1

A

GLOBAL / COUNTRY STUDY REPORT

On

“INDONESIA”

Submitted to Gujarat Technological University

IN PARTIAL FULFILLMENT OF THE

REQUIREMENT OF THE AWARD FOR THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

S.R. LUTHRA INSTITUTE OF MANAGEMENT (Inst. Code: 750)

MBA PROGRAMME

Affiliated to Gujarat Technological University, Ahmedabad

May 2013

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Table of Contents

Sr.No Particulars Page No.

PART-I

1 International Trade & Trade Opportunities 2

2 Sectoral Composition & Growing Industries 11

3 Financial, Capital & Money Markets 22

4 History, Culture & Society 36

5 Manufacturing 47

6 IT, Services & Infrasructure 55

7 Geography, Topology & Natural Resources 64

8 Agriculture & Processed Foods Industry 73

9 Political & Economic Environment & Legal

Aspects of International Trade

80

PART-II

1 Chemicals 91

2 Pharmacuticals 98

3 Textiles 109

4 Machinery and Equipment 128

5 Processed Food 137

6 Agricuitures 145

7 Automobiles 159

8 Petrolium 167

9 Metals 173

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PART-I

1- International Trade & Trade Opportunities

This report is designed to assist the Indian business community in intensifying bilateral trade,

economic and investment relations with Indonesia. It provides basic information on

Indonesia, the Indonesian economy, the profile of Indonesia’s foreign trade and major items

traded between India and Indonesia.

It also contains information for those intending to visit Indonesia or planning to set up

business operations here through a representative office. Information related to investment is

also included, together with contact details of Indonesian business entities. We hope this

project will prove useful to Indian business. The Embassy of India will be happy to assist

business endeavors to improve trade and investment between India and Indonesia in every

way possible.

Cooperation can be enhanced between India and Indonesia by investing in sectors such as

energy, mining including coal, oil and natural gas both upstream and downstream, power

generation, nonconventional energy, plantation, infrastructure such as toll roads, ports,

railways, telecommunications and healthcare facilities. Investments can also flow in service

sector such as consultancy (both legal and engineering), IT, telecommunication and tourism.

Some of the Indian companies, especially in oil and natural gas and infrastructure have

evinced interest in Indonesia. However, their efforts have been episodic and unfocussed.

Indonesia has large untapped potential in natural resources and is a maritime neighbor of

India with a strategic location. This should motivate Indian players to be more focused on

Indonesia and make concerted efforts to work towards better economic partnerships for

mutual interest.

Boosting investment and upgrading productivity are the main current challenges for

Indonesia’s economy in order to meet global challenges and reducing poverty and

unemployment.

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Foreign direct investment has also been an important element of Indonesia’s economic

development process. Even though the share FDI in total GDP is relative low (check the

number), FDI plays important roles both in boosting the overall productivity and export as

well. However, the current trend shows that Indonesia becomes less attractive as the

destination of multinational corporations.

As in many other countries, Indonesia has been offered special tax incentives to promote

investment. These incentives include, for example, tax holidays for new firms, tax credit for

new investments, exemptions from import duties particularly capital good and also providing

spesial zones for exporting companies.

Proponents of such incentives argue that they promote investment and jobs, while opponents

challenge that they are not effective and redundant. They have high revenue costs, distort

investment, and facilitate corruption, making the tax system complicated and non-transparent.

The debates over the effectiveness of tax incentives are always lively in Indonesia. This is

particularly true currently since Indonesia is in the process of reforming the (already liberal)

investment law together with tax reforms as part of institutional reform to improve

investment climate in Indonesia.

Given the growing importance of industrial competitiveness in increasing competitive global

marketplace and the potential of the relationship between FDI and productivity upgrading and

export promotion, this paper aims to explore the effectiveness of tax incentives policy in

attracting FDI (back) to Indonesia as argued by the proponent of tax incentives.

This paper starts with exploring the rationale behind providing tax incentives for promoting

FDI and empirical evidences across countries. In the next section, I will briefly discuss about

the recent trend of FDI in Indonesia. The discussion on the impact of FDI in promoting

investment and productivity will be reviewed in section IV. Section V examine the

Indonesia’s experiences with tax holiday regimes in 1970s and the next sequence of new

modified tax incentive regime starting in 1996 up to now. Finally, in the part of this paper, we

will propose better various ways to promote FDI in Indonesia.

The Government’s reform program, including measures addressing corporate governance and

the legal system, is changing the business culture. The Indonesian market rewards Australian

businesses that take time to develop strong personal relationships and community ties.

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Managing a business in Indonesia requires a sound understanding of the culture’s influence

on hiring, training and managing staff Navigating Indonesia’s legal and regulatory system is

best done with the aid of a notary; consulting a notary when setting up a company, obtaining

approval for foreign investment and drafting a contract is strongly advised.

The archeological evidence on the Indonesian kingdoms of the 5th century also points to the

existence of trade relations between India and Indonesia since a long time. These trade

relations influenced Indonesian native cultures, too.

The impact of Indian culture is clearly visible in architecture, philosophy of Life, Dharma and

traditions in various parts of Indonesia but, above all, in the languages of this country.

Despite having 90% of Muslim population, Mahabharata and Ramayana are two epics which

drive the way of life of Indonesia. Javanese, the original language of Java is 60% Sanskrit.

The national language, Bahasa Indonesia, contains at least 3000 Sanskrit words in its

vocabulary.

Trade relations between India and Indonesia go back to ancient times, contributing to the

historical and civilization affinities between the two countries. In the modern era, trade

relations were formalized under a Trade Agreement signed in June, 1978 committing both

countries to take all appropriate measures to facilitate, strengthen and diversify bilateral trade.

Periodic discussions have taken place at the Ministerial and official levels to strengthen

economic and commercial ties within the framework of this agreement. JBC/business level

meetings have also been convened periodically, particularly in conjunction with high level

visits. However, no forum for regular talks over a range of cooperative issues with Indonesia

existed during the Soeharto years and only a bilateral Agreement on Avoidance of Double

Taxation between the two countries was concluded in January, 1986.

Indonesian investment India is quite low and it ranks 36th

in FDI inflows to India. But now

days Indonesian companies have started bidding for enegry related projects and infrastructure

in India.

Indian companies have also been involved in supplying equipment to and undertaking

projects in Indonesia. This include STUP, TCIL, IRCON, WAPCOS, Punj Lloyd

Consultancy India Ltd., and recently RITES Ltd. NIIT and APTECH, LCC Infotech, Tech

Mahindra have established their IT Education Centers as well.

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BHEL get power power project contracts in the power generation sector. TCS has also set up

a respective office in Indonesia, and TCS has also been working on various projects with the

local banks and some in collaboration with Microsoft and other companies.

Indonesian investment India is quite low and it ranks 36th

in FDI inflows to India. But now

days Indonesian companies have started bidding for enegry related projects and infrastructure

in India.

During the visit of President SBY to India in 2005, KADIN decided to have a ‘India

Committee’ which would be a specialized body for promoting bilateral economic relations

between India and Indonesia and work to enhance interaction between the Chambers of

Commerce and Industry of the two countries and promote individual business interests of the

private sector. KADIN signed an MoU with FICCI in November 2005 to achieve this

objective.

KADIN India Committee was formally launched in November 2006 with Mr. S.P. Lohia as

its Chairman. The Committee has three member Advisory Board and over 40 members

including the Executive Office bearers.

There is also an association of corporate entities which mainly consists of Indian business

houses and enterprises of Indians and Indonesian Indians called “Economic Association of

Indonesia and India (ECAII)”. It was established in 1977 with a view to promote

development of economic relations between Indonesia and India

The prevailing implementing regulations in the customs sector remain in force insofar as they

are not contrary to and/or not regulated in the new implementing regulations based on the

Law

Customs matters that remained unsettled at the time the Law came into force shall be settled

based on the provisions of customs and excise regulations that are the least burdensome for

the individual or legal entity concerned.

Importation of goods into Indonesia must be declared to the Customs Authority using an

Import Declaration Form (PIB). To be able to fulfill customs obligations, the importer must

register with the Director General of Customs and Excise to obtain an Importer Identity

Number (API).

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Customs duty and import taxes payable should be settled first before the goods are released

from the customs area (ports). If the deadline is not met, the customs duty payable is subject

to an administrative penalty of 10% from the customs duty payable.

Import Facilities for Export Purpose (KITE) is defined as the granting of exemption and/or

repayment of Import Duty (BM) and/or Excise and Non-collection of Value Added Tax

(VAT) and Sales Tax on Luxury Goods (LGST) for import of goods and/or materials to

process, assemble, or be installed on other goods, the products of which are mainly intended

for export.

Balance of payments data includes foreign direct investment in the capital account. However,

FDI data in the BOP also include non-FDI items such as financial transactions with

commercial banks. But it is not taking to account FDI in oil and gas sectors. Therefore we

cannot conclude whether the BOP tends to overestimate or underestimate the FDI figures.

Recent reforms streamline procedures for foreign firms establishing operations. Investors

must submit a brief business plan and outline the proposed structure of the company to the

provincial office of the BKPM; approval takes at least ten working days. However, a good

relationship between the investor and the relevant bureaucrat helps reduce processing time.

Investment approvals and permanent license data issued by the Investment Coordinating

Board (BKPM) is widely used to measure investment trends. However, data from BKPM

does not include the oil and gas, and financial sector. Also, the approval data sometimes

include unrealistic projects with having huge amount, which distort figures. Permanent

license may be close to realization, but again the data does not include the oil and gas, and the

financial sector.

Products made using imported raw material may be supplied by a company that is a NIPER

holder to a Bonded Zone for further processing, provided that: a. it applies for BC 2.4 to the

Customs Office that supervises the applicant’s area; b. customs inspection is carried out by a

Customs Official; and c. import duty and/or excise are exempted and VAT and LGST are not

collected.

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A number of recent developments have increased the level of uncertainty for investors in

Indonesia. Although some of these—such as the increase in taxes, charges and restrictions on

business, and the hikes in minimum wages—impact generally, others have raised particular

questions about the future environment for FDI in Indonesia. Three cases arise from problems

in relations between local and national governments: Semen Gresik mentioned earlier, Kaltim

Prima Coal (KPC) and the Caltex operation in Riau province. A fourth, Manulife Indonesia,

raises fundamental questions about the administration of justice in Indonesia.

The Indonesian financial system is struggling to overcome the legacy of the Asian crisis. The

Government still controls more than three-quarters of the total assets of the commercial banks

and much corporate debt remains unrestructured. Bank assets are dominated by government

and central bank debt, with loans at only around one-third of deposits. About a quarter of

distressed corporate debt is known to have been subject to restructuring arrangements.

Even for that debt, recent World Bank analysis has raised doubts about whether most of these

arrangements have succeeded in reducing debt to sustainable levels. Public sector debt is also

substantial, with public debt interest payments budgeted to consume over 5 per cent of GDP

in 2002, making it the largest single line item. Some progress is, however, being made.

A series of bankruptcy claims were filed against Manulife Indonesia in the South Jakarta

District Court culminating in a court appointed administrator seizing the company. The move

prompted the intervention of the Canadian Government, and led to IMF calls for the reform

of Indonesia’s commercial court, the revision of its bankruptcy law and the establishment of

an anticorruption commission.

The Indonesian Supreme Court recently rejected the bankruptcy ruling of the lower court, but

the strength of that rejection has been questioned by leading Indonesian lawyers and the

plaintiff is reported to be considering the possibility of further legal action.

Investing in relationships is critical to succeeding in Indonesia. Establishing a relationship

requires time, preferably with face-to-face contact with a person of similar age and status.

Demonstrating loyalty and trustworthiness is critical to maintaining a relationship. The longer

term returns of investing in relationships can be significant and include:

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Relationships can determine many facets of commercial life, including granting credit,

placing orders and awarding contracts. A longstanding obligation between two people can

affect commercial outcomes. Showing patience and flexibility in commercial dealings builds

trust and improves the chances of a successful outcome; contrasting expectations can have

adverse consequences. Australian business people should not ‘force’ a relationship, or

overestimate its depth.

Variables including age, gender, educational and marital status, also affect how easily

personal and commercial relationships are formed. Western firms may find it more

productive to send older, more mature executives rather than young personnel to negotiate or

work in Indonesia.

Businesses in Indonesia are well advised to develop a genuine awareness of their surrounding

community. Demonstrating a business contributes to community welfare helps ensure the

community has an interest in protecting the business. Unless a venture seeks local community

involvement, providing employment and investment will not ensure good relations or

security.

The concept of traditional land ownership remains strong across Indonesia, and irrespective

of contractual rights the Government may award, local communities will act to protect their

environment. Hence, mining companies adopting consensus based approaches to secure their

rights are more likely to receive local community support than those relying on legal

solutions.

New government reforms and laws passed since 1997 governing corporations are changing

the business environment. For example, new corporate financial reporting and shareholder

accountability laws increase business transparency and information, especially for those

seeking to invest in existing ventures (Jakarta Post, 28 April 2000). New bankruptcy and

capital market laws conform with international best practice, clarifying firms’ obligations to

creditors and shareholders.

Newly introduced laws covering anti-competitive behavior also protect new entrants from

predatory behavior by existing market players. Recent audits of government institutions and

investigation of state officials and bureaucrats eventually should improve the quality of the

public service.

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Indonesian Bank Restructuring Agency, IBRA, sales of Indonesian corporations and banks

may dilute the concentration of asset ownership in the economy over coming years,

especially through increasing foreign ownership and competition between companies and

industrial groups. Nevertheless, implementing these new laws will take time and resources,

so gains will not be immediate; the Government recognises this is the case with legal system

reforms.

Many notaries are unfamiliar with processes relevant to foreign investors, and their

knowledge and fee structures vary considerably. Provincial offices of the Investment

Coordinating Board, BKPM, can suggest notaries experienced in foreign investment,

although their rates often are higher than those of other notaries. Indonesian based business

consultants normally use their own experienced notaries.

Contracts have a very important place in Indonesian business, although their role may differ

from western practice. Individuals are unlikely to breach contracts reached through consensus

with a group of distinguished peers. Compared with their foreign counterparts, many

Indonesian contracts are less detailed and the negotiations are more likely to influence their

meaning. While contracts often outline specific details, including obligations and dates,

Indonesians commonly assume contracts will be subject to ongoing negotiation and

interpretation, if circumstances change.

To honors contractual obligations, firms cannot simply rely on a signed document. They also

must maintain relationships at many different layers of business, government and the

community. To secure binding business agreements, social pressure is more important than

legal documents.

Contracts generally are in Indonesian, except where large Indonesian corporations are

involved; here English often is used. Firms should obtain more than one English translation.

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2- Sectoral Composition & Growing Industries

OVERVIEW OF INDONESIA

Name of country: Indonesia

Capital of country: Jakarta

Currency to be use: Indonesian Rupiah

Population of country: 238 million (2010 census)

Main industries: petroleum and natural gas, textiles, footwear, mining, cement, chemical,

fertilizers, plywood, rubber, food, tourism

Also, Indonesia has a third largest democracy after India and China. The distinction in its

characteristics from other countries is political stability, self – reliance and also a robust

economic growth. Investment opportunities are growing in all sectors from infrastructure to

manufacturing and services.

SECTORIAL COMPOSITION AND ANALYSIS

Indonesia includes different sectors like agriculture, Education, Energy, Finance,

manufacturing and services. Their overview and contribution are explained as follow.

1. AGRICULTURE SECTOR

Indonesia agriculture sector contribution in GDP is 15.3%. In Agriculture Sector the Main

Products are palm oil, cocoa, rubber, coffee, tea, sugar, tobacco. Markets for main export are

china, USA, Japan, Singapore, South Korea, ELI. Indonesia is the world’s leader in

production of pale oil as well as a leading global producer of other high value commodities

such as cocoa, rubber & coffee. The country is rich with fertile land ideal for growing a range

of crops for both export & domestic consumption. The country has still heavily reliant on

imports for staple goods such as wheat, soybeans & sugar which have raised the issue of food

security on the national agenda as world food prices have continued to climb. Institutions

such as the Indonesian Biotechnology Information Centre, advancement efforts are made by

the bogar agriculture institute and other private companies for development of hybrid seeds

technology which would increase the food production. Government owned fertilizer company

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made an announcement in 2010 that they are planning to set up new plant worth of $865

million USD which will completed by 2014.

PALM OIL

Fertile land, a favorable environmental condition, climate and low labor costs have made

Indonesia the leading producers of crude palm oil (CPO) worldwide at a time when global

demand for use in foodstuffs and bio energy is on the rise. It contributes 4.5% in GDP. From

that 16.38 million MET (2010) palm oil exports. Main export markets are India, ELI, China,

and USA. Demand for exports has being driven by China & India’s rapid growth for use as

edible oils in foodstuffs & for biofuel production. Industry players & the Indonesia palm oil

producers association, GAPKI, have voiced their discontent over the CPO & make it

uncompetitive in the export market.

RUBBER INDUSTRY

Indonesia is the world’s second largest natural rubber exporter after Thailand, while having

the largest area of rubber plantations. Indonesia’s rubber plantation have mainly demitted by

small hold formers which make up for 86% of the 3.5 million hectares of land under

cultivation, with the remainder split more or less equally between private companies & state

plantations. The main sites of plantations have found in North & South Sumatra as well as

Riau, Lampung & Java. According to the Rubber Association of Indonesia, GAPKINDO,

plantations in Indonesia produce an average of 880 kg – 1000 kg per hectare, compared with

up to 1500 kg for Malaysia & Thailand.

SUGAR INDUSTRY

The world’s second largest sugar producer & exporter in the 1930s, Indonesia’s sugar

industry has been in a state of decline. Indonesia is South East Asia’s largest consumer of

sugar and the world’s third largest importer, mainly for raw sugar. Main production areas are

West Java, East Java, Lampung, North Sumatra, and West Kalimantan. Sugar production and

refinery is mainly carried out in Java by private sector companies, state owned plantations

and community plantations. As of 2010, the government has aiming to make the country self-

sufficient in sugar production & processing by 2014.

SILK INDUSTRY

A key opportunity for future development is slik industry, which has high global demand as a

commodity and due to observed limitation capability of traditional producers due to natural

disaster.main silk producing area is found in south Sulawesi, east timor, yogakarta and few

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small producers in bali.silk industry has high potential that Chinese investors are rushing to

make investment of $ 20 million USD in Indonesia forest sector according to government

pledge.

2. ENERGY:

Increasing domestic demand of oil and gas and declining production resulted to Indonesia

became a net importer in 2004. Also rising prices, and temporarily withdrawn from OPEC

were the main reason for the declining oil production.

GAS SECTOR:

Indonesia has the third largest reserves of natural gas in Asia pacific region at 108.4 trillion

cubic feet of proven reserves at the end of 2010 which makes Gas production become more

positive. And also allows country to take advantage of its geographical position for energy

exports.

Local and international Institutions like BP Migas (upstream regulator in Oil and Gas

Industry), Perusahaan Gas Negara (PGN), Pertamina (acquired 15% of tatal natural gas

production), CNOOC, TOTAL, BP, Conocophillips, Exxon – Mobil etc are the well-known

players in Gas sector. Traditional export markets are Japan, South Korea and Taiwan in

2008.It has also ideal position to serve Chinese market and west coast of USA.Government of

Indonesia has aimed to reorient the domestic energy consumption towards gas in light of high

oil prices and the environmental benefits and because of gas considering the 50% reduction in

carbon emissions in the comparison to oil and coal.

OIL SECTOR:

Indonesia ranks 21st place in the world as an oil producer that has contribution of 1.2% of

total global production.The two largest fields in oil production are Minas and Duri on the

East coast of Sumatra and both maturing with over 80% of reserves. The key players in oil

production are Chevron (leading producer with 47% of total production in 2009), Pertamina

(with 16%), Total, Conoco Phillips and Medco. Main sources of imports are Asian countries

and Middle East countries including Saudi Arabia. 277,000 bpd of crude oil and 407,000 bpd

of fuel oil were imported which had shown in data of MEMR in 2010. Oil capacity has still

required to increase that attracts the foreign investors like Kuwait Petroleum Corporation

which and it plans to construct a refinery at Balogan and West Java.

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COAL INDUSTRY:

Indonesia is the world’s third largest coal exporter. By taking advantage of increasing apelite

for coali Asia’s emerging markets, it expected to grow at 421 MET by 2025. As per the 2011

BP Statically Energy Survey, it has 5529 million tons of proven reserves (0.6% of the world’s

total). Its main producing locations found in South Sumatra, Kalimanthan and East

Kalimanthan. Types of coal in Indonesia includes 13% of high quality bituminous coal at

more than 7100 Kcal/kg or ‘cokink coal’, 62% of bituminous thermal coal at 6100-7100

Kcal/kg and 24% of low quality coal at below 5100 Kcal/kg with low sulphur and ash

content. India and china are the main demand sources because of their emerging markets and

rapid industrial growth.

GEOTHERMAL ENERGY:

Indonesia has the largest estimated geothermal energy reserves in the world with approx. 27

GW or 40% of the global total. Presently, it utilizes less the 5% of estimated reserves or 1191

MW and also the third largest producer of geothermal energy after America and Philippines.

Electricity capacity for their entire country is approx. 31 GW and it also increases by 9%

every year. Country’s 80% of electricity generation is also done by fossil fuel according to

World Bank. The delay in development of this industry includes different factors like lack of

financing projects, conflict between local and central government as well as high risk for

investor that national electricity company, etc.

