Sourcing from Indonesia

 

From searching for suppliers to having products shipped, buyers looking to diversify their sourcing within Indonesia can find step-by-step support in this guide. In a free, downloadable PDF format, each guide provides information on:

Key export statistics top trading partners and principal exports
Manufacturing centers major production centers, special economic zones and export processing zones
Trade services trade offices, services and resources
Banking & finance major commercial banks and loan availability
Paying for your purchase preferred payment methods
Export documentation step-by-step export procedure
Settling trade disputes tips to avoid and handle trade disputes

View the complete eBook online by clicking the tabs below. You may also download your free PDF copy here.

Getting orientedKey export statisticsManufacturing centersBanking and financePaying for your purchaseExport documentationSettling trade disputesProduct galleryDownload PDF

Sourcing from Indonesia: Getting oriented

This section discusses key industries and products of Indonesia. It is part of the Developing Country Sourcing’s Sourcing from Indonesia series to empower buyers looking to enter new supplier markets in Asia.

Sourcing from Indonesia: Key export statistics

This section discusses key industries and products of Indonesia. It is part of the Developing Country Sourcing’s Sourcing from Indonesia series to empower buyers looking to enter new supplier markets in Asia.

Indonesia is Southeast Asia’s largest economy ranked 10th in the world and averaging over 5 percent growth over the last decade.

It has a strategic location, as 60 percent of global growth is expected to come from Asia by 2025. The country is part of the Association of South East Asian Nations (ASEAN), which is in the process of forming a free trade zone. It is also strategically placed to do business with China, Japan and Australia.

Indonesia has the largest economy in Southeast Asia with nearly half of the region’s gross domestic product (GDP). It is the only G20 member from Southeast Asia, and is predicted to be in the top 10 largest economies in the world by 2030.

Overall, Indonesia was 30th in globe export in the world at $152.5 billion in 2015, which was a decrease from $175.3 billion in the previous year, according to The World Factbook.

The industrial sector has contributed the most to Indonesia’s annual GDP growth with mining and manufacturing as major

pillars of the nation’s economy. The economy is still able to grow decently despite the sharply falling commodity prices, falling stock market and depreciating exchange rate.

Export trade with APEC members, including Australia, South Korea, Thailand, the US, Singapore, China, Thailand, Taiwan and Malaysia, involves oil, followed by electronic equipment and clothing.

trading partners

Export growth in 2015

In contrast, exports declined for mineral fuels (4.4 percent), footwear (10.8 percent); knitted goods (7.6 percent), fruits (26.1 percent) and fertilizer (74.3 percent).

Indonesia’s overseas sales from ASEAN countries increased by 15.1 percent to $2.2 billion. Other increases are sales from China (6.6 percent to $945.1 million), Japan (5.3 percent to $1.1 billion), Australia (66.7 percent to $275.4 million), South Korea (6.1 percent to $407.1 million) and Taiwan (2.7 percent to $225.5 million).

In contrast, sales declined by 4.6 percent to $1.1 billion to the EU countries, followed by the US (6.8 percent to $1.1 billion), and India (0.6 percent to $660.9 million).

Non-oil & gas manufacturing industry reached$72.2 billion up 5.2 percent from 4.7 percent in 2015. Indonesia’s main export markets for these products are the US, Japan, China, Singapore and India.

Household consumption of private sector in Indonesia contributes by 56.8 percent to the country’s total national economic growth.

Indonesia recorded $1.14 billion trade surplus in February of 2016, up from a $660 million surplus reported a year earlier, as exports fell less than imports. In February, exports declined by 7.2 percent to $11.3 billion, following a 20.7 percent decrease in January.

By products, export sales went up for pearls, precious and semi- precious stones (153.8 percent), vehicles and parts (13.0 percent), materials from iron and steel (74.2 percent), ships (366.9 percent) and tin (105.7 percent).

Top 10 philippine principal exports

Other principal exports

Oil exports increased 0.5 percent and sales of non-oil and gas products were up by 8.7 percent. Major exports are oil and gas (12.4 percent of the total exports, consist of gas (6.9 percent), crude oil (4.3 percent) and oil products (1.2 percent); animal and vegetable fats and oils (14 percent); and electrical equipment and machinery (10.5 percent).

