Indonesia - World trade indicators 2009 (Vol. 1 of 2) : Trade brief

 72638 v1 World Trade Indicators 2009/10 Indonesia Trade Brief Trade Policy investigations (of 44 AD user countries). Most AD investigations were on steel products, paper products, In the context of the East Asian financial crisis, and wheat flour, and the main target countries were Indonesia pursued trade liberalization in 1998 under China, the Republic of Korea, and India. the auspices of an IMF program. Tariffs and non-tariff barriers were reduced, and foreign investment was Since 1998, Indonesia has also taken steps to liberalize liberalized extending also to services industries. In key services, notably financial services, 2005, the government implemented a new tariff telecommunications, and shipping. There have harmonization plan, which aims at setting a uniform recently been a number of policy reversals in these tariff of 5 percent for most products by 2010. areas, however, and a variety of trade and investment However, protectionist elements still remain, restrictions remain. In 2007, the government particularly through nontariff barriers in agriculture, consolidated existing laws on domestic and foreign textiles, and steel. Indonesia’s latest MFN Tariff Trade investment into a unified legal framework, and issued Restrictiveness Index (TTRI)1 for overall trade is 4.6 investment negative lists in July and December 2007 percent, which is similar to the average TTRI of 4.8 to provide a transparent set of restrictions for foreign percent for the East Asia and Pacific (EAP) region, direct investment (FDI). Although these lists clarified but significantly lower than the average of 11.6 percent the areas where foreign investment could take place, for lower-middle-income countries. It ranks 56th of they also added new levels of restrictions, and 125 countries, where 1st is the least restrictive. increased restrictions for many services sectors.2 These Treatment of non-agricultural imports and agricultural included rising foreign ownership restrictions and imports is similar, with TTRIs of 4.7 and 4.4 percent, some scale limitations. According to the GATS respectively. Following a significant drop between commitments index, the country ranks 94th of 148 1995 and 2001, the simple average of the MFN countries, suggesting room for deeper commitments applied tariff rate has remained steady at 6.9 percent in to multilateral liberalization. Indonesia now allows 99 2007 (latest available), slightly lower than the average percent foreign ownership in the banking sector, but for both the EAP region and lower-middle-income has not revised its GATS commitment at the WTO, countries, which are 8 and 10.3 percent, respectively. which remains bound at 52 percent.3 In 2007, Indonesia decreased its maximum tariff by 13 percentage points to 102 percent and applied this rate In response to rising food prices, the Indonesian to vanilla, of which Indonesia is one of the top government removed tariffs on several imported exporters in the world. The trade policy space, as goods, including wheat and soybeans in 2008.4 The measured by the wedge between bound and applied government also limited exports of rice to maintain tariffs (the overhang), has remained steady at 30.3 domestic supply, allowing the state agency to export percent, similar to its regional and income group only when domestic stockpiles were above a threshold comparators. Over the 1995–2008 period, Indonesia of 3 million tons and domestic prices were below their was the 13th largest initiator of antidumping (AD) target price.5 In late 2008 as world economic growth slowed, protectionist tendencies arose. Indonesia restricted Unless otherwise indicated, all data are as of August 2009 imports by introducing new import licensing and are drawn from the World Trade Indicators 2009/10 requirements for five categories of goods (food and Database. The database, Country Trade Briefs and beverages, textiles and garments, footwear, children’s Trade-at-a-Glance Tables, are available at toys, and electronics) in December 2008, and for iron http://www.worldbank.org/wti. and steel in February 2009.6 Further, the country increased tariffs on 17 product lines including steel, If using information from this brief, please provide the electronic parts, chemicals, food, and beverages following source citation: World Bank. 2010. “Indonesia (February 2009).7 After initiating only one anti- Trade Brief.