3. FINANCE

OPPORTUNITIES IN INDONESIA’S BANKING INDUSTRY

Due to liberal rules of foreign ownership allow 99% stack in banking sector and hence 10

major foreign and 28 foreign joint venture banks are there in Indonesia. In 2010 economy

grow at 26.74% which creates interest of investors. In 2006 Single pricing policy was

introduce by Bank of Indonesia which create more transparency which was going to expire in

2010 but enforcement challenges of public sector lead two year postponement of SSP. With

growth in banking sector, Bank of Indonesia focuses to encourage banks among

specialization. Bank of Indonesia is going to offer incentives to banks which will make

public offerings in near future as there is need to increase capital adequacy ratios. Small scale

banks with less than $11 million USD needs to be acquired or merged and hence it leads to

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the end of market and raise opportunities for foreign investors which lead to banking sector

more profitable.

Mr Maryono, the president director of bank Mutiara - which has faced crisis in November

2008, has changed corporate governance and culture which result positively with double RP

of 12.6 trillion and net profit increase by 86.08% in first quarter of 2011. In June

2011American hedge fund is about sell its 30% stack in Bank Mayapada which is held by

family of Tihar with rating of A- from Fitch with right issue of 400 billon RP in 2010. These

both events were golden opportunity for Indonesia’s banking industry.

Rural population is served by rural banks and micro finance initiatives outside the main cities

of Java with growth in credit lending mostly for use of working capital. In 2008 after Texas

pacific group takeover the Tabungan Pensiunan Nasional, it has double micro loan portfolio

to $550 million USD and it has triple its branches to 1000 in 2010. Cause of new technology

like swiping machines, finger printing technology, etc helped to grow Rural Banking Micro

Financing.

CAPITAL MARKET

Stock exchange of Indonesia increase Jakarta Composite Index by 44% in 2010 which shows

that it’s outperforming market all over the world and there is quick movement by investors in

Indonesia’s banking sector with sound cash inflows. In 2011 volatility has been seen in first

half with problems that lay down the capital market reflection. In 2010 the positive result

seen due to positive IDX performance.

ISLAMIC BANKING SECTOR

In Indonesia 80% population is Muslim. Bank Indonesia is pressuring long term development

through Islamic bank Blue Print by 2015 with vision to make bank Indonesia most attractive

and build own brand of Morden Islam. The sector has 5 Islamic bank and 27 conventional

banks from which there are two leading players they are Bank Mandiri syariah and Bank

Muamalat.

According to Bank Indonesia more banks are to setup shariah units and 32 requests are

pending for establishment. Islamic bonds were popular among domestic investors.

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MAKING THE BANKS WORK FOR REAL ECONOMY

Impressive profit in banking sector of Indonesia has seen over past 5 years, even global

downturn was there. But when yardstick of sector performance is compared under

performance and limited contribution to real economy has seen. Low penetration rate and

shallowness of market gives penalty of leverage over lending rates. Net interest margin stood

at 5.8% in 2010 and in Q1 of 2011, it has dropped by 27 basis points. High overhead cost

leads to high rates. Cost of banks of Indonesia has been increase 17.7% during 2004 to 2010.

Bank Indonesia introduces penalties for banks have a loan to deposit ratio below 78% which

will bring lower net interest margin to borrower. Banks allowed increasing lending and

lowering the cost of it by taking more effective method of analyzing risk and credit history

through information technology.

CAPITAL MARKETS: WIDENING THE LOCAL INVESTOR BASE

Indonesian Stock Market is performing well among Asia pacific region for 2010. There is

risk of capital flight of foreign investors over 2011 as market struggle with inflation and

uncertainty to it. For benefit of whole country, environment is created more inclusive. The

debt management office of Indonesia face challenges in reducing debt and dependence to

foreign investment and for it government has issued bond to the domestic market. By this

government has met its deficit in budget in 2011.

The bond market of Indonesia has been dominated by government bond which leads to

introduce new product like retail government bond and shariah bond which is grown by 56%

in 2010. The online trading over past three years has been increased in number of investors in

which leads to growth in market with faster and improved online transaction. But the other

side of this fact is it has increased volatility and investors start to invest for short term for

quick returns. Government’s future plans to grant share in global bond allocation offering for

local investors may create less friendly environment for foreign investors.

The Prospects for Indonesia’s Insurance Industry

Insurance market of Indonesia is attractive and to gain competitive edge local provider are

offering international partners to diversify its product portfolio. It leads to development of

industry and increased opportunity for merger, acquisition and joint ventures. Each year life

insurance as well as general insurance companies is forced to new requirement to create

strength and consolidate sector.

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4. MANUFACTURING

According to census 2010 Manufacture sector is key driver for growth and economic

development of the country as it provides employment opportunity to 14.4 million people and

share of total FDI Inflows by 36.2%. Manufacturing sector is highly competitive in country

after singing China- ASEAN Free Trade Agreement (CAFTA) in 2010. The competition has

gone up to global level and local manufacturers productivity and growth is not efficient

enough to compete even in core industry like textile, this is also due to slow reforms in

industry regulation policy, underdeveloped technology and infrastructure. Country is blessed

with the wealth of natural resources which can be easily converted into competitive

advantage at the global level for the manufacturers. Manufacturing sector is highly

diversified in industries like Textile, Pharmaceutical, Automotive and Food and Beverage.

Manufacturing is the most popular sector for foreign direct investors which has grown up by

12% in 2010 from 2009, In April 2011, Ministry of Economic Affairs has taken some

incentives to attract foreign investors in key industry such as textile, readymade garments and

some of raw material producers where country is lacking, this industries will be given 100%

tax relief. Major disadvantage for the sector is high production cost due to high import taxes

on raw material necessary for the production such as chemicals for textiles and

pharmaceutical industry. Ministry of Industry targets 8% growth by 2014 in domestic

production facilities of raw material. Over all Indonesia is attractive destination for

manufacturers in ASIA but the major risk factor is raising wages in china, though it can be

avoided through quick steps to develop infrastructure and bureaucratic reforms.

Manufacture sector is negative affected due to singing ASEAN-China Free Trade Agreement.

Under the agreement raw material from china is exempted from all taxes, which has resulted

in market flooded with Chinese made goods. Major inflow of Chinese textiles, electronic,

footwear, cosmetics, food and beverage has seen trade deficit. However, country like china

believes in mass production while Indonesia has opportunity to build core competence by

positioning itself to quality production. e.g. After signing CAFTA in 2009 there was initial

drop in local production of fabric’s and yarn to domestic sales ,but in 2011 domestic sales is

increase by 33% compared to 2010.Other products like footwear have gone through similar

situation as consumer spending power and confidence has increased towards local

manufacturers so looking for quality and reliable products. China products are still coming in

the market and so labour intensive industries needs to remain competitive all the time.

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Manufacture sector needs to invest more on research and innovation to adopt more efficient

and effective technology. As compared to other manufacturing countries like India, China,

Brazil who is growing at average of 25% in exports, while Indonesia is way behind on the

way of development in exports with just 15%. The long term plan for research and

development to generate innovation is necessary for growth of the country, to be effective

they must be accompanied by sufficient financing. Banks are unwilling to lend any financial

service due to low competition and slow growth in labour incentive sectors. Loan to

manufacturing sector is decreased by 13.1% in 2010 compared to 2009; an increase is over

40% to the mining sector according to Bank Indonesia.

5. PROPERTY SECTOR

Indonesia’s real estate sector has been experiencing a revival following the shocks of the

Asian crisis & the global economic downturn. The average condominium price is 14,59,600

RP/sq ft Q4 2010(Prime area). Demand for low income housing has also increased giving rise

to satellite cities outside of the capital. The Indonesian Bank Restructuring Agency took over

property assets worth 70 trillion RP. Some of the largest companies by capitalisation on the

IDX include Lippo Karawaci, Bumi Serpong Damai, Ciputra Development, Summerancon

Agung, Bakrieland, Jadabeka and Pakuwon Jati. The majority of Indonesian nationals face

difficulties in owning their own property due to the high rate of lending offered by the banks

that put the average age of outright ownership at 61 years.

OPPORTUNITY IN REAL ESTATE

The combination of rising demand and increasing supply is conducive to improving supply is

conducive to improving the contribution of the real estate sector to the national economy

which remains low. Indonesia has a huge population & demand for housing is high, so the

country is a spectacular investment opportunity. Newly constructed state schools in Jakarta

are using more ‘green’ & sustainable material & technology while ciputra Group’s

development in Kunigam will use heat resistant glass & environmentally friendly paint. The

rental market for resistant apartments remains lucrative in Indonesia as bank leading for

mortgages remains tight & bureaucratic procedures for purchasing a property turn the lower

& middle income segment to the rental market.

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INDUSTRIAL LAND AND PROPERTY

Average industrial land rental price is 8,00,000 RP/ sq ft Q1 2011. Available Industrial land

is 9700 ha (2010). With continued economic growth, political stability & relatively low

labour costs; Indonesia is becoming an attractive destination for manufacturing. A number of

multinational companies have recently set up facilities in the country in light of rising wages

in china’s coastal provinces, such as Panasonic, L’oreal, Nestle and Yamaha. Indonesia’s

position as a manufacturing base lost its lustre aft1998 when the county came to be seen as

too risky for the large scale of investments needed to set up. The sharp rise in demand could

see land price rise by 20-30% by the end of 2011 as a market correction considering prices

were probably kept low by developers to attract investors following the global crisis.

PUBLIC PRIVATE PARTNERSHIP

In Indonesia average government spending on Infrastructure is 2.9% GDP (2009), 3.42%

GDP 2011 (estimated). In PPP Investment required is $ 140 billion USD (2011-2014). Main

project areas under PPP are transport, power generation, water supply and water

management.

6. SERVICES SECTOR

TRANSPORT IN INDONESIA: ROADS AND RAILWAYS

Indonesia has vast size stretching transportation over 5000 kilometers across its area of over

17000 islands. Java is the most populated island that faces huge integration around its sea

ports with the good expansion and modernization.

COMMERCIAL AIRLINE INDUSTRY

Indonesea has a good scope for commercial airline industries. Indonesia’s commercial Airline

industry has moved over a new wing inspite of such poor standards of safety and frequent

accidents. PT Lion Mentari Air is a dominant player for domestic routes with 40% of market

share and other players are Garuda Indonesia and Sriwijaya Air. However International

flightsto Singapore and Malaysia main route for indonesia and destinations that are becoming

more popular with more routes like china by all major airlines.

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SHIPPING SECTOR

Sea transportation is an important aspect of Indonesia’s trading infrastructure which carrying

over 90% of goods that internationally traded. Indonesia has hundreds of small ports; out of

these 11 ports are container ports. Indonesia’s Existing facilities are going to overloaded with

the main port in Jakarta and tanjung priok that handling over 70% of country’s total import

and export flow. The high logistical costs are big problem for competitiveness. Shipping law

opening up for the private players in 2011, this can be led to greater competition as well as

improved efficiency. The liberalization of port management required as much as to opening

of new facilities that will also bring the industry up to the certain level of its regional

counterparts.

THE RISE OF MODERN RETAIL OUTLETS

Indonesia’s retail sector has been growing rapidly since 2005. Traditional retail habits have

been quickly replaced by malls and hypermarkets that provide entertainment as well as

convenience. Partnerships among banks and the retail sector provide incentives and consumer

credit. Overseas companies such as CARREFOUR, LOTTEMART, SOGO etc are a major

players. MATAHARI which is Indonesia’s largest retailer having huge market value.

INDOMACRO, PRISMATAMA and HERO SUPERMARKETS have gained huge

popularity in the modern retail sector since 2003.

Traditional markets around 60% of total retail is still spending throughout the country and

modern retail are heavily concentrated in development. However government’s regulations

that protect traditional retailers can create a somehow restrictive environment for players of

retailers to operate in retail sector.

CREATIVE INDUSTRIES

The art form of batik, varying musical and performance style, rich cultural diversity and

heritage provides fertile ground for a creative industry. Such creativity is widely used into

other industries such as fashion, advertising, publishing and music production contributing

around 7.2% of total GDP and 9% of total export value. The coming year will see greater

personalization in the techno market to meet consumer and business need as internet

penetration increases rapidly. However, intellectual property rights and negative investment

list will remain a major challenge for it.

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TOURISM

Indonesia’s tourism industry still remains one of the country’s most underexploited natural

resources, in spite of having a luxury beach holidays and cultural and eco-tourist place.

Indonesia was ranked 81st out of 133 countries in 2009 and in 2011, it got 74

th rank in 2011 in

the World Economic Forum Tourism.

Indonesia is also known for the incredible beaches of Bali. However other place are still

deserves to attract the tourism numbers. This looks at some reforms to improve logistics and

human resources.

Transportation is big problem for Indonesia tourism industry which needs to be overcome. As

Indonesia made up of over 17000 islands so that calls for comfortable, convenient air as well

as sea transportation. The country having plenty of island that provide various type of

facilities from other countries nearer to Indonesia such as it having the world’s longest

marine and eco-tourism which is unexploited.

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3.Financial, Capital & Money Markets

The summary begins with introduction to Indonesia country. It is using huge polyglot nation

which uses several languages. The world’s largest democracy population in Indonesia is

Muslim. Indonesia performance is improving in recent years. After 2007 when the global

economy was turned unpleasantly a fundamental reform of the policy framework left

Indonesia in a strong position. Indonesia is affected by the weak global environment. Policy

rate is decrease by Bank Indonesia which allows market interest rate to fall below policy rate.

Indonesia economy is stand for $1.121 trillion of GDP in terms of Purchasing Power Parity

(PPP). According to report published by the World Bank the GDP in Indonesia was worth

$846.83 billion in 2011. Indonesia GDP value is 1.37 of the world economy. Indonesia

economy is growing faster than expected and climbing 6.4 percent year-on-year. In 2010 and

2011 it is grew an estimated of 6.1 percent and 6.4 percent. Indonesia has smaller GDP ratio

than country like Malaysia or Taiwan. Indonesia economy freedom score is 56.4 which make

its 115th

freest economy in the 2012 index. Indonesia is ranked 23rd

out of 41 countries and its

overall score is below the world average.

During the global financial crisis Indonesia outperformed from its regional neighbours and

join India and China in 2009. Yearly Government spending of Indonesia is 7.1 percent.

Indonesia estimated unemployment rate is 6.6 percent and estimated industrial production

23

growth rate is 4.1 percent. The Government of Indonesia faces the challenges of improving

Indonesia’s infrastructure to remove hindrance to economic growth and to reduce its fuel

subsidy program to face rising oil prices.

The slow global demand for commodities especially Chinese which make half of the

Indonesia exports affect Indonesia’s economy in medium term. But country is less depend

such kind of impact. The strong growth also support weak rupiah which fall 4 percent in this

year which makes less pressure Bank Indonesia and the country’s central Bank to cut interest

rates. Bank Indonesia has move country’s growth 6.3 percent which is lower level from

previous 6.7 percent for 2013.

Indonesia has taken wide range of changes to address various structural weaknesses in the

economy to improve competitiveness. In spite of the progress in the economic restructuring

Indonesia’s growth potential remain vulnerable and hinder the movement of progress and

political interference in the private economy discourages the dynamic change. President

Susilo Bambang Yudhoyono tried to control corruption and encourage more foreign

investment, but the weak rule of law is a major hindrance to attracting capital.

In Indonesia income tax rate is 30 percent and corporate tax rate is 25 percent. Other tax

includes value added tax and a property tax with overall tax burden equivalent to 11.4 percent

of total domestic income. Budget deficit is come down to around 1 percent of GDP and the

government spending is equal to 16.7 percent of GDP.

The trade tariff rate is 3.1 percent but trade flows are constrained by costly non-tariff barriers.

Foreign investment is welcome by the country publically but many foreign and domestic

investors faces hurdles and don’t like due to inconsistencies in the investment codes and

erratic.

Agriculture product of Indonesia includes rice, cassava (manioc), peanuts, rubber, cocoa,

coffee, palm oil, copra; poultry, beef, pork, eggs. There are various industries like petroleum

and natural gas, textiles, apparel, footwear, mining, cement, chemical fertilizers, plywood,

rubber, food, tourism.

Indonesia’s estimated export is $208.9 billion. It exports commodities such as oil and gas,

electrical appliances, plywood, textiles, rubber and to countries like Japan, China, US,

Singapore, South Korea, India, Malaysia. Indonesia’s estimated import is $172.1 billion. It

24

imports commodities like machinery and equipment, chemicals, fuels, foodstuffs and its

import in countries like China, Singapore, Japan, US, Malaysia, South Korea, Thailand.

FINANCIAL MARKET

Republic of Indonesia

• National name : Republic Indonesia

• Capital : Jakarta

• Monetary unit : Rupiah

• GDP : $901.7 billion

• Exchange Rate : 9630 Rp / USD

• Industries : petroleum and natural gas, textiles, footwear, mining, cement,

chemical fertilizers, plywood, rubber, tourism ,etc

Financial market is an important component of the financial system. A financial market is a

market in which people and entities can trade financial securities, commodities. The

participants in financial market are the borrowers (issuer of securities), Lenders (buyers of

securities) and financial intermediaries.

In finance, financial markets facilitate:

The raising of capital (in the capital markets)

The transfer of risk (in the derivatives markets)

Price discovery

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Global transactions with integration of financial markets

The transfer of liquidity (in the money markets)

International trade (in the currency markets)

Financial markets are a mechanism enabling participants to deal in financial claims.

This market also provides a facility in which their demands and requirements interact

to set a price for such claims.

Financial market comprises two distinct types of markets:

(1) Money market

(2) Capital market

Classification of financial market can be done as primary and secondary markets. While the

primary market deals with the new issues, the secondary market is meant for trading in

outstanding or existing securities. There are two components of the secondary market i.e.

Over The Counter(OTC) market and the exchange traded market. The government securities

market is an OTC market. In an OTC market, spot trades are negotiated and traded for

immediate delivery and payment while in exchange—traded market, trading take place over a

trading cycle in stock exchanges.

Financial Market of Indonesia

Indonesian financial market is still considered in an early stage of its development. Indonesia

financial market is considered as traditional . The financial market is mostly influenced by

government debt instrument. In the year 1997-1998. the development of financial market of

Indonesia took place from the year The global growth outlook of Indonesia remains weak.

The GDP growth in the first quarter of 2011 was 6.5 percent and in 2012 it GDP decreases to

6.3 percent. In 2002, Sun market was established, when bank were allowed to trade their

recap bond holding. The transaction in SUN market is being dominated by outright

transaction. The daily outright trading volume of SUN is just around 6.5 trillion and 300

transaction within the last two years

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The development of repo market can be considered as a starting point to increase

financial market liquidity. This will increase efficient banking liquidity and portfolio

management, as well as government financing It is also important to encourage the

establishment of broader self regulatory organization (SRO) in domestic financial market that

covers all segments in the market, to provide convention for various market transactions, and

to assist in monitoring OTC market, as well as a counterpart for the authorities and regulators

Indonesia’s financial market need to be develop

To increase the efficiency of financial portfolio management

To strengthen liquidity risk .

The most prominent investors in the Indonesia Financial Market are:

Indo Acidatama TBK.

Pan Brothers Tex TBK.

Alakasa Industrindo TBK.

Agis TBK.

Cahaya Kalibar TBK.

Radiant Utama Interinsco TBK.

Bank Mayapada International

Jaka Inti Realtindo TBK.

PANASIA INDOSYNTEX TBK.

BAT INDONESIA TBK

Money Market:

The Money market is a part of financial market which deals with borrowing and lending of

short terms loan generally for a period of less than 1 year or equal to 1 year Money market is

a market for financial assets which are close substitute of money. It is a market for overnight

to short term funds and instruments having a maturity period of 1 or less than 1 year. It is not

physical location like a stock market but an activity that is conducted over the telephone.

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The major function of Money market is given below:

To maintain monetary equilibrium

To promote economic growth

To provide help to Industry and Traders

To help in implementing monetary policy

To help in Capital formation

Indonesia Money Market

The Indonesian money market is basically inter-bank money market. It mostly involves

banking. The transaction in the inter-bank money market is influenced by unsecured

lending/borrowing (PUAB), and it has very short term maturity. Around 60% of inter-bank

transaction is overnight. There may be some short-term debt instrument in OTC (over the

counter market), but I believe in a very small numbers and not actively traded amongst bank.

There is also perhaps, an interest rate swap (IRS) or overnight index swap (OIS) in OTC

market, as there is sometime a quotation in Bloomberg or Reuters. But, it seems not quite

regular and the transaction is supposed to be in a very small number. Thus, in general, money

market is not yet considered to better serve banks’ portfolio management.

Money-Markets Instruments of Indonesia

1. Treasury Bills (Surat Perbendaharaan Negara)

Treasury Bill is short term device used by government to raise short term funds to

bridge seasonal or temporary gap between its receipt and payments which are widely

known as Surat Perbendaharaan Negara(SPN) and this t-bills are sold on discount. T-bills

had maturity period. The maximum maturity of this t-bill is 1 year. Currently, the

government regularly bids quarterly and yearly SPN at every auction.

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2. Islamic Treasury Bills (Surat Perbendaharaan Negara-Syariah)

This t-bill is also used by governments to raise short term funds and it is also sold on

discount, and with a maximum maturity of 12 months. Surat Perbendaharaan Negara-Syariah

is similar to SPN. The first SPN-S is issued by government in early August 2011 with a 6-

month tenor.

3. Certificate of the Central Bank (Sertifikat Bank Indonesia)

Bank Indonesia issued SBI in two body (28 days and 3 months). For open-market

operations and to manage the liquidity of the banking system, SBIs were the main device

used by Bank Indonesia. SBIs were the most briskly restored money-market device in

Indonesia. Beginning in June 2010, SBI certificates were bargain on a monthly basis with

maturities of 28, 91, and 182 days. In enlargement, SBIs was issued a 28-day

Shari’acompliant on a monthly basis by Bank Indonesia. In November 2010, Bank Indonesia

stopped issuing 3-month SBIs and began offering term-deposit instruments to blot excess

bank liquidity. Finally in February 2011, Bank Indonesia declared that they cannot issue

SBIs with maturities less than 9 months.