Other exports are footwear, part of such articles (3.4 percent); garments not knitted (3 percent) and ores, slag and ash (2.5 percent). Major export partners for these products are the US (11.6 percent), China (10 percent), Japan (9.9 percent), India (8.8 percent) and Singapore (7 percent).

Other exports include rubber and rubber articles; machines, engines and pumps; vehicles; gems, precious metals and coins; other chemical goods; footwear; and, wooden products.

Sourcing from Indonesia: Manufacturing centers

This section discusses key manufacturing centers in Indonesia. It is part of the Developing Country Sourcing’s Sourcing from Indonesia series to empower buyers looking to enter new supplier markets in Asia.

Being a vast archipelago with 17,000 islands, Indonesia needs to develop infrastructures for inter-island shipping services to connect to the main export and import gateway.

Being a vast archipelago with 17,000 islands, Indonesia needs to develop infrastructures for inter-island shipping services to connect to the main export and import gateway.

The largest islands are Sumatra, Java (the most populous), Bali, Kalimantan (Indonesia’s part of Borneo), Sulawesi (Celebes), the Nusa Tenggara islands, the Moluccas Islands and Irian Jaya (also called West Papua) and the western part of New Guinea.

Java is the most populous and the most developed island in the Indonesian archipelago. Java is split into four provinces, namely West Java, Central Java, Banten and East Java.

It is the main hub for the manufacturing sector, ranging from Banten to East Java. However, there is a need to consider the availability of labor, proper infrastructure and ports, especially for batik, handicrafts, electronics, automotive products, garments and chemicals.

Free trade zones (FTZ)

Batam, Bintan and Karimun of Riau islands in Sumatera are free of import tariffs, VAT and luxury goods tax. These FTZs are popular as offshore production bases for Singapore manufacturers.

A “Special Economic Zone is an area within the territories of the Republic of Indonesia and is designated to carry out the economic function and is granted certain facilities and incentives,” according to the Law of Indonesia No.39/2009.

SEZ are developed by preparing areas with geo-economic and geo-strategic advantages and accommodating manufacturing activities, exporting, importing and other economic activities with high economic value and international competitiveness.

incentives

Special economic zones (SEZ)

Indonesia originally opened the first SEZ in Batam, Bintan and Karimun in the Riau Islands to take advantage of the close proximity to Singapore and Malaysia.

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Sourcing from Indonesia: Banking and finance

This section discusses banking & finance in Indonesia. It is part of the Developing Country Sourcing’s Sourcing from Indonesia series to empower buyers looking to enter new supplier markets in Asia.

There are numerous foreign and local banks in Indonesia offering a full range of banking services throughout big cities such as Jakarta, Bandung, Yogyakarta, Surabaya and Medan. Their individual business products and services include saving accounts, electronic banking, credit cards, bank assurance, investment products, consumer credit products, remittance, collection and safe deposit facilities. For trade related products and services, there are savings accounts, working capital loans, investment loans and bank guarantees for small and medium enterprises and corporate customers.

Rupiah and foreign currencies, mostly U.S. dollar, are used for savings and checking accounts, term deposits, credit and debit card accounts and foreign exchange services. Safe deposit boxes are also available at some banks.

There are more than 118 commercial banks in Indonesia, consisting of state owned banks and private banks. It is important to select the right one to meet whichever suitable with the financial needs.

Central Bank

Central Bank (Bank Indonesia) is the central bank of the Republic of Indonesia. It aims to establish and maintain rupiah stability.

State-owned banks

State-owned banks (Bank BUMN):

  • Bank Negara Indonesia
  • Bank Rakyat Indonesia
  • PT Bank Tabungan Negara (Persero)
  • Bank Mandiri

Syariah banks

These banks operate in compliance with Sharia Law, as it is contrary to Islamic principles to invest in businesses that provide goods or services. It also prohibits acceptance of specific interest or fees, which is known as ribaa or usury, for money loans.

