA) resulting in lower import duties.

Indonesia has a well-developed market for Multi-Purpose Vehicles (MPVs) and Sport Utility Vehicles (SUVs). To promote a family car, which carries up to seven passengers, the government has imposed a low tax (10%) on production of these vehicles as opposed to luxury sedans (30%). This has discouraged domestic and foreign demand for Indonesian sedans due to higher prices; hence, sedan market in Indonesia remains underdeveloped. To ease pressure on the Rupiah, the Indonesian government discontinued fuel subsidy which resulted in higher fuel prices in 2013. At the same time, government encouraged car manufacturers to produce fuel-efficient cars (with 1,200 cm3 engines) to escape taxes (0% tax on production) while adhering to local component requirement (LCR) – between 70% to 85% (LCR in Indonesia is calculated based on the Completely Knocked Down parts and not on the subcomponents). This gave rise to Low Cost Green Cars (LCGC); since 2013, LCGC sales grew by 358.30% to 234,554 cars sold in 2017.

The table below shows sales and production of Completely Built Up (CBU) units in Indonesia from 2013 to 2017. Sales were 1,079,886 vehicles in 2017, which comprised of 844,224 passenger vehicles and 235,310 commercial vehicles. In contrast, production increased by 0.70% to 1,216,615 vehicles, of which 982,356 were passenger cars while 234,259 were commercial vehicles.


Sales and Production of Completely Built Up (CBU) Units2013 2014 2015 2016 2017

Units Sold 1,229,916 1,208,019 1,013,291 1,061,859 1,079,886

Units Produced 1,208,211 1,298,532 1,098,780 1,177,797 1,216,615

Table 41: Sales and Production of Completely Built Up (CBU) Units in Indonesia (2013-17)

Currently, Indonesian government has set a target of becoming a global production house for car manufacturing and to overtake Thailand in the coming years. In the long run, it is focusing on exporting Completely Built Up (CBU) units with 100% locally manufactured components. In this regard, the state is heavily investing in infrastructure projects including ports and roads. It plans to build 22 ports across Indonesia within the next five years at a total investment of USD 3.57 billion. Also, it is developing 2,650 km non-toll and 1,000 km toll roads across the country. Furthermore, companies are required to carry out activities such as welding, painting, assembling of the vehicles and quality control within the country. Importantly, Indonesia, which followed Euro-2 standard for carbon emissions, has converted to Euro-4 from September 2018, and hopes to target Euro-6 in the coming years. This transition would boost car exports in the future. Despite all these measures to improve the auto industry, major car parts including engines and axel shafts are imported from abroad; therefore, Indonesian government would require technology transfers along with infrastructure to allow companies to manufacture auto parts locally.

In 2017, Indonesia exported vehicles and parts worth USD 6,835.40 million under HS-02 category. From the top-10 export markets of Indonesian vehicles and auto parts, Pakistan imported vehicles and parts worth USD 168.60 million from Indonesia versus USD 33.91 million in 2015 – an increase of 397.20%.

Top-10 Export Destinations for HS-87 (Vehicles and parts thereof)All values in USD Million

2015 2016 2017

Rank World 5,419.38 5,867.76 6,835.40

1 Philippines 744.64 1,468.23 1,754.49

2 Thailand 744.57 849.39 942.31

3 Japan 479.67 488.54 537.52

4 Saudi Arabia 901.19 460.55 505.39

5 Viet Nam 125.96 200.69 424.99

6 Malaysia 404.38 435.82 413.13

7 Mexico 224.19 245.20 240.24

8 Singapore 213.81 180.15 183.01

9 Pakistan 33.91 66.70 168.60

10 USA 132.99 177.77 164.39

Table 42: Top-10 Export Destinations of Indonesian Vehicles and Auto Parts (2015-17)

78

Indonesian car exports included 231,169 CBU units in 2017 as compared to 170,907 units in 2013. This shows that foreign demand for Indonesian cars is increasing. Whereas in 2016, Indonesia exported 202,626 CKD units.

Indonesian Car Exports 2013 2014 2015 2016 2017

Completely Built Up (CBU) Units 170,907 202,273 207,691 194,397 231,169

Completely Knocked Down (CKD) Units 105,380 108,580 108,770 202,626 N/A

Table 43: Indonesian Exports of Completely Built Up (CBU) units and Completely Knocked Down (CKD) Units (2013-17)

Brief Comparison of Pakistani and Indonesian Automotive Market

Indonesia and Pakistan are undergoing similar economic growth rates (around 5%). Although both the countries lie in the lower middle-income group, the Indonesian economy – with a GDP of over 1 trillion – is much larger than Pakistan’s economy. Indonesian consumer has higher purchasing power with a GDP per capita of USD 3,846.86, whereas Pakistani consumer has a GDP per capita of USD 1,547.85. Also, there is a huge difference in the motorization rate of 87.20 vehicles per 1000 inhabitants in Indonesia as opposed to 17.00 vehicles per 1000 inhabitants in Pakistan. Still, Pakistani market is favourable for growth in car sales due to financial relaxations provided to customers and the growing working population. In Pakistan, minimum down-payment requirement is 15% in comparison to 25% in Indonesia on non-commercial vehicles. According to the World Bank, Pakistan had a lending rate of 8.07% while Indonesia had a rate of 11.07% in 2017.19 This allows for low cost of borrowing for Pakistani car buyers.