4. Commercial Paper

Commercial Paper is one of the most important instruments of money market.

Commercial Paper is unsecured short term promissory note issued at discount by credit

worthy corporate , primary dealers and all financial institutions. In other words, it is the short-

term securities in the money market which does not have any guarantee, issued with discount

by companies. This commercial paper is used only for short term investment but it is mostly

used for buying any stock or to control the working capital. Any Financial business buy all

device because par value is so large for secret lenders. This all will included safely in

investment. The maturity of commercial paper does not exceed 9 months. So that income of

maturity period is also low. The main reason for using commercial paper is for doing or for

paying transaction The offering of commercial paper was block from the burden to submit a

registration statement to Bapepam-LK.

In the early 1990s the demand of Commercial Papers rise very fast as they are also

offering bonds. Due to this cost is also low and also there is very low effort. A main bank

regulation in 1996 bring break to the growth of the CP market.

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5. Repurchase Agreement

A repurchase agreement is one type of short term financing for bankers in government

securities. This is also called as repo or we can say sale. Here the banker or dealer sell the

securities to investors.

Indonesia repurchase market is mostly controlled by bank of Indonesia. In Indonesia

there was done a new launching of repo market done by the government in 2004 and there

was also a new invention made by government in 2005 of Master Repurchase

Agreement(MRA) which is standard for repurchasing activity. Ansd this repurchase activity

was set by Bank Indonesia at amount of 3% for rapid repurchases

.

Indonesia Capital Market

When the Dutch Colonial government established a stock exchange the existence of

Indonesia’s capital market dates from 1912. When the Jakarta stock exchange was reopened

under the newly created Capital Market Operation Board (BAPEPAM) operated as a the

Ministry of Finance was the real development of capital market in Indonesia i.e. in the year

1977 .In order to create climate i.e conducive for business government during the year

1980’s government of Indonesia had obstructed investors interest . The major effect on the

market development was due to pakdes package of 1987 it relaxed government regulation of

market and licensing this pakdes package basically reformed the institutional structure of

capital market in the year 1990.

Various capital market instruments are:-

1.Stock/Share : Stock or share is a type of certificate that provide ownership to holder of that

certificates .and in return the shareholders can claim on the company’s earnings as well as

assets.

Mainly there are 2 types of stock:

a. Common Stock are the most common stock issued by the company basically to obtain

funds from the public . it is most popular in capital market.

b. Preferred Stock : under this stock mostly the shareholders are given preferential treatment

as compared to common stock shareholders in terms of timely dividend at a specified rate and

it can be easily converted into common stock .

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2.Bonds and convertible bonds: Bond is a certificate that contains a contractual agreement

between the investor and a company which shows amount of money investors has lend to

the company. Company issuing bond has to pay regular dividend at a specified rate and at

the end of maturity have to pay principal amount also. Bonds are rated by mostly the 2

common credit rating agencies of Indonesia i.e. PT. PEFINDO, and PT. Kasnic Duff &

Phelps Credit Rating Indonesia (DCR)

Convertible bond: these are the bonds that are easily converted into common shares . with

specific number of common stocks at a pre stated price.

There are 3 types of Bonds in Capital Market:-

1. Government Bond:- Bond issued by the government is known as the government

bond. There are 2 types of government bond:-

a) Treasury Bonds(T-Bonds):- T Bonds have different maturities like short

term, medium and long end maturity bonds. Indonesian government issued

various domestic bonds like zero-coupon bonds, fixed and floating rate

bonds, tradable and non-tradable bonds, and retail bonds.

b) Sovereign Shari’a Securities (Sukuk or Surat Berharga Syariah Negara):-

These are bonds issued by government based on Shari’a principles in

rupiah or foreign currency.

2. Municipal Bond:- It is issued by district government for financing public utilities

projects.

3. Corporate Bond:- Bond issued by the company is known as the corporate bond. There

are 3 types of corporate bonds:-

a) Corporate Bond and Medium term note(MTN):- It is rarely issued by

Indonesian Capital Market.

b) Corporate Sukuk.

c) Convertible Bonds.

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3. Derivatives :

Derivatives consist of any security that “derives” a value from another instrument called

the underlying. It is basically used for deriving the underlying value of an asset. They can be

proved risky if they are not used properly.

There are several kinds of Derivatives in Indonesia, such as rights, warrants, and futures

Contracts:-

I. Rights:

According to Indonesian Capital Market law the The Right is defined as the preemptive right

to subscribe the new stock at prestated price during the specified period. It is a kind of right

issue that are issued upon the secondary offering. i.e over here new shares would be offered

to the existing share holders.

II. Warrants :

Warrants with stocks or bonds when they are being offered to public upon IPO act as a

sweetener . They have their own trading mechanism. There price are generally lower than the

market price of the stock. The trading period of warrant lasts for 3 to 5 years.

III. Stock Index Futures

It is a contract of buying and selling at a predetermine price an underlying asset at fixed time

in future

Benefits of futures are:-

o It act as an hedging instruments i.e it protects from the risk to the investors.

o Helps in speculation with big leverage

o Provides a market for arbitrage

4. Mutual Funds

A mutual fund is a trust that pools the savings of number of investors who share a

common financial goal. They are managed by the professional investment company. It

is generally a pool of stock, bond or othe r security purchased by the group of investors.

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Regulatory Bodies of Indonesia:-

BAPEPAM – LK – It is the supervisory agency of Indonesian Capital Market and

Financial Institution), for all the capital market exchanges it acts as a as a supervisory

agency

Ministry of Finance (MoF) – The MoF has the ultimate responsibility for regulating the

capital market industry through BAPEPAM-LK.

Bank Indonesia (BI) – It is the central bank of Indonesia. It reports directly to the House of

Representatives works As an independent body. It provides currency control and supervises

the banking sector in Indonesia.It can be called as RBI of Indonesia.

PT Bursa Efek Jakarta (BEJ) – It is a main stock exchange a private company, that has

taken day-to-day administration of the previous JSX in 1992., It receives corporate action

notification and announce them back in the market monitors trading, settlement, and listed

companies’ actions.

PT KPEI – A limited liability company, owned by JSX and SSXwhich has obtained a

business license from BAPEPAM as a clearing and guarantee institution to provide services

in clearing

PT KSEI – A private limited liability company, that conducts central depositry Activities and

has obtained a license from BAPEPAM .

Capital Market Supervisory Agency

Stock Exchange(IDX)

Clearing and Guarantee

Corporation (KPEI)

Central Securities Depository (KSEI)

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About Indonesia Stock Exchange (IDX)

Type Stock exchange

Founded 1912

Headquarters Jakarta, Indonesia

Key people Ito Warsito, CEO

Website www.idx.co.id

The stock exchange of Indonesia is named as IDX i.e Indonesia Stock Exchange. Before

2007 it was known as Jakarta Stock Exchange (JSX). After 2007 it has merged with Surabaya

Stock Exchange (SSX).on 28th

June 2010 it had got listed 341 listed companies with

combined market capitalization of $269.9 billion. Highest intraday record by index currently

is4,320.59 points on October 5, 2012, Its all time highest closing is 4,311.31 points on the

same day.

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Indonesia Stock Exchange building

The two of the primary stock indices of Indonesia are the Jakarta Composite Index and

the Jakarta Islamic Index (JII). At present 30 corporate stocks are listed on JII. Along

with these 2 indices there are other 4 as well they are namely Individual Index, Sector

Stock Price Index, LQ 45 Index ,Main Board and Development Board Indices.

Benefits to investors related to IDX:-

1. Value to investors

IDX provides value to investors, this is due to Indonesia’s equity surged 17 % to

$416 billion in the current year.

Indonesia equity has surpassed the Malaysian stock market which is ninth largest in

Asia whose equity is $407 billion.

Jakarta composite index has risen to 8% in current year.

2. Faster Growth

The economy of Indonesia is largest among ASIAN countries.

3. Investment opportunities

Its beneficial for long term investors as the market is very volatile.

35

IDX has more than 535 billion USD in asset under management.

ETF consists of stocks which are traded at P/E ratio of 13 on an average, and it also

has dividend yield of 1.5%.

4. Capital Gain

When an investor earns profit by selling his shares which is higher than the purchase

price.

Conclusion

Towards the end conclusion is given from Indian perspective which states that the rising GDP

rate of Indonesia suggest boom in the Indonesia’s market and which suggest Indonesia is a

good country to invest in. Indonesia economy is stand for $1.121 trillion of GDP in terms of

Purchasing Power Parity (PPP)During the global financial crisis Indonesia outperformed

from its regional neighbors and join India and China in 2009.Indonesia’s estimated export is

$208.9 billion. It exports commodities such as oil and gas, electrical appliances, plywood,

textiles, rubber and to countries like Japan, China, US, Singapore, South Korea, India,

Malaysia. So it suggests that it is a positive sign for Indian investors.

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4.History, Culture & Society

Introduction

In South-east Asia, Indonesia is one of the largest countries. It is situated between the Indian

Ocean and the Pacific Ocean. It contain mainly mountainous and covered with rain forests,

swamps. It consists over 13000 islands. Indonesia’s capital is Jakarta. Indonesia declared its

independence on 17th

August 1945 from Japan but Netherlands agreed to transfer sovereignty

in1949. Susilo Bambang is the President of Indonesia. Muhammad Yusuf Kalla is the Vice-

President of Indonesia. Bahasa is the official language in Indonesia. It is modified form of

Malay. The most widely spoken language is Javanese in Indonesia. Muslim population in

Indonesia constitute 88% of the total population. It has a very large trading environment, with

several countries ranging in products from gas to textiles. In Indonesia 22% of its population

live below the poverty line.

History

There is a tie between Indonesia and India date back to the times of the Ramayana,

"Yawadvipa" (Java). It is mentioned in India's earliest epic, the Ramayana. Sugriva was the

chief of Rama's army. He dispatched his men to Yawadvipa, the island of Java, in search

of Sita.

Indonesia since early times and ancient Indonesian (Austronesian people) has embarked in

maritime trade in Southeast Asian seas and Indian Ocean. The very old Indians

spread Hinduism and many other aspects of Indian culture including the Sanskrit and Brahmi

Script. India had played a big role in Indonesian culture. It is a combination of Indian,

Chinese, Southeast Asian, and indigenous Indonesian culture. In Indonesian languages, the

trace of Indian influences is most evident in great numbers of Sanskrit loanwords.

The name Indonesia derives from the Latin word Indus, which means "India", and the

Greek nesos, which means "island". Indonesia having its name similar to India because of the

similarity of the culture in both regions. The name dates to the 18th century, far predating the

formation of independent Indonesia. During the Srivijaya era, many Indonesians studied

at Nalanda University in India.

37

Srivijaya, Medang, Sunda and Majapahit are Indianised Hindu-Buddhist kingdoms. They

were the predominant governments in Indonesia, and lasted from 200 to the 16th century,

with the last remaining being in Bali.

In 1945—1949, during Indonesian National Revolution and the formation of the

republic, India and Egypt were among the initial nations that supported and recognized the

Indonesian dominion and foster diplomatic relations with Republic of Indonesia. In addition,

prior to Indonesia's independence Muhammad Ali Jinnah who was the founder of Pakistan -

who at that time was President of the All India Muslim League, encouraged Indian Muslim

soldiers serving in British Indian army to join hands with Indonesians against their fight

against the Dutch Empire migration of Indonesia. As a result 600-Muslim soldiers of the

British Indian Army isolated the imposing forces putting their lot at risk, and related with

Indonesians. Since 3 March 1951, India and Indonesia officially opened the diplomatic

relations.

In 1955, Indian Prime Minister Jawaharlal Nehru and Indonesian President

Sukarno were among the five founders of the Non-aligned Movement.

Indonesia offered to provide Pakistan with military help, and 'to seize Andaman and Nicobar

Islands' of India so as to distract it from the Kashmir front and eventually declared war

against India mobilizing submarines to help Pakistan during the 1965 war with India.

Indonesia had absorbed many aspects of Indian culture since about two millennia ago. The

most obvious trace is the large adoption of sanskrit into Indonesian language. The Indian epic

the Ramayana and the Mahabharata played an important role in Indonesian culture and

history. They have also achieved great popularity in the socio-political life of Indonesia. Even

today, in the open theatre of the Prambanan in Java. Javanese muslims performs

the Ramayana dance during full moon nights. The example of profound Hindu-Buddhist

influences in Indonesian history are the 9th century Borobudur and Prambanan temples. Even

after the adoption of Islam, the link between two countries was still maintained. For example

the Indonesian Islamic architecture especially in Sumatra, has been deeply influenced by

Indian Mughal architecture as evidence in Baiturrahman Grand Mosque in Aceh and Medan's

Great Mosque.

38

The cultural admirations were actually reciprocated, Indians also attentive, familiar and felt

related to Indonesian culture. Rabindranath Tagore visited Java and Bali in 1927. He stayed

for two weeks in Bali and was fascinated with Balinese culture and praised Balinese

Hinduism. The cultural ties still continues up to modern days, the popular

Indonesian Dangdut music displays the influence of Hindustani musics. Bollywood films and

musics were also popular in Indonesia. The Jawaharlal Nehru Indian Cultural Center were

established in Jakarta since 1989 to promote Indian culture in Indonesia. It was having library

and providing lessons on Indian culture, such as Yoga, Indian musics and dances.

Unrest Plagues Wahid’s Tenure as President

In Indonesia, the Indonesian parliament Abdurrahman Wahid as the new president of

Indonesia, defeating Megawati Sukarnputri, the popular leader of the Indonesian Democratic

Party-Struggle on Oct. 20, 1999. It was a surprising upset. Wahid was a Sufi cleric as well as

an adept politician with a reputation for honesty and self-control.

In 2000, Rioting, bombing, and increasing unrest continued to plague Indonesia. Separatists

declared West Papua an independent country on June 4, 2000. Wahid totally opposed

independence for the territory. That contains sizable copper and gold mines. Unlike East

Timor, there is little international support for an independent West Papua.

In fall 2000, Suharto failed twice to show up in court to face corruption charges of falsified

Rs. 32,000 million in country funds, but his lawyers insist he was too ill to stand trial.

Prosecutors filed a civil suit against Suharto, looking for Rs. 24,000 million that he had

fraudulent and Rs. 60 billion in damages in July 2007.

President Wahid came under increasing criticism for corruption and ineffectiveness in the fall

of 2000 and winter of 2001. He was blamed for not stopping ethnic clashes and killings in

Aceh, West Papua, the Moluccas Islands, and especially in Borneo, where the Dayak people

turned against Madurese immigrants, violent hundreds. Wahid was forced from power in July

2001, and Vice President Megawati Sukarnoputri assumed the direct.

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Freedom

Indonesia has 17,000 islands. These islands make up Indonesia were home to a diversity of

cultures and indigenous beliefs when the islands came under the influence of Hindu priests

and traders in the first and second centuries A.D.Muslim invasions began in the 13th century,

and by the 15th century, most of the archipelago had changed to Islam. Portuguese traders

arrived early in the next century but were ousted by the Dutch around 1595. The Dutch

United East India Company established posts on the island of Java, in an attempt to control

the spice trade.

After Napoleon conquered the Netherlands in 1811, the British detained the islands but

returned them to the Dutch in 1816. Indonesia was made an important part of the Dutch

kingdom in 1922. During World War 2, Japan detained the islands. Tokyo was mainly

interested in Indonesia's oil, which was critical to the war effort, and tolerated fledgling

nationalists such as Sukarno and Mohammed Hatta. After Japan's surrender, Sukarno and

Hatta proclaimed Indonesian independence on August 17, 1945.

In November 1946, a draft agreement on forming a Netherlands-Indonesian Union was

reached, but dissimilarity in explanation resulted in more fighting between Dutch and

nationalist forces. Following a bitter war for freedom, leaders on both sides agreed to terms

of a union on November 2, 1949. On December 27, 1949, the transfer of sovereignty took

place in Amsterdam. Indonesia abrogated the union and began seizing Dutch property in the

islands, in February 1956.

In 1963, Netherlands New Guinea (the Dutch portion of the island of New Guinea) was

transferred to Indonesia and renamed West Irian, which became Irian Jaya in 1973 and West

Papua in 2000. Hatta and Sukarno, the cofathers of Indonesian freedom, split over Sukarno's

concept of “guided democracy,” and under Sukarno's rule the Indonesian Communist Party

(PKI) steadily increased its influence.

Sukarno was named president for life in 1966. He enjoyed mass support for his policies, but a

growing power struggle between the military and the PKI loomed over his government. After

an attempted military coup was put down by army chief of staff, General Suharto, and

officers loyal to him, Suharto's forces killed hundreds of thousands of suspected Communists

in a massive purge aimed at undermining Sukarno's rule.

40

Comparison of India and Indonesia

Introduction

Similarities between India-Indonesia

They are both very friendly people and like to joke around. When they see a foreigner they

are surprised. Indians are frequently darker then Indonesians, but some parts of Indonesia

there are pretty dark people. They doesn’t have similar food but is excellent. Indians have

more curry while Indo's have more stir fries. Traffic in both countries are crazy. India and

Indonesia are two of Asia’s most booming success stories. They are the continent’s third- and

fifth-largest economies. They are both members of the G20. Technological development

started to take place at the level of higher education, a level where India-Indonesia countries

had a relative disadvantage compared to more developed countries. The two are close

geographical neighbours who share a maritime boundary and a mutual stake in each other’s

progress, prosperity, stability and territorial integrity.

Differences between India-Indonesia:

Indians are mostly Hindus and Indonesians are mostly Muslims and they look different as

well. Indonesians are Arabs josh and Indians are south Asians.

In India, the currency is known as the rupee, roopayi, rupaye, rubai or one of the other terms

derived from the Sanskrit rupyakam. The most generally used symbols for the rupee are Rs,

Rp and . The rupiah (Rp) is the official currency of Indonesia and is subdivided into 100

sen. The name derives from the Indian monetary unit rupee which is called as rupiya in

Indian languages. Informally, Indonesians also use the word "perak" in referring to rupiah.

The current trend shows that Indonesia becomes less attractive as the destination of

multinational corporations, while India becomes more eye-catching destination other than

Indonesia.

41

India Indonesia

Population 1,198,003,000 229,965,000

Area 3,287,240 km² (1,269,210 sq mi) 1,919,440 km²

(735,355 sq mi )

Population

Density

364.4/km² (943.9/sq mi) 119.8/km² (312.7/sq

mi)

Capital New Delhi Jakarta

Largest City Mumbai Jakarta

Government Federal republic and Parliamentary

Democracy

Presidential (republic)

Official

languages

English and Hindi Indonesian(BahasaInd

onesia)

Classical

languages

Sanskrit, Tamil, Kannada, Telugu Sanskrit, Old

Malay, Kawi, Old

Javanese

Main religions 80.5% Hinduism,13.4% Islam,3% Christianity,

1.9%Sikhism

86.1% Islam, 8.7%

Christianity,1.8%

Hinduism, 1%

Buddhism, 2.4% other

GDP(nominal) Rs. 84 trillion Rs. 28,000 billion

GDP (PPP) Rs. 224 trillion Rs. 49,500 billion

HDI(Human

Development

Index)

0.609 0.726

42

Indonesia Education

Indonesia’s system of education is under the duty of Ministry of Education and Culture. The

language instruction is Bahasa Indonesia and there are some other local regional language

that may used during schoolings; Javanese, Sundanese and Balinese. Academic year in

Indonesia education system is during mid-July to mid-June. Education system in Indonesia is

categorised into three levels; Primary education, secondary education (junior and senior

education) and Higher Education.

Primary education is for 6 or 7 years old children to 12 years old and the leaving exam will

be the valuation Balakar Tahap Akhir Nasional (EBTA). Secondary education can be divided

into two level; junior secondary education for 13 to 15 years old teenager and senior 6

secondary school for 16 to 18 years old young person. They will be appearing for two types

of examinations in this time which is; The Evaluasi Balajar Tingkat Akhir Nasional Sekolah

Menengah Pertama and The Evaluasi Tingkat Akhir Nasional SekolahMenengah Atas.

For students who are engrossed in other stream for example technical or vocational track,

they have the opening to do so by going to Vocational Secondary School. The interval will be

three to four years. In the interim, for students who are interested to further their studies in

Islamic track, they can go to Islamic schools; they have this stream for primary school till

upper secondary school. Higher education consisting of diploma, bachelor (sarjana), masters,

doctorate and postgraduate. Higher education in the Indonesia is offered in four types of

institutions: University, Institute, Academy and Polytechnic.

Teacher training programs were varied, and were step by step upgraded. for instance, in the

1950s anyone finishing a teacher training program at the junior high level could attain a

teacher's certificate. Since the 1970s, however, the teaching career was limited to graduates

of a senior high school for teachers in a primary school and to graduates of a university-level

education course for teachers of higher grades.

In the early 1990s, these schools included religious subjects from the pesantren with secular

subjects from the Western-style public education system. The under 15 percent of the school-

age population who attended either type of Islamic schools did so as the perceived higher

quality instruction. However, among Islamic schools, a madrasa was ranked underneath

a pesantren.

43

Trade relationship between India and Indonesia

The Ambassador Andi M Ghalib of Indonesia has arrived India on a one week trip

and was the city till April 26 2011.

Indonesia is engrossed in electronics, telecom and textiles, and India in coal, rubber,

timber, palm oil and wood products.

Considering bigger potential in the fast growing business among India and Indonesia,

the bilateral trade objective for 2015 has been revised from USD 25 billion to USD 45

billion.

This June Indonesia would also resume its arrangement of commencing air traffic to

India.

Intending to develop associations with India, the Southeast Asian archipelago would

also establish air traffic of the state owned airlines Garuda Airlines from June this

year.

Attempting to assist further diplomatic associations between the countries, Indonesia

has proposed to set up a Consulate office in Chennai, which is yet to be considered by

the Centre.