Foreign banks

There are various international banks in Indonesia. Branches can generally be found in the larger metropolitan areas.

  • The Royal Bank of Scotland (RBS Indonesia)
  • Bank of America N.A.
  • Bank of China Limited
  • Citibank N.A. (Citibank Indonesia)
  • Deutsche Bank AG
  • JP. Morgan Chase Bank
  • HSBC Indonesia

Foreign banks and most local banks allow customers to open a foreign currency and rupiah account. Services such as debit, credit cards and checking accounts are standard, while foreign exchange services and safety deposit boxes are available in larger banks.

PH commercial banks

Banking institutions

Indonesian banking institutions are classified into commercial and rural banks, according to Indonesian banking law. In terms of operational definition, banks in Indonesia are classified into non-Sharia and Sharia-based principles commercial banks.

Banks must run business based on prudential principles. The functions of banks in Indonesia are basically as financial intermediaries that take deposits from surplus units and channel financing to deficit units. Commercial banks differ from rural banks in the sense that the latter do not deal directly in payment systems and have restricted operational areas.

Sourcing from Indonesia: Paying for your purchase

This section discusses payment options in Indonesia. It is part of the Developing Country Sourcing’s Sourcing from Indonesia series to empower buyers looking to enter new supplier markets in Asia.

Payment methods

Payment methods

Sourcing from Indonesia: Export documentation

This section discusses export documentation in Vietnam. It is part of the Developing Country Sourcing’s Sourcing from Indonesia series to empower buyers looking to enter new supplier markets in Asia.

There are certain procedures that must be followed when exporting from Indonesia. Export documentation is required and goods must pass customs clearance that checks the volume of goods and specifications, quality, quantity and standards according to the Indonesian custom. Prohibitions, export clearance, taxes and licensing regulations from Indonesia should also be considered carefully.

Export procedures

Export is an activity of shipping goods from the Indonesian custom area to the custom area of other countries. Usually, export process starts from an offer of a party followed by the agreement from another party in a sales contract process, which in this case, are the Exporter and Importer. Payment process for the shipping uses Letter of Credit (L/C) or non L/C; each method has its risk and advantage.

Custom procedures for export in Indonesia

Restrictions

There are some restrictions to follow in exporting from Indonesia to other countries. For some goods such as untreated animal skins and tanned leather, export taxes are implied. It is prohibited to export untreated reptile skins, protected wild animals and plants.

Export clearance and taxes

Exporters are exempted from import duties, VAT and tax on luxury products for materials and intermediate products used in manufacturing goods destined for abroad.

The export tax must be paid before delivery to the carriers. These are applied for exported goods which are taxable goods. The export tax is valid for a certain period of time by taking into account the consideration from Technical Ministers and other related associations. The government imposes duties on exports of untreated skins and on white tanned leather.

Export procedures

Export licenses

Goods controlled for export must be declared to customs at time of export withthe appropriate export license and or agency approval, such as:

  • Natural goods that are part of Indonesia and are protected by law, such as: raw woods, raw rattan, and natural resources that are unique to Indonesia and valuable to the local cottage industry;
  • Cultural goods;
  • Hides and raw leather from reptiles;
  • Rubber lumps; and,
  • Rubber in all forms harvested from local forest system.

Sourcing from Indonesia: Settling trade disputes

This section discusses settling trade disputes of Indonesia. It is part of the Developing Country Sourcing’s Sourcing from Indonesia series to empower buyers looking to enter new supplier markets in Asia.

Dispute avoidance

There are some ways to avoid trade disputes: buyers and suppliers should maintain clear communication, establish clear contract terms, ensure payment based on the agreement and conduct a thorough risk analysis.

Dispute avoidance

There are some ways to avoid trade disputes: buyers and suppliers should maintain clear communication, establish clear contract terms, ensure payment based on the agreement and conduct a thorough risk analysis.