Growth Indicators of Automotive Industry

Country

GDP

Grow

th R

ate

(%)

(201

7)

GDP

per c

apit

a (2

017)

Mot

oriz

atio

n Ra

te

(201

5)

Prod

ucti

on o

f Veh

icle

s (2

017)

Sale

s of

New

Veh

icle

s (2

017)

Min

imum

Dow

n Pa

ymen

t Re

quir

emen

t (N

on-

com

mer

cial

veh

icle

s)

Lend

ing

Inte

rest

Rat

e (%

) (2

017)

Indonesia 5.07 3,846.86 87.20 1,216,615 1,079,886 25% 11.07%

Pakistan 5.7 1,547.85 17 230,000 269,000 15% 8.21%

Table 44: Growth Indicators of Automotive Industry in Pakistani and Indonesian Market

19 Source: World Bank; Gaikindo; ASEAN Automotive Federation; https://www.indonesia-investments.com/business/industries-sectors/automotive-industry/item6047


S E C T I O N 7

DOING BUSINESS

82

Ease of Doing Business

The Doing Business Index, a measure by the World Bank, compares business regulations in 190 economies. It uses ten indicators in order to compare the ease of starting and running a business by a local in every country.

The table below is a comparison of 2018 and 2019 rankings. Major improvements for local businessmen were in ‘starting a business’, ‘getting electricity’, ‘registering property’, ‘getting credit’, ‘paying taxes’, and ‘resolving insolvency’.

Country: Indonesia DB 2019 Rank DB 2018 Rank Change in Rank

Overall 73 72 -1

Topics

Starting a Business 134 144 10

Dealing with Construction Permits 112 108 -4

Getting Electricity 33 38 5

Registering Property 100 106 6

Getting Credit 44 55 11

Protecting Minority Investors 51 43 -8

Paying Taxes 112 114 2

Trading Across Borders 116 112 -4

Enforcing Contracts 146 145 -1

Resolving Insolvency 36 38 2

Table 45: Ease of Doing Business in Indonesia (2019)


Embassy

Indonesian Embassy in Islamabad, Pakistan

Address: Diplomatic Enclave I Street 5, Ramna G 5/4, P.O. Box 1019, Islamabad - 44000

Telephone: (+92) (51) 283-2017 to 20

Fax: (+92) (51) 283-2013

Email: [email protected]

Website: indonesian-embassy.pk, www.kemlu.go.id/islamabad

Head of Mission: Iwan Suyudhie Amri, Ambassador

Pakistani Embassy in Jakarta, Indonesia

Address: Jalan Mega Kuningan Barat, Block E.3.9, Kav. 5-8, Jakarta Selatan - 12950

Telephone: (+62-21) 5785-1680, (+62-21) 57851836-37

Fax: (+62) (21) 5785 1645 / 872

Email: [email protected], [email protected]

Website: www.mofa.gov.pk/indonesia/

Head of Mission: Mr. Abdul Salik Khan, Ambassador

Consulate

Indonesian Consulate General in Pakistan

Address: E/1-5 Sharah-e-Iran Clifton, Karachi 75600

Telephone: (+92-21) 3587-4619, (+92-21) 3587-4623

Fax: (+9221) 3587-4483

Email: [email protected]

Website: www.kemlu.go.id/karachi/

Head of Mission: Dempo Awang Yuddie, Consul General

S E C T I O N 8

SOURCES

86

Data

Map of Indonesia: https://www.nationsonline.org/oneworld/map/indonesia_map.htm

Wikipedia: https://en.wikipedia.org/wiki/Politics_of_Indonesia

GAIKINDO: https://www.gaikindo.or.id/

ASEAN Automotive Federation: http://www.asean-autofed.com/

World Bank: https://data.worldbank.org

ITC Trade Map: http://www.intracen.org/

CIA Factbook: https://www.cia.gov/library/publications/the-world-factbook/geos/id.html

BPS: https://www.bps.go.id/

BKPM: https://www.bkpm.go.id/

GAPKI – Indonesian Palm Oil Association: https://gapki.id/

USDA Foreign Agricultural Information Network: https://www.fas.usda.gov/

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Documents

THE REPUBLIC OF INDONESIA · As the 16th largest economy in the world, Indonesia is heavily reliant on bilateral trade for economic growth. Trade contributed 39.54% to the GDP, with