Jakarta (ANTARA News) - Indonesia and India has agreed to increase their economic

cooperation.

Both countries should revise their trade target in 2015 from US$25 billion to US$40

billion.

Sixty-seven Indian companies, covering along with others mining affairs, railway,

energy, steel, infrastructure and banking, are participating in the exhibition, called

"The India Show: Land of Limitless Opportunities", is being held commencing March

6-8.

There was huge likelihood of growing trade relations connecting India and Indonesia,

owing to the huge populations in the two countries.

Therefore, India and Indonesia are growing very quickly in the Asian region.

Impact of culture and society on Economic Development

Boosting investment and improvement in productivity are the main current challenges for

Indonesia’s economy in order to meet universal challenges and dipping poverty and

unemployment. The vital role of FDI in Indonesia in both for investment recovery and its

impacts to productivity and employment growth. India and Indonesia have economic

44

complementarities with great prospective for enhancing cooperation between the two

countries. Indonesia is India’s second biggest export market in ASEAN (after Singapore) and

one of its major trade partners in the county. The revival of the Indonesian economy after the

Asian financial crisis together with political change gave a fresh drive to the economic

relations. There are more than twenty major Indian manufacturing joint ventures in Indonesia

with direct Indian participation or financed by overseas Indians. The bulk of these first phase

investments were made in the 1970s and 80s, and in fact up to 1985 India was among the top

five investors in Indonesia. Foremost during this period were in textiles, garments, synthetic

fibre, steel and hand tools. A huge number of Indian companies have also been involved in

supply of equipment to and undertaking projects in Indonesia. These include IRCON,

WAPCOS, TCIL, Punj Lloyd, STUP Consultancy India Ltd. NIIT and APTECH, LCC

InfoTech, Tech Mahindra have set up IT training centres in Indonesia. Bharat Heavy

Electricals Ltd. (BHEL) has opened its representative office in Jakarta in 2006 to bid for

power projects, contract with the objective of take part in the power generation sector in

Indonesia. Tata Consultancy Services (TCS) has also set up an office in Indonesia in 2006 for

local and Asia-Pacific markets. It has been functioning on various projects with the local

banks and some in alliance with Microsoft and other companies. Essar and Gujrat State

Petroleum have an exploration licence for gas on shoreline in Sumatra.

The Relationship between India and Indonesia:

Indian-Indonesian relations refer to the mutual relationships of India and Indonesia. The

Indian-Indonesian relationship stretch back for roughly two millennia. In 1950, the first

President of Indonesia - Sukarno called upon the peoples of Indonesia and India to "intensify

the cordial relations" that had existed between the two countries "for more than 1000 years"

ahead of they had been "disrupted" by regal powers. Fifteen years later in Jakarta,

government-inspired mobs were uproar: "Down with India, the servant of imperialists" and

"Crush India, our enemy." Yet in the spring of 1966, the foreign ministers of both countries

began speaking yet again of an era of sociable relations.

India has an embassy in Jakarta and Indonesia work an embassy in Delhi. India regards

Indonesia as a key member of ASEAN. Both countries had approved to establish a strategic

partnership.

India had supported Indonesian independence and Nehru had elevated the Indonesian

question in the United Nations Security Council.

45

There are grounds and believe that this relationship may build up into a broad based security

partnership over time. This occurs sooner rather than later will depend on the extent to which

both nations see an imperative to turn their numerous complementary interests into practical

deeds. Indian-Indonesian relations during the cold war, investigating their shared strategic

circumstances and their history of opposition and coexistence.

India is looking for a direct political and security role in southeast Asia as part of its

emergence as a province, and geographical position, is likely to happen to an essential

element in India’s local stratagem. For Indonesia, India also represent a potentially eye-

catching partner in its wish to play a important role in the developing regional order in Asia.

After talks by Indian Prime Minister Manmohan Singh and visiting President of Indonesia

Susilo Bambang Yudhoyono, India and Indonesia had signed business deals worth billions of

dollars and set an motivated target of doubling-up trade over the next five years On 25

January 2011. Indian Nationals are issued tourist visas on arrival in Indonesia. Tourism wise,

Indonesia is one of only 14 countries in which tourist visas prior to entry are not necessary in

India.

President of Indonesia Sukarno was the first chief guest at the annual Republic day parade of

India. In the year 2011 too, President Susilo Bambang Yudhoyuno was the chief guest for the

same.

India also has further economic ties with Indonesia through its free trade agreement

with ASEAN, of which Indonesia is a member.

Impact of social on society

Realistically, a company’s impact on society is not confined to its community investment or

philanthropic efforts. It runs through the core business, human resource policies and even

supply and distribution chains. A systematic understanding of a business’s main social impact

is through direct and indirect job creation, Government tax revenues, capacity building and

knowledge transfer, local sourcing and customer issues.

In Indonesia, Unilever conducted a related study on the social impact in terms of job creation

alongside its full value chain. The 2003 study revealed that Unilever Indonesia employs

approximately 5,000 people and in some way supports the livelihoods of 300,000 along their

value chain. Such data not only relays a company’s social impact, it identifies opportunities

46

for additional social investment. In this case, the value created at the supply (agriculture) and

distribution (retailing) end of the chain is much underneath the value captured by those at the

centre of the chain (companies’ directly supplying Unilever Indonesia). This straight away

produces opportunities such as producer co-operatives to raise the value created in that area

of the chain.

47

5.Manufacturing

In the early 1970s Major Policy regarding the Manufacturing sector adopted by Indonesia is

that replacement of foreign produced goods and services are replaced by Domestic

production of goods and services. In the 1980s, reforms were introduced to increase the

competitive position of Indonesian manufactures in international markets.

Government launched a series of deregulation encourged domestic and international private

investment. As a result manufacture sector has become the single largest contributor to the

economy, constituting well over one forth of GDP and employing just over one-tenth of the

labour force. Proportion of the production is shifted from medium- and small-scale to large-

scale and high-technology industries, such as telecommunications and electronics;

automobile manufacturing. Investment opportunities are ripe in all sectors; ranging from

infrastructure to manufacturing and services.

GDP per capita of $3,500 exceeds many of its ASEAN neighbors such the

Philippines and Vietnam.

Indonesia is a thriving democracy with significant regional autonomy. It is located on

the world’s major trade routes and has extensive natural resources spread over an

area the size of the United States and comprising over 17,000 islands.

There are certain reasons for why Indonesia are as follows.

Rising in the flow of the F.D.I (foreign direct investment) and make very strong

position in ASIAN Economy like as chaina and India. Its distinct characteristics are

now coupled with political stability, self reliance and robust economic growth which

saw the country largely shielded from the global economic crisis.

Next Reason is Natural resources, Indonesia is endowed with diverse naturalresources

and is strategically positioned among markets from which there is high demand for

them.Indonesia has high range of liquid natural gas (LNG), coal, minig, silver, coper

and compatative advantage for exporting them also good performance in Agriculture

sector, the vast availability of land and the low levels of productivity in many of these

key crops give the scope for increased output.

48

Next Reason is Large & Youthful Domestic Market, some 240 million people and

growing with high diversity of culture, the size of the Indonesian domestic consumer

market, this growth attract any investors. In 2009 the country recorded 4.5% GDP and

6.1% GDP in 2010, this shows strong private consumption. There is much to be said

for Indonesia’s demographics as a key component of its future growth potential. Over

50% of the population is below the age of 30, is highly adaptive to new technology

and has a low dependency ratio among its workforce giving rise to a so called

‘transitional demographic dividend.

Composition of Goods Trade with respect to trade between India and Indonesia :In order

to expand the trade between India and Indonesia, It is very important for the composition

of exports and imports between the two.

This comparision is made on three bases: Such sectors with high share include:

Mineral fuels, oils, distillation products, etc, Iron and steel. Sectors with medium

share include, among others: Cereals; Oil seed, Nuclear reactors, boilers, machinery,

etc.; Sugars and sugar confectionery; Cotton; Plastics. Sectors fall in the category of

low share sectors such as: Manmade staple fibres; Cement, Aluminium.

Similar situation with respect to India’s imports from indonesia. Sectors with high

share are only three and account for almost 68 per cent of total imports.

As per JWG (joint working group) and (Comprehensive Economic Cooperation

Agreemen) both countries have good compatative advantages of inflow of FDI (Foreign

Direct Investement) in different diifernt sectors and facilitate more investment inflow

between them. As per the reports of Indonesia abnk and World Bank, in Indonesian

economy highest inflow of FDI in manufacture Sector.

Contribution of manufacturing sector to the economy of Indonesia: As per the World Bank

and global guid Indonesia 2012,manufacturing sectors food and beverages and tobacco has

contributed very high compare to other products. Then it is followed by transport, equipments,

machinery and apparatus i.e. 28% in 2012. Iron and steel metal has contributed very low

compare to other products. I.e. 2%.

49

Automobile and heavy machinery which is 10.53% had contributed more in manufacturing

sectors compare to other sectors. And then followed by fertilizer, chemicals and rubber

products i.e. 4.67% but at the same time timber and forests products had contributed very less

compare to other sector i.e. -3.5%.

The major manufacturing industries Of Indonesia:

A) Electronic Industry:Indonesia was a potential market for electronic goods especially

ones of premium category such as those imported from Japan and South Korea.strong

growth of this selling electronic goods are TV, refrigerator, washing machines.

B) Ement Industry: The Indonesia cement Association (ASI) cement requirement in the

country will raise to 53 million tons in 2012 from 48 million tons in 2011 thus

domestic prodution and annual usage of cement is increased year by year.

C) Textile Industry: According to the Indonesian Textile Association (API), the country's

textile industry is expected to grow only slightly by 2% when the world's textile

industry is forecast to suffer a contraction and very strong contriution in export.

D) Automotive Industry: the Indonesian Association of Motorcycle Industries (AISI)

noted that selling of Car reached 890,410 units in 2011 and expect reach1 million by

2012 Thegrowth of the country's automotive industry in 2012 will depend much on

the government policy especially on plan to raise the prices of subsidized oil fuels.

E) Steel Industry: Steel market in Indonesia is forecast to raise 7.9% on-year in 2012 to

10.25 million tons. If the pricesof steel reach US$ 690-US$ 720 per tones in the world

market, the market value in Indonesia is expected to reach US$ 7.38 billion or Rp

66.4 trillion in 2012 and high contribution to Indonesian GDP. In overall steel

production, crude steel production contributing high compared to hot- rolled steel &

apparent steel.

The major manufacturing industries Of India:

A) Textile Industry: Textile industry provides job opportunities to over 35 million

individuals thus playing a major role in the nation's economy. It has 4 per cent share

in GDP and shares 35% of the gross export income besides adding 14% of value

addition in merchandizing sector India’s textiles and clothing exports are around 4 per

cent of world exports, a market dominated by China.

50

B) Food Processing Industry: Supported by the GDP estimates, the approximate

expansion of this sector is between 9-12% and during the tenth plan period the growth

rate was around 6-8%.

C) Chemical Industry: India by featuring as the 12 largest producers of chemicals. With

an approximate cost of $28 billion, it amounts to 12.5% of the entire industrial output

of India and 16.2% of its entire exports. Under Chemical industries some of the other

rapidly emerging sectors are petrochemical, agrochemical, and pharmaceutical

industries.

D) Cement Industry: Totals the capacity of Indian cement industry at 159.38 million

tonnes.

E) Steel Industry: India steel industry is the 10th largest in the world which is evident

from its Rs 9,000 crore of capital contribution and employment opportunities to more

than 0.5 million people.

There are certain major players in Indonesia such as ArwanaCitramulia, BentoelInternasional

Investama, Apac, Citra Centertex, IOI Corp and many more. There are certain major players

in India such asTATA motors Ltd. , Larsen and Toubro Ltd, Steel Authority of India Ltd.,

bharat Heavy Electricals Ltd and many more.

Import and Export for Manufacturing related goods in Indonesia

A) Import and Export of Indonesia: Import of manufacturing sector increasing year by

year which indicates weak position of Indonesia There is high import in January to

July 2012. i.e. approx 17000 million USD and Export is increase up to July 2011 and

then fluctuate up to January and then start decreasing with 14000 USD.

B) Import and Export of India: India imports of manufacturing sector were worth 41779

Million USD in September of 2012 historically, from 1994 until 2012 and exports

worth 23698 Million USD in September of 2012. Historically, from 1994 until 2012

are decreased.

C) Trade relation Import and Export Agreement between India and Indonesia:As per the

Government of India, Growth of the trade between two countries is increased year by

year.

51

There are certain rules and regulation for manufacture related goods in Indonesia:

Strengthening connectivity around key manufacturing agglomeration areas, Prioritizing

improvements in port productivity, Removing regulatory uncertainties for investment in

modern third-party and end-to-end logistics services would be helpful in improving

manufacturing productivity, Special Economic Zones to facilitate agglomeration in

manufacturing clusters, Maintaining a relatively open economy, Rationalizing tax

incentives, Fostering cooperation between manufacturers and higher education

institutions for worker training or research and development, Building manufacturing

clusters with the capability to better position Indonesia’smanufacturing sector in global

competition.

There are certain rules and regulation for manufacture related goods in India:

High FDI Flow, Increase manufacturing sector growth to 12-14% over the medium term to

make it the engine of growth for the economy, Increase the rate of job creation, Creation of

appropriate skill sets among the rural migrant and urban poor to make growth inclusive,

Increase domestic value addition and technological depth in manufacturing,

Rules and Regulation For Import and Export in Indonesia are as follows: The importer must

register with the Directorate General of Civil Aviation (DGCE) to obtain a Customs

Identification Number and, For Exporter, calculations of Duties like Ad valorem Export Duty

and Specific Export Duty, Tariff Administration, Tariff Rates and Their Adjustments.

Rules and Regulation For Import and Export in India are as follows: In India, exports and

imports are regulated by the Foreign Trade (Development and Regulation) Act, 1992: Export

and Import (EXIM) Policy and also amend the same from time to time, by notification in the

Official Gazette, 'Importer Exporter Code Number' (IEC) from Director General of Foreign

Trade or from the officer so authorized, Export Oriented Units (EOUs) and Export Processing

Zones (EPZs) enjoy special incentives such as duty free import of capital goods and raw

materials for the purpose of export production and Import related, import licensing, efficient

import substitution and self-reliance

52

The import and export regime, whether tariffs or export promotion measures constitute

important policy instruments which shape a country‘s production profile.The import and

export regime, whether tariffs or export promotion measures constitute important policy

instruments which shape a country‘s production profile.With increasing globalization and

international engagementincreasing globalization and international engagement. Combination

of Domestic Production policies with International Trade.

Trade along with cultural linkages has been the bedrock of the relationship between the

biggest countries of South Asia and Southeast Asia, respectively. Two nations used to trade

in timber, minerals, precious stones, cotton and silk.India and Indonesia an Emerging

Nations:

o Facilitated trade, investment liberalisation, fiscal and monetary policy reforms, and

infrastructural upgradation. As a consequence, both economies have emerged as

dynamic markets with strong economic fundamentals and a robust financial sector

and manufacturing industry.

o The two economies have been reaping the dividends of low labour costs and have

positioned themselves among the top five investment destinations in Asia.

o Growth of the Industries In both the countries: Metal products, textiles, and mining,

cement, Automative.

o Increasing in consuption of both durable and non-durable, agreement of

manufacturing those goods.

Trade and Investment Potential in Indonesia are described as follows:

o Dr. Manmohan Singh, prime minister of India and Dr. H. Susilo Bambang

Yudhoyono, president of Indonesia, inked a bilateral strategic partnership agreement.

As part of the agreement, the two sides agreed to increase bilateral trade up to $10

billion by 2010.

o India and Indonesia have pledged to increase the volume of trade to the $20 billion

mark by 2015.

o There is increase in trade balance year by year. In 2007, the trade balance is around

134473 which were increased by 8465 in 2009 which shows that there is increase in

trade balance. In the year 2010, it peaks a new level which is 215544. Each and

every year imports is lower than an export which shows the growth of the country.

53

SWOT Analysis of Indonesia related to manufacturing sector:

Strength:

I. In steel industry gain competative advantage and Indonesia’s proximity to

Australia, which is the major source of coal and iron ore for China’s steel

products?

II. industrial competitiveness enhancement program according to groups of industry,

namely: (1) textille and textille product, footwear and furniture industry; (2) (fashion,

handicrafts, precious stones, ceramics and essential oils industry; (3) machinery and

shipping industry; (4) (palm oil, cocoa, rubber, seaweed, steel and aluminum upstream

industry; (5) automotive, electronics, and telematics industry; (6) sugar, fertilizer and

petrochemical industry.

III. Economic Partnership Agreement (EPA), which is the first bilateral free trade deal

of Indonesia. Under the terms of the agreement, Indonesia is exempt from Japanese

import duties to the extent of 90%.

Weakness

I. Lower international price textile, garments and footwear.

II. Inability to reduce production costs to match those of their competitors in China.

III. Absence of technological deepening in production and exports: while low

technology, labour-intensive industries

IV. Indonesia’s manufacturing industry has not been robust enough to meet the

challenges created by the ASEAN–China Free Trade Area (ACFTA).

V. The slowdown of Indonesian exports.

Opportunities:

I. Create enough jobs.

II. trade liberalisation by increasing the level and competitiveness of the country’s

manufacturing industry

III. In terms of foreign direct investment, manufacturing does continue to be the most

popular sector in the economy.

54

Threats:

I. The Asian financial crisis.

II. Suffering from a case of Dutch disease, where high commodity earnings drive the

exchange rate to the point that manufacturing becomes internationally

uncompetitive.

III. Agricultural-based industry.

IV. hurdles in promoting its exports with U.S and Europ, Singapore, China, Japan,

Malaysia, Korea

SWOT Analysis of India related to manufacturing sector:

Strengths:

I. regular periods of recovery

II. ability to maximize both the productivity of the workers andmachines to maximize

profits

III. Relative stability, laborcost advantage, skilled work-force, rich sources of natural

resources, and democratic regime.

Weaknesses:

I. Lack of awareness

II. heavy competition

III. Very low productivity as compare to U.S, South Korea, Taiwan.

Opportunities:

I. In the technology and bio-technology areas.

II. Free Trade agreement with other country like china, USA, Japan etc.

Threats:

I. Tough competition from imports and MNCs in the domestic market oras new

entrants in the global market.

II. Asian counterparts

55

6.IT, Services & Infrastructure

Indonesia has a mixed economy which both the private sector and government play

significant roles. According to WTO data, Indonesia was the 27th biggest exporting country

in the world 2010, moving up 3 places from a year 2011.

Indonesia's main export markets (2009) are Japan (17.28%), Singapore (11.29%), the

US (10.81%), and China (7.62%). The major suppliers of imports to Indonesia are Singapore

(24.96%), China (12.52%), & Japan (8.92%).

The business development in Indonesia has, for many years, been liked to political influence

and patronage, it has been virtually impossible to make progresses on any major project

without the right level of influence with senior people in the relevant government ministry

and the closer one’s contacts to the president, the better.

Indonesia with a population of 230 million and a rapidly growing economy represents a

significant business opportunity in such areas as automotive, electrical goods, infrastructure

and retail. To as this market though, you need to understand the business culture.

The world’s forth most populous country is Indonesia .

Indonesiais the 3rd largest democracy in the world.

Indonesia poverty over 100 million people live on less than $2 per day.

The majority of Muslims in Indonesia are Sunni. 9% of the population was Christian, 3%

Hindu, and 2% Buddhist & other. Most Indonesia Hindus are Balinese, & most Buddhists in

modern day Indonesia are ethnic Chinese. Thought now Hinduism, minority religions &

Buddhism remain defining influences in Indonesian culture.

Indonesia has about 300 ethnic groups with cultural identities developed over centuries, &

influenced by Indian, Arabic, Chinese, & European sources.

In this report show that banking systems is also affected with Indian banking system. The

Indian bank is also in Indonesia. ICICI. SBI and BOB was a major player in Indonesia

banking. In Indonesia is a huge opportunity in banking sector. In Indonesia there are only 18

% people are associated with any financial service.

56

Indonesia GDP was depending on the 3 major sectors

1). Agriculture,

2) Industry and

3) Services

Contribution of GDP

Agriculture: 14.9%

Industry: 46%

Services: 39.1%

In Indonesia GDP growth was increase 2.3% in last 5 year In GDP composition of services

sector 39.1 % which means its was high percentage contribution of any industry.

Relations with India

Foreign investment from India in Indonesia dates back to the1970s. In recent years there has

been a new wave of investment focusing on the mining, banking sectors and automotive .

India is the 2nd

largest partner with the Indonesia in ASEA.

India is the largest buyer of crude palm oil from Indonesia.

India’s exports to Indonesia are petroleum products, telecommunication equipments and

parts, hydrocarbons and derivatives, oil seed, motor vehicle for goods transportation, animal

feed, cotton, flat rolled product, alloy steel.

India has most substantial investments in Indonesia is the textiles, steel, automotive, banking

and resources sectors.

In auto-mobile sector Bajaj & TVS Company, steel sector Essar, TATA GROUP,

RELINECE GROUP also performing.

In FMCG sector the Godrej was there in Indonesia. And so many Indian company are

performing in Indonesia

57

Indonesia Intending to improve relations with India, the Southeast Asian archipelago would

also start air traffic of the state owned airlines Garuda Airlines from June this year, he said.

"Chennai has a lot of potential in business terms and we don't want to be left

behind.Indonesia have made a proposal to open a Consulate here, next to the one we already

have in Mumbai.

INFORMATION TECNOLOGY

IT is the use of computers & telecommunications equipment to store, retrieve, transmit and

manipulate data.