Resolve legal disputes

One of the most common problems that faced by all exporters is whena foreign partner or buyer is not adhering to an established agreement. Methods of resolving disputes that may arise are generally known as Alternative Dispute Resolution (ADR), offering neutral mechanisms for resolving disputes that may arise and can include arbitration, conciliation and mediation. Contractual disputes are usually resolved through arbitration or litigation, either in Indonesia or a foreign jurisdiction.

Indonesian arbitration

The Indonesian National Board of Arbitration (BANI) was established in 1977 and has its own rules and procedures. It is the principal domestic arbitration institution. If parties submit a dispute to BANI they are obliged to use BANI registered arbitrators.

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Conciliation or mitigation

Conciliation, also known as mediation, is a process in which disputing parties appoint a neutral third party to assist them in resolving their disputes. In Indonesia, this process is preferred to settle disputes. Unlike a judge or an arbitrator, the mediator does not have the power to make the parties to accept a recommended solution. The goal of mediation is a voluntary negotiated settlement.

Indonesian litigation

Litigation usually involves numerous formal hearings and parties, can be costly and time-consuming. It may delay a case by simply failing to attend such hearings. With Indonesian judges not formally bound by previous judgments, outcomes can be unpredictable. The risk of external influences also complicates this uncertainty.

A claim in the local District Court, followed by an appeal to the High Court and then a final decision by the Supreme Court may take over five years.

Foreign litigation

Indonesian law does not recognize or facilitate the enforcement of foreign judgments. The foreign judgment may be introduced as evidence in the new proceedings, but the Indonesian courts are not bound by the decision of the foreign court.

Foreign litigation is usually only effective against assets outside Indonesia.

Protection of intellectual property rights, trademarks and patents

Intellectual property rights

Indonesian law does not recognize or facilitate the enforcement of foreign judgments. The foreign judgment may be introduced as evidence in the new proceedings, but the Indonesian courts are not bound by the decision of the foreign court.

Trade marks

Trade mark system in Indonesia is generally adopting the ‘first- to-file’ system. It is important to register trade marks in Indonesia because trademark piracy due to bad-faith registration is a serious problem. This registration exists where a third party, which is not the legitimate owner of the mark, registers the mark first in Indonesia, to prevent the legitimate owner from registering it.

The solution is to apply to the Indonesia courts to cancel the unauthorized registration. Once registered, a trade mark is protected in Indonesia for 10 years from the date of filing. The registration can be renewed for subsequent periods of 10 years without limit.

Patent

Indonesia adopts a ‘first-to-file’ patent system, meaning that the first person to file an IP right in the Indonesian jurisdiction will own that right once the application is granted. A standard patent is granted for 20 years from the filing date. A simple patent lasts for 10 years from the filing date.

Annual payments must be made after grant to keep the patent valid.

Copyright arises automatically after a work is created in a material form such as in writing, video and audio, among others. It is not required to be registered in order to have it protected, however, many small businesses operating in Indonesia choose to register copyright as proof of ownership. It usually takes about 12 months for the registration certificate to be issued.

Sourcing from Indonesia: Product gallery

Choose from our gallery of innovative products featured on the Analyst’s Choice section of GlobalSources.com. For more Indonesia suppliers and their latest products, visit NewSourcingMarkets.com.

Men’s suede boots

The model #6403 from CV Karunia Multiniaga is a pair of suede boots with lace. Marketed under the Zorgeo brand, it has a dark brown upper and white soles. The company exports most of its products to Asia.

suede-boots

Stingray leather bangle

This brightly colored bangle is from Jabruzz Fashion. The exterior comes in stingray leather and the inner surface is made of cow leather. Custom designs are accepted. Jabruzz Fashion’s main export market is Asia.

bangle

Basket made of Indonesian rattan

Agung Jaya Rattan offers model 1-#0793, a storage basket made of top-quality Indonesian rattan. Exported mainly to Europe, the product is available in its natural color or can be painted on request.

basket

Handcrafted silver earrings

The model #8473 from Bimbika Silver Jewelries & Accessories is a pair of sterling silver dangle earrings. It features intricate floral patterns handcarved by experienced artisans from Bali, Indonesia. Bimbika exports the majority of its products to North America and Asia

chair

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