Living in an agrarian and maritime culture, people in Indonesian's archipelago have been

famous in some particularly in agriculture, traditional technologies and marine. In agriculture,

for instance, people in Indonesia & also in many other Southeast Asian countries are famous

in paddy cultivation technique namely terasering. Bugis & Makassar people in Indonesia are

also well-known with their technology in making wooden sailing vessel called pinisi boat.

With information and communication technology penetration of only around 20% and

development restricted to richer areas such as Java, Indonesia’s uneven development (and

resultant digital divide) is a major barrier to faster growth within the potentially huge IT

market.

In the customer segment, which is relatively small as a proportion of the market, demand

should be fuelled by lower prices and new entertainment and wireless connectivity features,

particularly with the governments reported plans to establish fixed wireless networks in major

cities.

Indonesia’s President Susilo Bambang Yudhoyono announced the establishment of a new

guiding body to provide strategic direction for the country’s IT development. . The

committee has been tasked with implementing a large and ambitious programmed of ICT

initiatives including completing the Palapa Ring Project which is to cover 50% of cities.

The indonasian government also announced the formation of a special body to manage

financing issues in relation to its Universal Service Obligation under the World Summit on

the Information Society (WSIS) programmed.

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Computer sales, peripherals and including notebooks, have been experiencing close to 20%

growth in 2006, and the growing number of internet users and government initiatives should

see this continue in the next few years.

It is becoming a more attractive market for foreign vendors such as Dell which has been

climbing the competitive rankings in 2006 with 61% growth in the second quarter alone.

One feature of the Indonesia computer market is its domination by the enterprise segment

which accounts for 70-80% of all sales & is currently the only segment served by Dell in

Indonesia. Dell is reported to be second in the enterprise market and fourth overall.

The Directorate General of the Telematics Application Bureau – part of the Department of

Communications and Information – has said that it may take two years to legalize all

software used by the government. Low computer penetration of 1.5% in 2008 is expected to

double to 3% by 2012, but anything faster would depend largely on improved government

support.

Indonesia's IT services market is expected to be worth US$349mn in 2006. Currently,

services account for only 16% of Indonesia’s hardware-centric IT market sales &

opportunities are mainly in fundamental services such as support systems, training, system

integration, professional services, internet services and outsourcing.

There are some notable technology developments made by Indonesians in modern Indonesia

In 80's an Indonesian engineer, Tjokorda Raka Sukawati invented a road construction

technique named Sosrobahu which becomes famous afterwards and widely used by many

countries.

The technology has been exported to the Malaysia, Philippines, Singapore and Thailand in

1995, a patent was granted to Indonesia.

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OPPORTUNITIES in IT Sector

The Indonesian economy is rapidly growing and because of the increasing household budgets

as well as decreasing prices the IT Sector has huge business opportunities.

The internet penetration rate is expected to increase from 20% to 65% by 2015.

Penetration rate of personal computers is also still low at around about 20% of the population

of about 230 million people.

Personal computer penetration rate also simelar to the Internet penetration rate in Indonesia is

also still relatively low at around about 20%.

Business Opportunities:

In Indonesia there is a huge opportunities in Mobile broadband IT, Web-enabled mobile VAS

such as social networking apps, mobile Internet products, Digital content, E-commerce,

Cloud services, Data centre & Risk and compliance management.

Still in an online social shopping company, the e-commerce sector, multiply, recently has

relocated its headquarters from Boca Raton, Florida to Jakarta to take advantage of the

growing local and regional markets.

Indonesia is also becoming a destination for various IT companies looking to outsource their

works.

SERVICE SECTORS

Banking

Indonesia’s economic growth continues to be strong at 6.5 % in 2011 and predicted to reach

6.1% to 6.3 % in 2012, and is south East Asia’s largest economy.

Indonesia’s credit rating has reached investment grade. Long term foreign currency rating

from Fitch Ratings’ is BBB-, while Moody’s is Baa

There are 122 banks with more than 13000 branches in Indonesia. These consist of state-

owned, local private banks foreign banks and the regional development banks

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Scope in Banking

The market has become both broader and deeper, and interest rates are sinking lower.

Indonesia and its neighbor have grown in large part by supplying cheap labor, therefore

exports & when global demand has shrunk, Now, in the aftermath of the 2008 crisis is clear

that these countries, Its perhaps chief among them, thay have enough domestic demand to

sustain growth for external economies cycles.

Only select clients receive repayments terms that extend into multiple years, its means that it

is difficult to use bank financing to fund infrastructure development

The problem is that infrastructure projects typically require a long period & it is often more

than a decade before profits materialize that length of time is beyond the comfort zone of

most Indonesian banks, whose loan officers expect to valuate credit requests based on a fast

turnaround. Guarantee funds & other methods have been created to help share the risk & the

overall performance of these groups of financiers will be closely watched in the next year.

The consumer finance side for banks will likely be more familiar in 2012 & beyond.

Indonesia’s banks run the gamut from small rural lenders to international players.

Indonesians are progressing through stages toward sophisticated financial relationships and

starting with small loans & deposits with rural banks and micro financiers, and then moving

to regional or national banks and deepening their relationship through credit cards, lines of

credit, saving schemes and other options.

Perhaps the biggest regulatory discussion in 2011 addressed the presence of foreign financial

institutions in the system. The banking sector has been large welcoming to foreign investors

since 1999.

Small and medium-sized enterprise segment is an important part of Indonesian banks’ loan

portfolios, accounting for Rp1035trn ($124.2bn), or 53.1% of total system lending as of June

2011.

While overall lending had grown by 23% y-o-y as of June 2010, the value of consumer loans

increased more quickly over this period, rising by 23.2%. This was apparently a cause for

concern at BI, with local newspaper reporting in early August 2011 that the central bank

governor had said that it was keeping a close watch on growth in auto and housing loans.

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Opportunities in banking

Continuous growth of middle class in recent years offers huge opportunities for

priority banking product.

Banks are increasingly focusing on providing better services and product innovation

to their customers. Many banks continue to invest in IT-based banking systems and

software.

Considering the size of the Muslim population in Indonesia and the growth of the

Islamic banking sector over the past 5 years, strategic investment and partnerships are

to be found in expanding the product base that Sharia banks are able to offer to

customers. Limited knowledge of more sophisticated banking products presents

collaboration opportunities.

In spite of the current regulations, there is an increasing interest on the part of foreign

providers in supplying professional services in Indonesia to support the activities of

international and Indonesian clients.

HEALTH CARE

Indonesia spends less on healthcare than its neighbors. Healthcare spending accounted for

2.8% of GDP in 2010, compared with 3.3% in Thailand, 3.9% in the Philippines and 5.2% in

the India.

The number of people with health coverage increas to 95.1m when those covered by the

National Social Security System was included. This system, which was extablised by the

government in 2005. Provides poor families with access to free outpatient primary care in

local health centers & free treatment at hospitals.

The capital, Jakarta, enjoys comparatively high levels of primary care, whereas healthcare in

remote areas, such as the western province of Aceh. Budgetary pressures mean that the

government concentrates on providing primary care and basic hospital services.

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Hotel Service

The Government has been actively promoting the country’s tourist destination. Besides

Indonesia Visit program, some of regional government also launched several programs to

attract more visitors; one of them is Visit Lombok Sumbawa program.

Foreign visitors who visit Indonesia are still dominated from ASEAN countries such as

Malaysia, Singapore, Philippines, Vietnam, Thailand & Brunei. Number of visitors from

those countries has shown an increasing trend particularly in the past four years from 2.17

million in 2005 to 2.79 million in 2012.

The second largest number of visitors came from other Asia countries such as Japan, South

Korea and Taiwan which represented 27.72% of total foreign visitors in 2012, followed

by European countries (14.83%), Australia (7.22%), USA (3.84%), Middle East (1.08%)

and Africa (0.48%). In term of purpose of visit, more than half of foreign visitors came

to Indonesia are for vacation.

INFRASTRUCTURE OF INDONESIA

Infrastructure is the backbone of development of any nation. A strong infrastructure is

indispensable for the sustainable growth of a national economy. Traditionally major

infrastructure sectors are power, road, railways, ports, civil aviation and telecommunication

in physical infrastructure area, while social infrastructure covers areas like literacy and

education, housing, health,water and sanitation & culture. The objective of the study is to

assess the extent of innovation in different areas of infrastructure and its contribution to the

nation’s development. The study analyzes the measures taken by concerned agencies to

enhance the innovativeness of the infrastructure sectors. It is also to give suggestions to

improve on the same.

Progress made in each of sectors under physical and social infrastructure has been discussed

with statistics. At many time, comparison has been made for different aspects of

infrastructure in Indonesia with those of comparable economies as well as advanced

economies. Various innovative measures taken in each of the physical and social

infrastructure sectors have been discussed in the report. In power sector, the use of flexible

AC transmission system, gas insulated substations, capacitors and the application of wide

power; ocean energy and solar thermal power have been mentioned.

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Indonesia has sought investment from Indian companies in areas such as road, infrastructure,

national resources & food.

Indian firms have signed agreements worth $15 billion for the construction of infrastructure

projects in Indonesia.

Indonesia will spend approximately $250 billion over the next five years on infrastructure.

Indonesia is ready to offer 14 major infrastructure projects valued at $6.1 billion to the

private sector in 2013, as part of an effort to boost economic growth.

The 17 projects already under construction include a $3 billion power plant in Central Java; a

$1.5 billion railway stretching 185 kilometers that connect coal mines and plantations

The nation has more than 17000 islands. Even on some of big islands, infrastructure such as

airports, ports & railways are still under developed, creating high costs for businesses to

transport goods.

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7.Geography, Topology & Natural Resources

In the beginning of project we have concentrate to give brief introduction regarding the

Indonesia. Indonesia has very great amount and ample amount of recourse capability from the

beginning of their development and Indonesia is also largest in south East Asia and have also

larger mountainous and with rain ,forests, swamps and more than 13000 island all over the

country itself. Jakarta is the capital of Indonesia and 22% of people in Indonesia are living

under the poverty line.

In every country such kind of the factor plays a important role in the development of nation at

global level with good amount of recourse capability like land, people, climate & weather,

natural resource and economy of that country.

Land is very crucial parameter of any country because it deals with how good fertilizer land

helps in good amount of growth of nation in agriculture area of those nations. In Indonesia

more than 17000 island of which around are inhabited.

Climate and weather almost determinate the agriculture scope in particular nation itself for

long period of time. Almost similar kind of weather Indonesia has like India. But in recent

time due to global warming climate have been noted change. But still enjoying 4 month of

monsoon period from December to March. People is most crucial resources of any particular

nation have in Indonesia 88% are combine of Hindu, Muslim and Balinese are living among

most important and famous city Sumatra and java itself. Including Indian community like

Punjabi, Tamil & Sindhi. In Indonesia almost 50000 people are Indian origin.

Indonesia has most and world largest richest country in natural recourse among the world and

major part of the countries earning comes from foreign exchange. Indonesia have natural

recourse like coal, tin, copper, nickel oxide, bauxite, gold, lead, manganese, silver, titanium,

zinc etc. Now Indonesia government is more focusing on the development of fishery business

in their nation due to good amount of recourse available with them and ample amount of

scope in future regarding that particular business.

For the last couple of decade Indonesian government has focusing the foreign direct

investment regarding the various sectors for the development of local people and business.

Indonesia is foundering member of ASEAN at time of it establishments in 1968. Indonesia’s

GDP of US$ 296.7 billion (at actual prices) and it was the largest in ASEAN.

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Indonesia have Contact with India from very begging of 7 D.C at that time king of their

respective kingdom were trading with each other.but after than Britisher are ruling the India

country were trading the good from India with Indonesia. Both Mahabharata and Ramayana

holy books of India were derive the way of life of Indonesia

Indonesia was ruled by colonial power, the Dutch. Independence of Indonesia were comes in

1945 after Second World War.

Now, we will focus on main part of our report that Natural resource of Indonesia’s shown

in above Indonesia have very potential natural resource. Indonesia currently exporting both

crude oil and refined product to worldwide and Indonesia is also founder member of OPEC

from its establishment in year of 1962 to 2009.In January 2009 Indonesia were suspending

from membership of OPEC. Many international companies like Chevron, Total, Conoco

Phillips, Exxon, and BP are doing business there and doing 40% of their total output of

production. According to Oil & Gas Journal, Indonesia had 3.9 billion barrels of proven oil

reserves as of January 2011.

Refinery Indonesia has a refinery capacity of just over one million, according to Oil & Gas

Journal. Spread across eight refineries owned by PT PERTAMINA.

Indonesia has 106 trillion cubic feet of proven natural gas resources Natural. Indonesia is

world’s 14th

largest holder of proven natural gas resources. Every year 1.3 % of growth rate

has been noted for natural gas production by government of Indonesia itself and government

trying to make foot step of development of that areas too. Indonesia was the world's sixth

largest net exporter of natural gas in 2009. Indonesia was world’s 3rd

largest exporter for

Liquefied Natural Gas.

Indonesia has 4.8 trillion of short tons of revocable coal, of which was majority located near

to Sumatra and java district of Indonesia. In last decade coal consumption in Indonesian has

been 24%.now Indonesia is second largest exporter of coal in the world after Australia.

Natural resource of India, India was largest 4th

consumption country in the world, due to

over crowed population of country the demand for natural resource is being noted to

increasing every year. In 2011 India has 5 billion barrels previous of reserve. India produced

roughly 950 thousand barrels per day (bbl/d) of total liquids in 2010.india is world’s largest

5th

importer of oil about of 70% of consumption. Various oil companies in India like bharati

petrol, reliance and ONGC are producing the oil from India.

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India has 4 billion barrel of crude oil refining capacity over 21 facility plant over the world.

India has world 5th

largest capacity of refinery. Indian government is providing more than

20$ billion subsidy per year. In India 21% of people living below the poverty line so it is

necessary for government to give subsidy. It is obligation for government to intervention in

the price of the gas and petrol for the benefit of local people. It was estimation that till end of

2012 India has reserve of 40 million barrel of oil.

India has 38 trillion cubic feet of proven natural gas reserve as of January 2011.it was noted

India has shown in 63% growth the production from January 2008.majorty of production

comes from western offshore region like Mumbai & west Bengal.

ONGC the India’s largest producer of natural gas and Indian government has approved $7.2

billion with joint venture agreement reliance & B.P they will together off shoring and

expanding. Indian government is most important factor and preventing price control in every

area.

Due to increasing in the global expose and demand for natural recourses at world level due to

insufficient recourse of capability. India has to depend upon the export from other country for

oil and natural gas.

Major import from Iran, Myanmar and Turkmenistan. Pakistan became key link for import

from Iran and Turkmenistan.

The second chapter includes the PESTEL Analysis of Indonesia. PESTEL stands for the

Political, Economical, Social, Technological, Environmental, and Legal factors that affect

any country or that can be used as tools to evaluate the economic condition of any country.

If we talk about the Indonesia’s political and legal factors, it includes the political stability,

labor law, common law, prime lending law, environmental law, business or individual tax

system, etc. Each factor is correlating with the Indonesia’s growth and its future expansion in

terms of GDP and GNP. In Indonesia after five year election is conducted so that we can say

that there is same level of government as prevailing in India. Labor law includes the several

rights of labor so that they can protect their demand and need. In Indonesia there banks lend

the money by talking only 6.41% and their central bank charged 10.83% as per CIA report,

2009.

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Economic also plays an important role in any country. Indonesia is developing country where

economic factors like GDP, GNP, Per Capita Income, Exchange Rate, FDI, Inflation Rate,

Imports, Exports, Balance of Payment, etc are considered to be most effective factors of

economic.

Indonesia is developing country as stated above so it is merely depends on it exports.

Indonesia had exports of $93.3 billion in 2008 compare to $83 billion in 2007 so it shows the

positive growth in exports that not only increase the country’s economy but it also make

strong the country’s currency in Foreign Exchange market.

FDI may leads to increase the overall development of any country. In Indonesia FDI was

$67.3 billion in 2008 compare to $58.96 billion in 2007. So, it shows the upward trend in

overseas direct investment in Indonesia.

Society and social factors are also important to evaluate the country’s condition. A social

factor includes the population age factor, education, religion, etc. Indonesia is religious

country where people are coming from different religion. Indonesia’s religions can be divided

in four parts like Muslim, Protestant, Roman Catholic and Hindu. Indonesia has majority of

people are in the age group of 15-64 years that is approx 66% and only 6% peoples who are

over 65 years of age so we can say that Indonesia has more manpower to compete with global

industries.

Indonesia is developing country and so technology is also at its developing stage but

Indonesia has developed many technologies like transport system, communication system,

and broadcasting technology, etc

The communication system in Indonesia is highly developed which maintain 17.33 millions

of people use landlines where as 83.3 millions of people use cellular mobiles in the same way

there are 13 millions of internet users and Indonesia has also its own domestic satellite

communication system coverage which make communication batter and also open the door

for future development in technology.

Indonesia has 139 airports, railway line of 8529 km and water ways covering of 21,579 km

that provides the easy transportation for individuals as well as for industrial vehicle

transportation.

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An environmental factor includes the various geographical location, natural disaster, etc.

Due to geographical location, several times Indonesia faces many natural disasters such as in

December 26, 2004; magnitude 9.0 earthquake caused a tremendously powerful tsunami in

the Indian Ocean and about 15500 people died and after this in May 26, 2006, in Feb 2007,

January 27, 208 and many times country faced such types of disasters. Indonesia has one of

the most complexes and varied in the world, it has situated in South-Eastern Asia between the

Indian Ocean and the Pacific Ocean. It covers the more than 19 lakh sq km area in that land is

18 lakh sq km and water is 93000 sq km.

The third chapter includes the trade relation between India and Indonesia. India and

Indonesia had signed an agreement in June, 1978 committing both countries to take all

appropriate measures to facilitate, strengthen and diversify bilateral trade. An agreement for

the promotion and projection of investment, which was signed in February, 1999 came into

force in January, 2004.

Both countries had formed a meeting called Joint Commission Meeting (JCM) which was

held in Yogyakarta in September, 2003 for taking a major decision on bilateral trade and

commercial relation in various field. KADIN is the Indonesian Chamber of Commerce and

Industry. During the visit of president SBY to India in 2005, KADIN decided to have an

“India Committee” which would be a specialized body for promoting bilateral economic

relation between India and Indonesia and work to enhance interaction between the Chambers

of Commerce and industry of the two countries.

Indonesia is the second largest export market after Singapore and one of the major trading

partners in the region. During 2004, the bilateral trade expanded by 36% and it further boost

of 20.90% in 2005 and growth rate has been sustained in the year of 2006 by a quantum jump

of 22.08% which has brought the two way trade to US$ 4.7 billion.

Traveling from Indonesia to India has increased significantly. According to data being issued

by embassy 8,038 visas to Indonesia in 2004, 8227 in 2005 and 8797 in 2006. Likewise the

total number of business travelers from Indonesia to India in the last three years has been

2,672 in 2004, 3,409 in 2005, and 4,103 in 2006. This reflects an increasing trend of people-

to-people contact between the two countries with many more Indonesians visiting India than

in the past.

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India has tremendous growth in some commodities been exported to Indonesia. Like

Petroleum Products registered the growth of 95% between two continuous years, cotton also

increased the growth from 33.8% to 83% form 2006-07 compare to 2008-09. Apart from

these two items India had exported so many other commodities such as Oil, Coal, Natural

Rubber Latex, Pulp and Waste Paper, etc

There are many business available to invest in Indonesia which can be categorized in several

category like Small and Medium Size Enterprises, Partnership, Capital Ownership, invest in

certain location, special Permit business, Domestic Capital, Capital ownership and location,

etc.

The fourth chapter focuses on the business scope in Indonesia. If any company or

organization wants to enter in any other global market for business purpose there are certain

government regulations because it ultimately affects the home country company or

organization. So to find out the opportunity was very much important. The government of

Indonesia defined the limits of the investment so certain home company can be protected. In

Indonesia there are various Indian company doing operations but the main focus was on the

textile and steel sector. Also some companies are in hotel and tourism industry because of the

chain of island of Indonesia. Second for most rice wheat production in Indonesia because it is

the chain of island and here the monsoon is for the 9 months so the needed water for the

production of rice is plenty of and easily available and the climate also in favor of the rice

production.

After the explanation of India’s companies focus on particular industry the non-tariff barriers

are listed like hot rolled coil, wheat flour etc. Indonesia also banned India’s bovine meat

product and milk product. Indonesian government had imposed a 14% anti-dumping duty on

the import of Ampicillin Trihydrate and Amoxicillian Trihydrate from India till 2008. Now it

has been discounted. Indonesia has imposed duty of 11.40% on the sourcing of wheat flour

from India over and above 5% duty on the product from India.

The next thing includes Comprehensive economic Cooperation Agreement (CECA). It

reviewed the India-Indonesia economic relation and discussed terms of reference, modality

and timeframe for the joint study group. First India-Indonesia joint study group was held in

Jakarta on 30-31 October, 2007.

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After that India-Asian Free Trade Agreement was given after the CECA. It’s a one type of

agreement which was sign by India and Asian in 2003 for Comprehensive Economic

Cooperation Agreement. The 21st Meeting of the India and Asian was held at the Jakarta in

July 2008 which was led by P.K. Dash and Ministry of Commerce. In this particular meeting

negotiation was held bout various issues pertaining to the proposed FTA.

There are more than 20 major Indian manufacturing joint ventures in Indonesia with direct

India participation or financed by overseas Indians. The major joint venture during the 1970s

was in textile, garments, steel and hand tools. There are various players like Aditya Birla

Group, Jaykay Files Indonesia, Ispat Group were established during this period. The Second

phase of investment brought in Essar Group which set up a cold rolling steel mill, PT Punj

Lloyd Indonesia who invested in oil and gas infrastructure, petrochemicals and refineries and

Oberoi Hotels. Till then it was estimated that the total Indian investment was around 1.5

billion US$ in assets in Indonesia and the output of these companies was between1 – 1.5

billion US$. Recently after the economic and political change more Indian companies were

investing in mining, banking, IT, automotive also. Jindal Group invested ina cold rolling

operaqtions in 2004. Tata Power has sign an agreement to invest in coal mines. Indian steel

maker Essar Steel Limited is going to invest in integrated steel production facilities in

Kalimantan. The Public sector giants like NTPC and RITES are looking for cooperation in

energy and transportation sector. Tata Consultancy Services (TCS) has been working on

various projects with the local banks and some in collaboration with Microsoft and other

companies.

Indian companies have also been involved in supplying equipment to Indonesia. This include

IRCON, WAPCOS, TCIL, Punj Lloyd, STUP Consultancy India Ltd. and recently RITES

Ltd. NIIT and APTECH, LCC InfoTech, Tech Mahindra have established IT Education

Centers in Indonesia. Bharat Heavy Electricals Ltd. (BHEL) has opened its Representative to

get power projects, contracts and with an objective to be a future player in the power

generation sector in Indonesia.

Indonesian companies have started bidding for infrastructure and energy related projects in

India. For example, in 2006, Adhi Karya, an Indonesian State owned enterprise, was awarded

a contract by Rail Vikas Nigam Ltd. worth US$ 90 million to develop infrastructure facilities

in the State of Orissa. But Indonesian investment in India is rather low and it ranks 36th

in

FDI inflow to India.

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After the detail view of various companies joint venture and all the focus was shifted to the

promising areas for Trade/Investment/Joint Venture/Services. Jakarta Investment Board (JIB)

organized a seminar on “Investment in Indonesia” in Mumbai on 15 September, 2006 with

the co-sponsorship of CII. Then, Riau Investment Board led a delegation to India in 2006 to

attract investments.

The event was hosted by FICCI. In April 2007, the Indonesian Government, in collaboration

with India Indonesia Business Association (IIBA), organized ‘Expo Indonesia 2007’ wherein

55 SMEs participated which resulted in a few tie-ups to begin with. A delegation from

Agricultural & Processed Food Products Export Development Authority (APEDA)

participated for the first time in “Food & Hotel Indonesia 2007” held at Jakarta from 28-31

March, 2007 which generated sizeable number of queries in Indian food processing sector.

The biggest participation has been in January 2007 wherein 23 Indonesians went to New

Delhi to attend the Engineering Export Promotion Council (EEPC) Buyer-Seller Meet.

PHARMEXCIL held a reverse Buyer- Seller Meet in Hyderabad from 11-15 February, 2008

in which 14 delegates from Indonesia representing six leading pharmaceutical companies

participated

The next thing was the list of Negative Investment given like Agriculture and Forestry.

The fifth chapter was about the Indian investment and Joint Venture in Indonesia.

In it the table was given which includes the name of the company, its office address, Indian

partner, Line of Business and No. of employees. There three major companies namely PT

Bhatia International, PT. Punj Lloyd Indonesia and Reliance Industries Ltd.

Ambassador of the Republic of Indonesia Andi M Ghalib said that the bilateral trade between

India and Indonesia is expected to grow to $ 45 billion by 2015 from $ 20 billion at present

because of the signing of 35 MoUs, including 18 business pacts. After that the Import of

Indonesia shown in which products and its amount is given. Indonesia is importing various

products like cotton, telecommunication equipments and parts, Sugar and honey, Aluminum

etc. Export of Indonesia table was also given after the import table. It includes fixed

vegetable oils & fats, Coal, vegetable oils etc.

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Indonesian government introduced policy packages to eliminate economic distoerions and to

open up the economy. The policy packages promoted the liberalization of trade and

investment. It helps to remove the tariffs and non-tariff barriers from the trade and more

sectors opened up to foreign direct investment. This policy helps the government in many

ways. Non-oil exports grew rapidly and labor intensive manufacturing became buoyant,

resulting in significant creation of jobs. A second trade reforms was introduced in 1995 and

1996 in large part to implement Indonesia’s commitments under the agreement to form an

ASEAN free trade area to be completed in 2003. Several products excluded from this

program like chemicals, automobile sectors, products related to moral and security items.

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8.Agriculture & Processed Foods Industry

As India is an agricultural country, agriculture plays vital role in economic development and

growth. India has an advantage of different weathers and different climate at different part of

country. As an example north India has a cold atmosphere that allows growing the winter’s

crops.

Though agriculture satisfies the hunger needs of Indians, it also provides the huge labour job

to uneducated people and reducing poverty in country. The agricultural industry also makes

Indian economy strong by foreign exchange. Agriculture industry provides 50% income to

the country.

We have focused on Indonesian and Indian Agriculture trade relationship where we have

found that by reducing the poverty rate, it results in to high growth rate. Growth of

Indonesia leads to poverty reduction (1) service sector growth has the biggest impact

reducing poverty during both pre and post crisis periods, (2) the role of Agricultural growth is

strong in rural areas with a slightly declined impact in The post-crisis period, (3) urban

service growth continues to have the highest Impact, yet the role of rural service growth

increases tremendously after crisis in both rural and urban areas.

Indonesia’s climate is in favour of sunshine and rain that grows many agriculture products

like Coffee, Rubber, and Coca. It includes the 40 million hectors of the forest areas of the

total area of the country. The main variable of Indonesia's climate is not temperature or air

pressure, but rainfall. Split by the equator, Indonesia has an almost entirely tropical climate,

with the coastal plains averaging 28°C, the inland and mountain areas averaging 26°C, and

the higher mountain regions, 23°C. The area's relative humidity is quite high, and ranges

between 70 and 90 percent.

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As in Gujarat, climate allows growing the different crops as shown in detail part of report and

we found the relation with Indonesia of them. The conclusion of the study shows that there is

a positive relation of some crops and no relation of export import of some crops. The

positive relation on wheat, groundnut, Potato, Tomato etc and negative relation of

cumin, coriander, fenugreek etc.

From number of crops, Onion and wheat is the most known and used product in both the

country. In last year 2011-12, India has exported 4,85,11,000 Kg of Onions only to Indonesia.

Through this value we can know that how much quantity of Onion India is producing. In

India, Onion is used in every individual’s house in very state because; onion is most

prominent crop of Indian culture and even Indonesian. India has varying climatic conditions

and provides an opportunity for growing a large number of horticulture crops including

vegetables. Maharashtra is the leading onion producing state in India. The other major

states producing onions are Gujarat, Uttar Pradesh, Orissa and Karnataka. In India per

hectare yield is highest in Maharashtra (21.55 MT/ha) followed by Gujarat (21.24 MT/ha),

Hariyana (20.37 MT/ha) and Rajasthan (15.24 MT/ha). Whereas for Wheat the maximum

average production of wheat is in U.P. but the highest average yield is in Punjab (2715 kg/ha)

and Hariyana (2685 kg/ha). The data of Indonesia shows that the consumption of wheat is

increasing 10% by the previous year, which gives high scope for export in it.

Another product is Grams, Bengal gram is called Chickpea or Gram which is a major pulse

cropping India, widely grown for centuries and accounts for nearly 40 percent of the total

pulse production. 61.65 percent of the total world area and under Bengal gram during 2002

and 68.13 percent of the total world production. The major producing states are Madhya

Pradesh, Uttar Pradesh, Rajasthan, Maharashtra, Andhra Pradesh and Karnataka. During

2001-2002, India’s total export of Bengal gram was 1375.676 tonnes valued at Rs. 36.10

lakh.

Major Bengal gram producing countries were India followed by Turkey (7.56%), Pakistan

(4.64%), Iran (3.20%), Mexico (3.07%) and Ethiopia (2.25%).The production of the

world was about 7.8 million tonnes.

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Global trade of Gram is the maximum of 100000 tons a year. EU and US are major

importers. India and Argentina are the major gram exporters. Indonesia imported 52,897

tonnes of Gram, dry beans, peas, pulses and lentils valued at C$ 27.8million in 2008

Indonesia has been in long term decline and became relatively stagnant after the onset of the

Asian economic crisis in 1997‐1998. Indonesia’s imports of Gram were variable between

2004 and 2007. Imports amounted to 8,169 tonnes valued at C$ 4.1 million in 2008. In 2004,

imports were 6,384 tonnes valued at C$1.9 million in 2004.

Today the Gram market is a niche market within Indonesia’s larger market for Gram, dry

beans, peas, pulses and lentils. The bulk of imports are dry green peas, which probably

account for more than 95% of the segment.

For maize, Andhra Pradesh tops the list with the contribution of 17% to the total Indian maize

production. Other producers are Rajasthan (14%), Madhya Pradesh (12%), Bihar (10%),

Uttar Pradesh (9%), Karnataka (8%) and Gujarat (6%).As per the production of the maize in

India it can be opportunity to export in Indonesia. Maize is the second most important cereal

crop in Indonesia after rice. The demand for maize as food and feed has been steadily

increasing. Total national maize production has grown at 4.07% per annum in the last three

decades, thanks mainly to the adoption of improved production technologies, particularly

hybrid seed. This high production, however, still fails to meet domestic demand and has

caused a rapid increase in the net import of maize.

As per our study, in both the country technology has been used for farming. In Indonesia,

they are using different technology in each stages of farming that are Preparation for land,

Planting, Weeding, and Usage of Fertilizer. There are constant technological changes

taking place at each stage of farming of crops. Varieties of fertilizers as well as pesticides are

used by farmer, for different type of land and different kind of seeds. Several institutional

arrangements were taken by them for better productivity in crops.

On other side, in India, different crops having their own technology used by farmers which

are very helpful for high production and quality. Those names of different technology are as

follows: Organic Farming, Greenhouse Farming, Hydroponics or Soil less farming,

Organic Manures, Mushroom Farming and Fish Farming. These are the major

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technological farming methodologies which are currently implemented by Indian farmers to

increase production through technological farming. Apart from these technologies, in India,

Fancy pigeons farming, Goat Farming, Honey Bee Farming are also growing in their

field.

Today Fertilizers, Pesticides and Seed Processing is the most vibrant issue in global

agriculture sector. Fertilizers are added to plants to promote growth. Urea is a nitrogenous

fertilizer that has a very high demand among Indian agriculturalists. In fact, in India of the 64

large-scale fertilizer units in the country, 39 are involved in producing urea.

As the fertilizers help in plant growth, pesticides work as a safeguard against pests. A

pesticide is a substance or mixture of substances designed for preventing, destroying,

repelling or lessening the damage of a pest. The current production capacity of the Indian

pesticide industry is about 1, 24,000 tones.

The requirement of food regulation in India may be based different factors like international

norms, good agricultural and manufacturing practices, and country’s own suite of food

regulations. Basically more than one agencies are involved in food regulations, all are have

centralized or regionally controlled for food regulations. Different laws for food safety and

quality standards are apply in most countries.

The Act establishes a new national regulatory body, the Food Safety and Standards Authority

of India, scientific based standards for food and to regulate and monitors manufacture,

processing, storage, distribution, sale and import of food to ensure the availability of safe and

wholesome food for human consumption. All food imports will covered by the provisions of

the Act and rules and regulations made under the Act.

Act covers the Weights and measures, Shelf life and Livestock of product, Milk and Milk

Products Order. Also Bureau of Indian Standards (BIS), Management Systems for Quality

and Food Safety, Export (Quality Control and Inspection) and Other Government Regulations

Food Act of 1996 in Indonesia includes, Food has to be safe, good quality, nutritious,

diverse, and provided in adequate quantity is the primary condition because it consumed by

all the citizen of Indonesia . Food requires an honest and responsible trading system so that

available within the purchasing power of the society.

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Basic requirement that is Labelling Requirements, import of food must be reported, Product

Registration and Certificates required for the import of food products Seed processing is an

important part of the seed production needed to move the improved genetic materials of the

plant breeder into commercial channels for feeding the rapidly expanding world population.

Food processing sector in India is largest sectors in terms of production, consumption, growth

as well as export. India's food processing sector covers meat and poultry, fruit and

vegetables; spices; fisheries, milk and milk products, plantation, alcoholic beverages, grain

processing and other like confectionery. India's exports of Processed Food were Rs.34864.36

Crores in 2011-12. India is importing number of products from Indonesia. The imported

products in 2011-12 are Cocoa powder, Cocoa beans, Nuts, Sugar confectionery, Cocoa

butter, Plants & parts of plants, Peas.

Whereas India is exporting Grapes, Onion, Pomegranates Fresh, Tomatoes, Potatoes, Fruits

& Vegetables seeds, Groundnuts, Guar gum, Honey, Non-Basmati Rise, Other Fresh Fruits,

Other Cereals, Poultry Products and wheat. We have also identified more than 50 major

Gujarati exporter who export these products to Indonesia.

The Indian food processing industry is basically export oriented. Also India’s

geographical situation gives it a unique advantage of connectivity to Europe, the Middle East,

Japan, Singapore, Thailand, Malaysia and Korea.

India ranks first in world buffalo population and one-sixth of goat population in world. India

is also fifth in egg production and stands ninth in the number of poultry. As India’s own

poultry production is good it doesn’t need to import any product from any other country

except in the year 2000-2003. But as per statistics were found exports were not satisfactory,

reason being quality considerations. The quality India is producing is not up to the mark and

so exports are low as compared to other countries.

India’s processed meat production is good and it is still expected to increase in near future as

India is implementing new technologies to store meat. India’s government is providing

transportation subsidies (Rs 3-15 per kg) for its exports. India is exporting meat to different

countries like Afghanistan, Germany, Denmark, Indonesia, etc. As per statistics Indonesia’s

import of poultry is basically from United States, Australia and New Zealand. So India can

create trade relation by increasing export of poultry product by exporting meat and beef to

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Indonesia, as Indonesia’s own production is very low and it depends on other country for

these products.

India has huge dairy industry as it have huge cattle. It is producing many dairy products like

milk powder, baby food, milk and cream, butter and other fats, etc. All around 40% dairy

products are exporting to different countries such as Bangladesh, Singapore, United States,

U.A.E, etc. The Government of Indonesia (GOI) estimates that the Indonesian economy will

grow by 6.5 percent; this combined with a stable political situation, there would be increased

in consumption of milk. Though increased consumption Indonesia can’t meet with demand of

the milk, in Indonesia they use whole fresh mix with the imported milk powder as they don’t

have enough fresh milk to satisfy the demand. So India can create trade relationship by

exporting milk powder as India already have enough production in dairy products. So

Indonesia creates an opportunity for India.

Focusing on Indonesian strength, in that Indonesia is the fourth biggest aquaculture (fishing

Culture) producing Country, following China, India and Vietnam. Aquaculture production in

Indonesia reached 6.98 million tons in 2011 where as Indian fishing culture is growing. India

is trying to utilize their resources at maximum level. Indonesian government has planned to

use their strength in such a way that they can make their country as fish producing hub.

Indonesia is the fourth biggest aquaculture producing country, following China, India and

Vietnam. Aquaculture production in Indonesia reached 6.98 million tonnes in 2011, consist

of seaweed (4.3 million t), milkfish (582,242 t), tilapia (481,440 t), shrimp (414,014 t),

catfish (340,674) t), carp (316,082 t), pangasius (144,538t), gourami (59,401 t), grouper

(12,561 t) and other species. Government of Indonesia has set a target to increase the

aquaculture production to 9.4 million tonnes in 2012.

Along with the rapid growth in aquaculture production, demand for fish/shrimp feed also

increases, and in 2012 it is estimated at 3,642,041 tonnes. There are about 27 feed mills in

Indonesia with the total capacity of 2.2 million tonnes per year. Demand for fishmeal in

Indonesia is around 150,000 tonnes a year. In 2010, the domestic fishmeal production was

only 30,170 tonnes.

The demand for fish is increasing day by day in Indonesia because the reyail price of meat

and poultry are continuously increasing. The most valuable product is shrimp in Indonesia.

The export of shrimp is highest from the country. In Indian scenario the fish production and

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consumption are equally that create no need of import and export relation with Indonesia. In

future if the consumption of fish will be higher in India than there will be scope for Indonesia

to export the fish products in India.

The packaging industry is also a growing industry of India. This industry’s contribution is

valuable to Indian economy. The current growth rate is 25% in this financial year. Leading

companies in the Indian packaging industry show a compound annual growth rate of 30 per

cent and the Indian Rupee is strengthening against the US dollar. Key drivers for packaged

food industry are increasing income of Indian, challenging life, improved packaging,

increasing freezing capacities and growth in organized retail.

In this scenario the Indonesia is the major importer of package food industry for India, but the

packaging industry is also a growing industry in Indonesia. The future of packaged food

industry in Indonesia is also a very bright. It increases by 25.7% In every year. So the study

shows that in some items the India having a good scope to make relation with Indonesia in

future.

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9.Political & Economic Environment & Legal Aspects of International Trade

The Indonesia has remained an important trade region . it is imported from when Sri

vijaya and then later Maja pahit traded with China and India. Indonesia has a mixed

economy in which both the private sector and as well as public sector. The country is the

largest economy country in Southeast Asia and the Indonesia is a member of the G - 2o

major economy.

Indonesia’s external trade improved in 2010 .In 2009 the indonesia’s trade decline because

of the global financial crisis of the indonesia.Eexports and imports of Indonesia have

rebounded vigorously since 2009, with indonesia’s imports growing faster than exports.

China and India’s strong economic expansion have increase Indonesia’s exports of coal and

palm oil, and increased the export of rubber products and base metals.

China, India and South Korea have been increasing their imports from Indonesia in recent

years, because of their high demand for mineral fuel. China and India will remain the most

importer market for Indonesian palm oil.

Indonesia’s Exports: Commodities

There are major commodities which are exported by Indonesia :

rubber

Electrical appliances

textile

plywood

Oil and gas

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Indonesia’s Imports : Commodities

There are major commodities which are imported by Indonesia :

Machinery and equipment

Chemicals

Fuels

Foodstuffs

As per the major partner of Indonesia as of 2010 along with the percentage of import :

country import in (%)

2010

Singapore 16.9

China 11.8

Japan 11.7

Malasiya 6.9

Us 6.1

Soth Korea 5.4

Thailand 4.9

Here , this table shows that as per the import of Indonesia of 2010, the major import partner

of Indonesia is Singapore , china, japan, malasiya, Us, south korea, and thiland.

For entering in to Indonesia ‘s major importer player ,india have to export to Indonesia these

commodities which are mostly imported by other country such like as: machinery,

equipment, fuel, foodstuff etc.

The graphical representation of the indonesia’s major partner of importer as per the 2010’s

measurement

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Link between Indonesia- india for international trade

Indonesia’s key exports to India mostly consist of vegetable oil, crude palm oil, coal, copper

ore, cashew nuts, newsprint, chemicals and natural rubber. and while, India’s primary exports

to Indonesia for nylon thread, organic chemicals, iron and steel products, synthetic fiber and

cotton.

In the year as of August 2010, Indonesia’s exports to India has $6 billion, a 34.7 percent

increase compared to the same period of 2009. It recorded a surplus of $4.6 billion in its trade

with India in the first 3 quarter of 2010.

In 2010 bilateral trade targeted up to $ 10 billion but in 2010 its actually reached at $ 12

billion from the $4 billion in 2005.

India’s exports have almost trebled from the last five years, the products which are India

exports to Indonesia are gems and jewellery, machinery and equipment, raw material,

minerals etc. while Indonesia exports to india such as chemical, engineering product,

precious stone etc,.according to government meeting both the countries promote for better

trade and reassure for the business community of both the countries.

India - Indonesia Trade (Year to Year Trends)

Sr.

no

year 2006-07 2007-08 2008-09 2009-10 2010-11

1 Export 1380.20 2032.96 2164.17 2559.82 3063.36

Growth 0 47.29 6.45 18.28 19.67

2 Import 3008.11 4181.96 4828.21 6666.34 8656.66

Growth 0 39.02 15.29 38.27 29.86

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At a trading view point Indonesia is a member of General Agreement on Tariffs and Trade

(GATT) and ASEAN Free Trade Agreement (AFTA). India regards Indonesia as a key

member of ASEAN free trade agreement. Both the nations had agreed to establish a

strategic partnership.

Political situation of Indonesia

Indonesia's political system is a constitutional democracy system for the international trade.

The country adopted protectionist trade system and industrial licensing policies for the

misguided effort to promote industrialization. Instead, these policies made disturbed for

manufacturing and smothered non-oil export growth.Indonesia significantly reduced its trade

barriers and consequently enjoyed with the manufacturing boom that lasted well over a

decade. Over the last few months, the Indonesian authorities and government have begun to

re-introduce barriers to foreign trade and investment, with the intention for promoting more

industrialization, domestic investment, and employment.

India and indonesia agree for fast track of international trade:

As on March 5, 2012: ( as per the jakarta business report)

India and Indonesia agreed to fast track the ongoing negotiations for the comprehensive

market and for enhancing the bilateral trade relation between the both countries. In

october,2012 both the countries started negotiations for CECA (comprehensive economic co-

operative agreement) which consist trade of goods, service and investment.

1380.2 2032.96 2164.17 2559.82

3063.36 3008.11

4181.96 4828.21

6666.34

8656.66

0

2000

4000

6000

8000

10000

2006-07 2007-08 2008-09 2009-10 2010-11

Export Import

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India and Indonesia have identified five areas for working in joint group:

manufacturing

skill training and healthcare

pharmaceuticals

mining, agro and food processing;

Research and development

Government trade barriers of indonesia

Trade barriers which are made by government authority and public authority for import and

export of the goods and services with the another country.here some political trade barriers

which are facing by india for export and import of the goods and services.

1. Custom duties:

Export from the india which is import for the indonesia.importation fo the goods in to

tndonesia must be declared in to the custom authority using import declaration form of the

indonesia. Indonesia have to fulfill the obligation as a importer.

2. Duty rate:

At the time of import from the indonesia Duty rates in india is can be on the percentage of

the value of product.an average duty rate is 11.9% .and some goods have no any duty rate

like on product such like laptop, and any electronic products.

3. Government procurement :

As a result of the government rules due to common practice for produce goods and import

goods with the connection of public authority and as well as authority of state, regional and

local authoroties.

4. Export for product from india:

India can not export product like primary product, finished product and intermediate product

in to Indonesia.India have to take permission by government license, it is differently

treatment at different country.

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5. For forien direct invest:

For operation of the company and invest in Indonesia is restricted on the profit and its also

apply on the poor business, it has also restricted for set up the factory and establish any

production facilities.

6. Rules and standard:

There is restriction for import and sales of foreign product and also restriction on technical

goods. India have to follow technical rules for export and import for a technical roduct like

laptop, and technical product. Indonesia constituted technical rules for protecting animal,

plant,health of the human being. For importing of the product import license is must required.

There are other trade restrictions are based on regulation and principle for quality matters and

as well as for maintaining the product quality, for consumer protection, for education and

service qualification. There are rules also relating to patent and trademark protection of the

Indonesia.

Economic environment of the Indonesia

Indonesia is one of the largest economy in South-east Asia and indonesia is one of the

emerging market economies of the world.india and Indonesia have historical and cultural

linkages for trade and investment.india and Indonesia have very close constitute for the

international trade. Economy mainly consist the following factor:

Table shows the economic factor performance of Indonesia from 2006 to 2010

factor 2006 2007 2008 2009 2010

Poverty 17.8 16.6 15.4 14.2 13.3

Gdp 5.5 6.3 6 4.6 6.2

Inflation 18.1 8.3 8 8.3 8.1

Gni ($) 1950 2160 2500 2160 2500

Debt 4.3 4.8 4 4.8 4.3

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There are many companies of india which are consist with the cashew nut and pieogen pea

industry.both the countries tie up for research , techniq of training , expert knowledge for

export service sharing seminar etc. Indian companies private invest on the industry such like

the jute, soybean, corn, rice that type of agricultural product.

India’s better progress in the bio- diesel technology, for house hold ,and for growing of

commodity.

In fisheries industry Indonesia provides greater opportunity for co-operation of Indian

company. Fisheries industry of the india as well as development of marine technology.

Indonesia would like to produce various training service from the india in certain area:

1. In broad casting , online media, management expertise and operational expertise in

data base, audio visual, etc.

2. Reporting system and information processing for various publication.

3. For government sector and as well as for private sector information technology and

computerized system.

4. Indonesia also encourage to Indian companies for getting the opportunity for

establishment of call center in service sector.

Indonesia’s co-operation to india

1. At a service sector,Indonesia would like to establish various training centers and

training programme with the help of Indian country for enhancing the research and

development.

2. At a airlines,Both the country try to enhance bilateral relationship , and india has

given the permission to Garuda airways for four flight in a week.

3. At a health care center,Indonesia would like to co-operate with Indian pharmecutical

companies. And Indonesia wants to do joint venture with the Indian pharmecutical

companies for producing reasonable and better medicin for population of Indonesia.

4. Indonesia attract from the medical treatment from the Indian hospitals.

5. At a construction sector, Indonesian company hoped from the Indian company that

india can help for the expert training field, expert engineering,and research and

development department.

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Range of projection of india’s export to Indonesia and indonesia’s export to

india

India’s x to Indonesia Indonesia’s x to India

year range Range

2010 1197.48 2669.44 2355.60 3953.18

2015 1437.95 6064.45 2850.98 4111.37

2020 1678.42 7777.25 3346.37 9660.91

There are mainly two sectors of particular interest in which Indonesia seeks to co-operate

with India are:

1) textile and textile products

2) iron and steel.

For enhancing the textile and textiles products Indonesia needs mordenization of the

textile pattern, various textiles machineries, environmentally friendly manufacturing

technologies, etc.

For the iron and steel industry Indonesia majorly efforts to reach at the global

competitiveness. For achieving the global competitiveness Indonesia have to focus on certain

criteria:

cost,

quality,

delivery time,

skills,

technology, and

optimal utilization

local natural resources

india has already help to Indonesia for achieving the criteria for the enhancement of the

global competitiveness. And both country creating the stronger bilateral trade relationship for

the international trade.

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Legal aspect of the Indonesia

The law system of Indonesia is based on the civil law system.indonesia is a democratic

countrya as based on its constitution.the civil law is adopted by the Indonesia.civil law

consider the criminal act and criminal procedure to the court.

Legal system of indonesia for international trade

Standard and special requirements

For import of the goods and export of the goods must be registered with the ministry of

health. For the import of the medicine must be special permit from the general director of

medicine. The import of hypodermic needles, acetic anhydride and opium pipes ther is a

special license delivered by the Director General of medicine and for the food control.

Labeling

For the any import of food product must be labeled in Indonesian English. With the food

name, brand name,composition, net weight, content, etc. the register no. assign by the

ministry of the health sector.all perishable good have expiry date. Certain special food require

the code of production.

Distribution system

Foreign investor can not allowed for taking goods in directly in the open market but foreign

company have to register to the ministry trade and industry.without the registration foreign

company not allowed to keep goods in local market directly.

Free import :

Tobacco products : 50 cigars or 200 cigarettes or 100 grammes of tobacco;

1 litre of liquor

A reasonable quantity of perfume;

Personal goods up to a value of USD 250.- per passenger or USD 1,000.- per

family

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Restricted

(Video) cameras, portable radio, cassette recorder, and sport equipment

Film pre-recorders, video tapes, video laser disc, records and computer software must be

screened by censor board.

Chinese medicines and printings, , firearms and ammunition, pornography, fresh fruit,

cordless telephone which are not permitted except for those holding licence from the ministry

of industry and health.

Government law:

1. International law

International law which is legal entities and capacity for any foreign country to enter

in to the country for international trade.its consist maulti lavel country and as well as

national level country.

2. Administrative law

Administrative law of Indonesia suggest for the administrative behavior of the trade

and determine the efforts of the executive government. Its consists administrative

complaints and administrative decesions.

3. Import law

As per the import law of Indonesia basic requirement is necessary for international

trade:

- Import license

- Registration under the custom office

- Tax payer id

- Original invoice

4. Property law

Different type of property law for different type of use of property such like as right

of ownership, right of use, right of build, right to rent , right of exploitation, etc.

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5. Environmental law

Environmental law is law for keeping country like eco friendly country. So the report

of the product compulsory for the each and every product under the environmental

impact assessment.its also analysis environmental risk of the particular product.

Thus these all are the laws which are required for the international trade with the Indonesia .

and its one type of restriction only for the protection of the customer, live being , country’s

capacity of the bilateral trade.

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PART-II

1. Chemical Industry.

The industry plays an important role in global economic and social development; it is a

science, technology and knowledge based industry that is essential to a sustainable world

economy while at the same time contributing towards improved health and nutrition. In

addition, the industry is a rich source of employment generation – about 7 million people

are directly employed in the chemical industry, a figure that soars to more than 20 million

people worldwide if indirect employment were also to be taken into account. Today, the

chemical industry acts as the basic building block for almost all other manufacturing

industries such as textiles, pharmaceuticals, fertilizers, food processing and paints. Its

products permeate the entire spectrum of daily use items and cover almost every sphere of

life.

As far as the Indian chemical industry is concerned, given the level of cut a throat

competition, the industry needs to look beyond the domestic shores in a more proactive

manner, primarily through a two pronged approach that would entail market

d i v e r s i f i c a t i o n and expansion along with mapping of international demand for

chemical products so as to identify a product market strategy.

GLOBAL CHEMICAL INDUSTRY: AN OVERVIEW

The world chemical industry is estimated to have reached € 2353 billion (~ US$ 3127

billion) in 2010. The Asian region has emerged as the largest contributor to the global

chemical industry, accounting for nearly half the global sales (€ 1147 billion) followed

by Europe (€ 578 billion). Individually, China was the largest market for chemicals with sales

aggregating to € 575 billion, followed by USA (€ 395 billion), Japan (€ 153 billion),

Germany (€ 142 billion) of € 56 billion was ranked the eighth largest market in 2010.

International trade in chemical products has witnessed a continuous rise with global exports

of chemicals recording an average annual increase of 6.2% during 2006-2010 to amount to

US$ 545 billion in 2010 as compared to US$ 451 billion in 2006. USA was the largest

exporter of chemicals with exports aggregating US$ 63.9 billion, followed by China (US$

49.3 billion), Germany (US$ 48.2 billion), Belgium (US$ 36.6 billion) and Japan

(US$ 31.9 billion). However, in terms of dynamism in exports, it was led by the emerging

markets of Asia-Pacific, Middle East and Africa. While the average annual increase in

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exports from Asia-Pacific region was 11.9% during the 2006-2010 period, it was as high

as 21.9% each in the case of Middle East and Africa. Consequently, the shares of these

regions in world exports of chemicals registered a consistent increase.

While Europe accounted for 51.0% of global chemical exports in 2006, its share fell to

44.9% in 2010. As against this, the share of Asia- Pacific and the Middle East increased from

26.1% to 31.3% and from 2.2% to 3.1%, respectively, during the same period. North

America was able to maintain its share of 13.5% during both 2006 and 2010.

INDIAN CHEMICAL INDUSTRY OVERVIEW:

The chemical industry is an indispensable and integral constituent of the growing Indian

industry. The mankind is immensely benefited, right from its inception till date, by the use of

chemicals and life, without chemicals, is unimaginable and inconceivable. The wide range of

chemical products play vital role in catalyzing not only the economy of the country, but also

making the life-style of human beings comfortable and sophisticated. Apart from the above,

chemicals are essentially contributing in several other fields, viz., health, agriculture,

environment, forest, communications, pharmaceutical, transport, power, textile,

infrastructure, housing, etc. However, in spite of the above, the word “chemical” denotes a

negative connotation.

The chemical Industry, one of the oldest in India, is critical to the economic development of

any country and has played an important role in the country’s ongoing metamorphosis from

an agrarian economy to an industrialized economy. This industry occupies a pivotal position

in meeting basic needs & improving quality of life and is one of the most diversified sectors

covering thousands of commercial products

The industry is the mainstay of the industrial & agricultural development of the country &

provides building blocks for several downstream industries, such as textile, paper, paint,

soap, detergent, pharmaceutical, varnish, etc. The chemical sector is predominately based on

feed stock derivatives from cracking of naphtha in the economic reforms of 1991 had a

significant impact on the domestic chemical industry. With the onset of liberalization, the

hitherto protected industry was exposed to international competition, which had been

insulated so far by keeping high tariffs and import substitution centric policies. With the

advent of liberalization, the role of the public sector substantially reduced, and the focus of

the industry gradually shifted from base chemicals to petrochemicals, pharmaceuticals,

specialty chemicals, construction chemicals, dyestuff and a wide range of agro-chemicals.

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PCP has been contributing substantially to the economic growth of the country. More

importantly, it can immensely help in accelerating the growth momentum by enhancing

competitiveness and technological edge across various sectors.

Indian companies have already begun innovating new substances, molecules and products by

registering their own patents and Intellectual Property Rights (IPRs). The stage is now set for

a major jump in this trend. Another positive aspect is that there is a growing trend of

entrepreneurship and product innovation. The policy recognizes that entrepreneurship and

innovation hold the key and so seek to provide the necessary enabling environment to nurture

this evolution.

This sector, though holds promise for the future, faces significant challenges also. Lack of a

strong base in R&D, an adverse international trade environment and failure to build eco-

friendly technologies in the industry enabling eco-system are among the major barriers. A

stage has now been reached where sustaining growth trends are largely dependent on our

ability to foster a strong R & D and manufacturing base in the country. A holistic view, by

evolving interdependent and synergistic policies, can overcome the enormous challenges.

Indian Chemical Industry : Moving Up The Value Chain:

The chemical industry in India is one of the most diversified of all industrial sectors covering

more than 70,000 commercial products. Given this varied range of products, the scope of

analysis in this study has been confined to basic, specialty and agricultural chemicals. Thus,

the analysis in the study has included organic and inorganic chemicals, tanning, dye extracts

and insecticides and pesticides.

As defined in this manner, the size of the Indian chemical industry is estimated to have

reached around US$ 60.3 billion in 2010. The Indian chemical industry was the 5th largest in

the world, and 2nd largest in Asia after China.

The industry accounts for about 10% of the output of the Indian manufacturing sector, 13%

of India’s total exports, and 9% of the country’s total imports. In terms of segmentation, basic

chemicals was the largest sector with total revenues of US$ 43.3 billion, equivalent to

about two-third of the industry’s overall value in 2010. Over the last decade, the Indian

chemical industry has evolved gradually moving up the value chain. With increasing

investments in research and deve lopm ent (R&D), the industry has been registering

significant growth in the knowledge arena, including specialty and fine chemicals. The

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industry now produces a large number of fine and specialty chemicals which have very

specific uses and are essential for increasing industrial production.

These find wide usage such as food additives and pigments, polymer additives, anti-

oxidants in the rubber industry, etc. With per-capita consumption of chemical products in

India being only a fraction of the global average, the opportunities for the domestic industry

are enormous. In dyes, for example, India’s per capita consumption is 50 grams, as against a

global average of 425 grams. In case of polymers, the per capita consumption is 5.2 kilograms in

India, compared to the world average of 25 kilograms. Keeping in view the size of the

domestic market and the growth of end user segments, the potential for growth in for the

Indian chemical industry is immense.

In a nutshell, the principal policy objectives are to optimally leverage our existing and

developing infrastructure and capabilities to meet the growing demands in all areas to foster

innovation, catalyze manufacturing, green technologies, encourage HRD and R&D through

academic institutions & industry and create a range of products that not only meet domestic

needs but also address global demand as a logical expansion of the industry.

Concerns about environmental pollution due to chemical industries are gaining attention,

especially in public perception. Current efforts in these areas need to be stepped up with

appropriate arrangements for co-ordination across multiple agencies involved, and make

them effective in meeting new and emerging challenges. Department of Chemicals &

Petrochemicals, and Department of Environment & Forest would need to play a key role in

this endeavor

Present status of the chemical industry of India:

With Asia’s growing contribution to the global chemical industry, India emerges as one of

the focus destinations for chemical companies worldwide due to high domestic demand,

significant knowledge pool and favorable demographic dividend. The Indian chemical

industry, estimated to be $108 billion, is at the threshold of accelerated growth. Indian

chemical sector ranks 6th in the world and 3rd in the Asia. It is also one of the largest

industrial sectors in the Indian economy and an important employment generator.

The Indian Chemical Industry comprises both small and large-scale units, and presently, there

are about 40,000 chemical manufacturing units located in the country out of which about

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80% are covered in the small scale sector. This sector provides employment to about 3.3

million people. There are no quantitative or other restrictions on the import of chemicals

except for few chemicals which are covered under the obligations as per International

Conventions.

Indian chemical industry exports dyes, pesticides and specialty chemicals to the developed

world and to the developing countries which form about 3% share in the global market and

contributes significantly to the foreign exchange basket of the country. The fiscal concessions

granted to small scale sector in mid-eighties led to the establishment of a large number of

units in the Small Scale Industries (SSI) sector.

In the chemical sector, 100% FDI is permissible under automatic route. Manufacture of most

chemical products inter-alia covering organic/ inorganic chemicals, dyestuffs and pesticides

is de-licensed. Entrepreneurs need to submit only IEM (Industrial entrepreneurs

Memorandum) with the Department of Industrial Policy & Promotion to set up chemical

manufacturing. Only the following items are covered under the compulsory licensing list

because of their hazardous nature:

Hydrocyanic acid & its derivatives

Phosgene & its derivatives

Isocynates & di-isocynates of hydrocarbons

The basic customs duty on most chemical feedstock is 2.5%. Import Duty on most of the

chemical products is at 7.5% ad valorem. In general, the central excise duty rate for chemical

sector is about 10%.

CHEMICAL INDUSTRY OF INDONESIA:

The development of Indonesian industry in general is aimed at strengthening

competitiveness, extending the domestic processing chain and motivating growth of industry

‘clusters’. For the period 2010-2025, the industrial sector is expected to grow 10%/year, to

account for 35-40% of national output. Petrochemicals is one of ten core industry clusters.

The long-term objective is to meet growing domestic olefin needs of 10-20%/year.

Key regions for development of the petrochemical industry are Banten, East Java and East

Kalimantan. Capacity utilization of the petrochemical industry is still below installed

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capacity, and the government is driving for better integration with raw material supplies.

Ethylene demand has climbed from around 450,000 tonnes in 1995 to over 1.5m tonnes 2006

and is projected to reach 2.6m by 2015. In 2006, ethylene production was around 585,000

tonnes while demand was put at 1.6m tonnes. Chemical industry growth in 2006 is put at

4.5%, accounting for 10% of total industry’s 28% contribution to GDP.

Indonesia is an importing country, but in another side also producer of raw materials or

industries and various chemical products including goods (PVC pipes, roof, paint). The

endency of chemical usage is increasing from year to year in line with the inter-relation of

technology innovation and science on the one side to the society’s need pattern (supply-and-

demand) or the increase in the society’s need on the other side. The major use of chemicals is

in the base organic chemical industries that produce special chemicals.

The National Industrial Development Policy initiated by the government identifies chemical

industry as one of the key industries in the country. Petrochemicals and Fertilizers are two

major chemicals expected drive the growth during the forecast period. Growing demand for

plastics is to create substantial demand for petrochemical products. Opportunities in the

chemical industry exist in urea fertilizer, polypropylene, polyethylene, ethylene, decorative

paint segments.

INDIA CHEMICAL INDUSTRY TIES UP IN INDONESIA:

On 22 Jan, 2013 a 50-member-delegation of Indian chemical industry representatives,

visiting Indonesia to explore possibilities of joint ventures, has signed many deals with

Indonesian companies.

The delegation from CHEMEXCIL, a premier chemical industry association in India, arrived

in Jakarta Monday, the Indian embassy said in a media release.

On this occasion, a buyer seller meet was organized by the embassy in association with

Federation of Indonesian Chemical Industry (FIKI) and Chamber of Commerce and Industry

of Indonesia (KADIN). The event was attended by over 100 Indonesian companies and many

business deals were finalized.

GUJARAT CHEMICAL INDUSTRY:

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"State government wants to ensure that the state remains leader in the sector despite changing

scenario," a senior government official said. In the first meeting organised recently, the task

force discussed a long term vision document with help of international consultant and FICCI.

The document will analyse the global mega trends in the sector and advise with due

prioritisation, strategic interventions including infrastructure, technological improvements,

and raw material availability.

Investment Climate in Gujarat:

A key indicator of investor and industry confidence in Gujarat is the number and scale of

Investments and business ventures committed to the state. About 7,936 memorandums of

understanding (MoUs) were signed for INR 20,83,000 crore ($ 450 billion) at Vibrant

Gujarat Summit 2011.

Indiachem- Gujarat 2011:

To promote the growth of the chemical sector, IndiaChem - Gujarat 2011, the second in the

series of India Chem Gujarat - an International exhibition & conference covering Specialty,

Fine Chemicals, Agrochemicals and Colorants was inaugurated by Shri Narendra Modi,

Hon'ble Chief Minister of Gujarat at Mahatma Mandir on 13th of October 2011 at Mahatma

Mandir, Gandhinagar, and Gujarat.

CHEMICAL INDUSTRY AT CITY LEVEL IN INDIA:

We took valsad city for our research study on chemical industry. And we took atul Ltd as a

company in our report.

Atul Ltd At Domestic Level:

Atul LTD’s registered office is in Ahmadabad whereas its corporate headquarters are located

in Atul LTD, Gujarat. And Atul Ltd has its office at Mumbai also. The Company is listed on

the NSE in India and has over 35,000 shareholders.

Atul Ltd At International Level:

Atul Ltd operates a number of overseas offices that function as subsidiaries. Currently, Atul

has offices located in China, Germany, UK, USA & Vietnam.

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2.Pharmaceutical Industry

Our Global country study report is about the Pharmaceutical industry of Indonesia. The

whole project report is divided into four major parts namely,

1. Market overview of Indonesian pharmaceutical industry

2. Standards and technical regulation

3. Trend of import export statistics in Indonesia and India

4. Growing opportunities for Indian pharmaceutical companies in Indonesia

1. Market Overview of Indonesian Pharmaceutical Industry

Role of pharmaceutical industry in India

According to the role of the pharmaceutical industry in India, an Indian pharmaceutical

company depends on the international market in 1970s. Indian pharmaceutical companies

copied the drugs and make the medicine on the cheaper rate. In 2001, Cipla, the second

largest company of India, found the drugs for AIDS and offered AIDS drugs to African

countries at a price of USD 300, while same preparation cost USD 12000 in US.

India uses the alternative and develops the cost-efficient production. Patent legislation is also

important in the country. According to the international standard, patent of the product and

process valid for the period of 20 years. India’s government of the TRIPR Agreement

necessary to signing on that patent. So no more foreign drugs should copy and they produce

in the domestic market.

Trade policy strategy in Indonesia

On the other side, in Indonesia, Indonesia has the large market share of the oil in the fcountry.

In the international market big proportion of the export which is cover by the oil. Tariffs and

non-tariff barriers to trade were gradually removed and more sectors were opened up to

foreign direct investment. In the labour market, non-oil exports grew quickly and labour-

intensive manufacturing became floating, resulting in significant creation of jobs.

Development whiles the financial crisis, in that mansion the different measurement. In 2004

Indonesia’s commitment under AFTA, “ASEAN Harmonized Tariff Nomenclature” adopted

a new tariff of classification. Tariff Harmonization program introduced in Indonesia since

2005.

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SWOT Analysis of Pharmaceutical Industry in Indonesia

Strengths

In Indonesia population growth rate is high and there is well established local

manufacturing units create strengths for Indonesian pharmaceutical industry. And new

standards of Good Manufacturing Practice (GMP) are also introduced which add to this

strength.

Weaknesses

Weakness of Indonesian pharmaceutical market is that it’s is least developed market

among Asian market. As no private player in insurance market do exist and there is no

proper regulation for pricing for drugs. Indonesian pharmaceutical industry mainly

focusing on lower earnings population and hence there’s no scope for expensive drugs.

This industry is mostly depends upon other countries for raw materials and illegal sales

also exist which crate more interference of government in industry.

Opportunities

There are opportunities for Indonesian pharmaceutical industry as it has become more

aware about low cost drugs which are in demand. There is potential growth in trade

liberalisation and hence government is providing subsidy for healthcare cost. Indonesia is

becoming more attractive for clinical trials base and there’s potential growth for exports

and government is also providing platform for the growth.

Threats

Threats of Indonesian pharmaceutical market are there’s no regulation for intellectual

property rights and there’s corruption also in industry which leads to decrease in foreign

investments. In Indonesia no proper monitoring for disease and insurance protection

related to health is there. As per government law all outside country companies must to

have manufacturing units in Indonesia which crates industry less attractive.

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Industry overview

Growth driver of Indonesia’s pharmaceuticals industry

Major drivers for growth in industry are,

Large population

Increase in pattern of life

Increase in health awareness

Increase in government support

Improvement in economy

Increase in purchasing power

Proportion of healthcare expenditure to Gross Domestic Product in 2010

In 2010 the proportion of healthcare expenditure to GDP of Indonesia is only 2.1% which is

lower than other countries. Total healthcare expenditure is growing at 14.1% per year approx

from IDR 86 Tn in 2007 to IDR 247 Tn in2015.

Composition of Indonesian Pharmaceutical Market

Ethical drug is contributing more 58.1% to Indonesian pharmaceutical market with 13.9%

growth rate per year from 2007 to 2011. At the same time Over the Counter (OTC) drug is

growing at 11.8% per year with market share of 41.9% in 2011.

Ethical drug market is composite of Patent drug, Branded generics and Real generics. In

which Branded generics control 67% share, 25% of share is control by Patent drug and only

8% is control by Real generics which is comparatively low.

Government regulation related to obligation to use generic drugs for healthcare is expected

future potential growth.

Production of real generic is controlled by state owned enterprises (SOEs). There are mainly

two SOEs Indofarma and Kimia Farma and their market share is 21% together and there is

growth potential for SOEs.

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Geographical Distribution of Pharmaceutical Manufacturer

There are more than 250 players in pharmaceutical industry in Indonesia in 2010 where 32%

of market share is covered by five big players. 38% players of this industry are located near

West Java.

Market Share of Main Player in Ethical and OTC (%)

Major market share is covered by Kalbe Group for both Ethical and OTC drugs. For Ethical

Drug market other big foreign players are there like Sanofi Aventis Group of France and

Novartis Group from Switzerland. OTC drug market is mostly controlled by local players.

Competition in pharmaceutical industry has increased with vast line of different products

offered by different players. But at the same time government regulation restrict foreign

players to sell their products without having manufacturing units in Indonesia and high

quality standards creates entry barriers in the industry.

Drug Distribution Lines

In Indonesia every drug is distributing through pharmaceutical wholesalers (PBF) and then

after those drugs are redistributed and marketed by sub-distributors or through retailers like

pharmacies, hospitals, drug stores, physicians and other general stores with the help of

medical representative (MR).

Number of Distribution Facilities of Pharmaceutical Sector in Indonesia (Unit)

There was 2855 wholesaler with 16603 pharmacies and 8447 drug stores in which 43% drug

sold by pharmacies, 18% through general stores, 14% through drug stores, 13% through

physicians and 12% through hospitals.

Location, presence of physicians and public perception about drug is main factors affecting

sales turnover. Through OTC drug approx 10% margin is earned and through ethical drug

approx 20 to 30% margin is earned.

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2. Drug Regulatory Authority

In 1983, Indonesian National Drug Policy was established with the motive to control efficacy

and safety of drugs, ensuring availability of drugs through responsible distribution, so that

rational use of drugs can be promoted. Directorate General of Drug and Food Control (DG

DFC) is regulatory authority for pharmaceuticals in Indonesia Its main functions are to

formulate policies and programs on drugs; to supervise and control the supply of drugs for

the public sector; to control distribution, production and utilization of drugs. In the private

sector, DG DFC performs drugs registration, licenses providing for drugs imports and

exports, monitors and supervises for implementation of Good Manufacturing Practices

(GMP), controls drug promotion activities, monitors distribution of drugs and examine the

quality of drugs before and after in the market and. Standard Treatment Guidelines for

primary health care are develop by The Directorate General of Community Health Services

coordinates with DG DFC.

2. Drugs Selection:

Every three years the Indonesia Essential Drug List (EDL) is revised by the Committee. The

Indonesia EDL reflects standard requirements for hospital, primary health centre and village

drug depots. Utilization of drugs outside of the on National Essential Drug List (NEDL) is

banded in community health centres but is allowed in Private hospitals but Director of private

hospitals should approve such drugs which then have to report to the National Committee on

the NEDL. Public hospitals and community health centres have to compulsorily use drugs on

National Essential Drug List.

3. Production and Quality Assurance

95% of all drugs for public and private sectors are manufactured in Indonesia itself. The

national private pharmaceutical companies produce almost all drugs including vaccines on

the NEDL. Government-owned pharmaceutical companies manufacture drugs for the public

sector and generic drugs. The government controls for quality by taking samples from the

manufactures to be analyzed in the quality control laboratory. Implementation of good

manufacturing practices (GMP) in pharmaceutical factories is mandatory.

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4. Trade and Industry Policy Environment

ASEAN Consultative Committee for Standards and Quality setup a Pharmaceuticals Product

Working Group (P-PWG) in 1999, with help of Malaysia as the lead country. The objective

of this group of experts is to agree differences of regulations in the ASEAN member states,

and to develop common guidelines with the aim of arriving at a Mutual Recognition

Agreement (MRA). Indonesia observes patents rights for a period of 20 years, and is very

keen to be regarded as a reliable partner in the World Trade Organization and agreements like

TRIPS (Trade-Related Aspects of Intellectual Property Rights).TRIPS delays the

introduction of generics; reduce access to medicines for the majority of patients in developing

countries and increase prices. TRIPS will on the other hand attract foreign direct investment

as well as technology. In order to compensate the protection of innovative medicines, testing

and regulatory approval of generics will be allowed before patent expires. ASEAN Mutual

Recognition Agreements helps to eliminate technical barriers and tariff rates, non-tariff

barriers of trade. ACCSQ also have signed a Memorandum of Consultation with the USA and

EU but the most important ASEAN MRA is the Agreement on Common Technical

Requirements (ACTR) and subsequently on a Common Technical Dossier (ACTD) in

Indonesia.

Customs procedure in general:

Tariff duty assessments of Imports are classified in four broad groups A to D pharmaceutical

comes under group A for extremely essential product, with the highest duties applying to the

least essential items. Exemption of import duties on raw material imported for manufacturing

export products are; sales taxes, value added taxes as are goods imported for use in foreign-

funded government projects. Value Added Tax (VAT) which is 10% except for certain

goods, Sales Tax On Luxury Goods with rates vary from 10% - 75%;• Income Tax, which is

2.5% for Registered Importers and 7.5% for Unregistered Importers. The customs value of

imported goods is the transaction value which is the price actually paid or payable for the

goods and may be adjusted in accordance with the provisions of article VIII of the agreement

on Implementation of Article VII GATT 1994.

Indonesian Customs is using EDI (Electronic Data Processing) to process customs

declarations submitted by the importers. Customs examinations, consisting of document

verification and physical inspection, Physical inspections shall be focused particularly on

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high-risk imported goods. Customs has time frame for each step of cargo clearance. Any

person/importer who is not satisfied with the decision made by the Customs regarding tariff

classification and/or valuation, may file a written objection to the Director General of

Customs or further to Board of Tax Dispute Settlement.

To facilitate exports and imports, Customs Authority has taken following steps:

• Indonesia enacted a new Customs Law No 10/1995; The Law accommodates some

basic elements to provide, among others, better trade facilitation.

• Indonesia has provided an Advance Tariff Classification facility.

• Application of Electronic Data Interchange (EDI) system.

• Established Tax Appeal Court.

• Provides necessary information in locations like seaport through website and

brochures.

• Improved the implementation of Risk Management Approach.

5. Import Restriction

All companies is mandatory to have import licence from Ministry of Industry and Trade, only

registered pharmaceutical wholesaler or manufacturers are allowed to import products with

the permit from Ministry of Health. Importing pharmaceutical products have no quota or

restriction form importing from any country. All imported pharmaceutical product (raw

material or finished goods) should be WTO standard. Company should have adequate storage

space and laboratory facility either it own or arrangement with a laboratory permitted by

Ministry of Health for testing purpose. An import license is non-transferrable.

6. Investment Requirements

Pharmaceutical sector is open for foreign direct investment foreign investors are allowed

100% shares of the company. Special exemption or deduction provided to new investor i.e

reduction of import duty for production machines, equipment and raw materials. For

Investment application, simple and smooth approval procedure has been adopted by giving

authority to local government for issuing licenses.

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7. Labelling and Marketing Requirements

Pharmaceutical product labelling regulations requiring labels in local language and expiration

date are in place. A product registration regulation is also in place that requires detailed

product processing and salt contain information so as to approach proprietary information.

8. Distribution System

Distribution of new product requires license for this pharmaceutical company must apply to

the Indonesian Department of Health, which might take from two months to a year,

depending on the product. Manufacturers are not supposed to sell their products directly to

the consumers or retailers; they must go through distribution channel like wholesaler

Producers are largely required to leave the promotion and distribution tasks to wholesale

companies. Two Major types of retail establishments for pharmaceutical distribution are

Apotik and toko obats.

Apotik is the Indonesian term for pharmacy. Most apotiks are agents of particular

pharmaceutical firms Apotiks sell prescription drugs and a small number of OTC drugs.

Apotiks and hospitals do not buy gray market products. Toko obats, meaning medicine

shops, sell OTC drugs, along with some fakes and illegally imported drugs from the gray

market. Toko obats sell pharmaceuticals at relatively cheaper prices, often 10% to 20% less

than apotiks so role of toko obats is also important.

Importers of

special drugs

Importers of Pharmaceutical Basic Ingredients

Pharmaceutical Factories

Pharmaceutical Wholesalers

Gray Market

CONSUMERS

Clinics Apotiks Hospitals Toko Obats Doctors

Export of Pharmaceutical Products and Basic Ingredients

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9. Pricing Pharmaceutical Products

According to a regulation set by Indonesia's Food and Drug Supervision Directorate General,

an a potik is allowed to sell its product at a price 1.425 times the buying (net) price.

2. Trade Promotion Authorities

(a) Ministry of Trade and Industry

(b) National Agency for Export Development (http://www.nafed.go.id)

(c) Indonesian Chamber of Commerce and Industry (http://www.kadinnet.go.id) (KADIN)

(d) GP Farmasi (Gabungan Perusahaan Farmasi Indonesia) / Indonesian Association of

Pharmaceutical Companies.

3. Trend in export-import statistics of Indonesia and India

Export of Indonesia

The export statistics of the Indonesia in the period from 2007 to 2011 represents the

continuous increase in export which is 176 USD Million in 2008 to 386 USD million in 2011

and the share in Total export and World export was also increased.

Exports statistics of the pharmaceutical industry in chapter wise i.e. 3001 to 3006 Indonesia

in the year 2007 to 2011 represent that exports of products which are included in chapter

3001 are nil. In chapter 3002, the export was continuously increased which is 36 USD million

in 2007 to 82 USD million in 2011. In chapter 3003, exports were increased which was 21

USD million in 2007 to 25 USD million in 2011. In chapter 3004, exports were continuously

increased i.e. 96 USD in million in 2007 to 253 USD million in 2011. And in chapter 3006,

the exports were quiet high in 2007 and from 2008 to 2011 it became only 1 USD million.

Import of Indonesia

Import Statistics of the Pharmaceutical industry in Indonesia during the period of 2007 to

2011 represents the continuous increased in import which is 279 USD million in 2007 to 519

USD million in 2011.

Imports of pharmaceutical products chapter wise i.e. 3001 to 3006 represent that in chapter

3001, imports were 1 USD million in 2007 to 2010 and became 2 USD million in 2011. In

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Chapter 3002, imports were continuously increased in the year 2007 to 2010 which was 65

USD million to 114 USD million and became same as in 2010 i.e. 114 USD million. In

Chapter 3003, imports were continuously increased from 2007 to 2010 i.e. 8 USD million to

17 USD million and remained same in 2011 i.e. 17 USD million. In chapter 3004, imports

were continuously increase from 204 USD million in 2007 to 342 USD million in 2011. In

chapter 3005, imports were continuously increased in 5 USD million in 2007 to 12 USD

million 2011. In chapter 3006, import were25 USD million in 2011 which is higher than any

other years.

Likewise, the comparison of export-import data shows that the total export of Pharmaceutical

products is more than the import in the Indonesia which impacts in its Net trade.

Export of India

In India, Exports were 3833 USD million to 8246 USD million during the year from 2007 to

2011. It shows the continuous increase in export as the year by year.

Chapter wise export statistics of India during 2007 to 2011 were as follow.

In chapter 3001, imports were higher in 2007 which is 29 USD millions. In Chapter 3002,

imports were higher in 2011 which is 405 USD millions. In chapter 3003, imports were

higher in 2008 which is 679 USD million. In chapter 3004, imports were higher in 2011

which is 7009 USD millions. In chapter 3005, imports were higher in 49 USD millions in

2011. In chapter 3006, imports were continuously increased from 2007 to 2011 which is 38

USD million to 84 USD million.

Import of India

In India, the imports were 700USD million to 147USD million in the year 2007-11 which

provided a clear picture that imports had been increased since last 5 years.

Chapter wise imports of India during 2007 to 2011 were as follow.

In chapter 3001, the imports were higher in 2010 i.e. 41 USD million which was higher than

other years. In chapter 3002, the imports were continuously increased which is 143 USD

million to 424 USD million during 2007 to 2011. In chapter 3003, imports were 54 USD

million in 2008 which was higher than any other years. In chapter 3004, imports were

continuously increased which was 483 USD million to 894 USD million during 2007 to

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2011. In chapter 3005, imports were decreased form previous year which was 13 USD

million to 12 USD million. But in the next year imports were increased and remain same

during 2009 to 2011 which was 17 USD million. In chapter 3006, imports were increased

during 2007 to 2011 which was 26 USD million to 58 USD million.

4. Growing opportunities for Indian pharmaceutical companies in Indonesia

The growth of Gujarat’s pharmaceuticals industry so far, has been cluster-driven. These

clusters have not only fostered competitiveness and complementarities across these regions

but have also created a diversified manufacturing base for various products across the

pharmaceutical value chain. Governmental actions can support the creation of conditions that

encourage the formation and growth of clusters. These clusters can also help in terms of

resource sharing in the areas of training and R&D facilities as well as other facilities such as

waste management and water treatment plants. The regulatory and fiscal framework should

provide incentives that facilitate company formation and growth within the pharmaceutical

clusters.

Globalization permits much greater freedom for reaping competitive advantages based on

regional resource endowments and opportunities for global integration. Globalisation of

Gujarat’s pharmaceutical industry and the enhanced role of markets could offer greater

opportunities.

Gujarat has a tradition of regional specialisation in industry (textiles, chemical,

petrochemicals, Pharma within the large scale sector; specific clusters of medium and small

units too abound). The long term development perspective will have to take advantage of the

region’s existing potential.

Strong linkages with the chemicals sector, a Well-established machinery and engineering

sector, large number of Contract Research Organisations (CROs) and a booming healthcare

sector has played an important role in the growth of Gujarat’s pharmaceutical industry.

Partnerships Between hospitals, academic and research institutions, allied industries and

Pharma companies can create an efficient networked model that will help the Industry grow

at a sustainable rate.

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3.Textile sector

In Indonesia there are less trade barriers than other countries like Thailand, Korea. The main

problem in trade is current exchange rates. Main problems come in customs, valuation,

classification and origin. Most trade was sent from Singapore in past so there was high tariffs

and import taxes, import quotes and export restriction for cotton.

Indonesia is a traditional cotton producer. Indonesia comes on 4th

rank after China, India and

Japan. In manmade fabrics Indonesia faces competition from Japan and South Korea.

Indonesia is one of the important sector in hiring and economic contribution. Inspite of this

Indonesia textile industry faces some challenges due to outdated machinery and lack of

competitiveness among the regions. It currently employs an estimated percentage of total

industrial labour force. With improving Indonesian’s economy the need of textile is expected

to continue to rise in domestic market.

Textile plays an important role in garment and textile sector of Indonesia. It details for

4% of polyester key fibers, 4% of polyester filament yarn 2% of polyamide, 13% of clammy

key fiber production and o.o3% of cotton. In Indonesia garment and textile industry use 1.8

million workers. Textile and garment exports declined by 8.8% $9.5 billion in 2009 because

Indonesia and its top two markets United State and European Union was affected by the

recession and it was certain that some factories would not survive. At least 222000 workers in

all industries had been removed in March 2009 by Employers Association of Indonesia.

Strategy for the Future

The Textile industry was listed as a mani chamber of commerce and it will efforts the

economy for industrial development in 2013. The Indonesia Textile Association is also

optimistic that a competitive enhancement program under the auspices of the Source ASEAN

Full Service Alliance will improve their progress as well as the region’s prospects.

Relationship between Indonesia and European Union (EU)

The EU and Indonesia enjoy a strong and positive trade relation. There are still

abundant opportunities for European business in Indonesia. There are approximately

EUR 50bn of EU investments in Indonesia from over 700 EU companies, which

provides direct employment to an estimated 500,000 people.The biggest category of EU

imports from Indonesia is in agricultural products, mainly palm oil, fuels and mining

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products, textiles and furniture. EU exports to Indonesia consist mainly of machinery and

transport equipment, chemicals and various manufactured goods

Strengths, Weaknesses, Opportunities and Threats

Indonesia primary strength is that its garment and textile industry is vertically

integrated. Drawback includes outdated machinery along with rising energy costs, higher

interest rates than its neighbours and lack of supportive infrastructure. Indonesia totally

depends on imported cotton for both its export and domestic needs. Indonesia believes that

opportunities for global and regional exports should improve. Indonesia took advantage in

2005 and 2006 when US and EU prevent quantity to protect from taking unfair advantage of

several textile and clothing products from china. Indonesia took steps to increase its exports

to both regions. In addition to China, Indonesia has threats from Bangladesh, Shri Lanka and

Vietnam which has already crowded market. Another barrier is country’s exchange rate. The

Indonesian rupiah fluctuates so much, and the gap between buying and selling is so large, and

its adversely affects businesses that depends largely on cash-on-hand.

Overview of Fibre, Textiles & Garments (FTG)

Indonesia’s oldest and most strategically significant industries are fiber, textile and

garment sector. Indonesian textile is far better in international export markets by providing

high quality standards in developed market like USA. During the economic crisis clear

control on demand, FTG production and exports began to move quickly at the end of 2009 to

meet new challenges in the form of the ASEAN China free trade agreement (ACFTA) in

January 2010.

Indonesia’s synthetic fibre producers are well positioned to serve the global textile

industry with a ready supply of petrochemical derivatives such as purified terephthalic acid

(PTA) for materials such a polyester and rayon. As cotton prices doubled during 2010 hitting

a 15 year high, garment producers across the world have shifted polyester and cotton blended

yarns as synthetic fibre prices increased less drastically by 43-77%. In export Indonesia is an

ideal position than China in low wages and politically stable. China declined exports in

country like US and Europe in 2010 because of mired trade disputes. As US and Europe look

for alternative sources Indonesia come out as strong in export but figures does not rise as

much as countries like Bangladesh and Vietnam. The main reason for Indonesia weakness is

its comparatively slow in adapting new styles in the fashion industry. In addition the natural

disasters in Japan at the beginning of 2011 cause harm to exports as Japan is one of

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Indonesia’s main textile markets. Low labour costs, political stability, availability of raw

materials and cheap industrial land for investment Indonesia is better than China for

investors. Despite of these Indonesia faces lots of challenges in modernising itself and main

reason is outdated machinery.

ASEAN Free Trade Agreement

In January 2010 the introduction of the China- ASEAN Free Trade Agreement (CFATA) hit

fiber, textile and garment (FTG) producers particularly hard with a 70% surge of Chinese

exports over the year & has had an overall negative impact on the country’s manufacturing

sector. The CAFTA has highlighted the challenges faced by Indonesia in labour intensive

industries in trying to take on China by price alone considering the latter’s larger capacity and

superior infrastructure that makes transportation an average 5% of total production costs as

opposed to 15% in Indonesia. Indonesia’s fabric and yarn producers saw an initial drop in

sales to domestic garment producers in the aftermath of the CAFTA. Indonesian textile

producers find it difficult to compete in price compared to China and regional neighbours. To

make Indonesia stand in the global textile market will come from not only improvements in

the regulatory environment and updating of machinery but also from improving its position

among its domestic market.

Laws to be considered

Ministry of Finance Decree No 241/2010 on the Setting of the Classification of Goods

System and the Imposition of Import Duty on Imported Goods.

Ministry of Trade Regulation No.45/2009 regarding import licenses that stipulates

that companies must choose to hold either a General Import License (API-U) or the

Producer Import License (API-P).

Customs Law 10/1995 and Customs Law 17/2006 gives authority to the Directorate

General of Customs and Excise to examine inspection of all imports and decentralises

authority to local government of the relevant port of entry.

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Indonesia Manufacturing Snapshot

Contribution to GDP: 24.2% (2011, Non Oil& Gas)

Real Sector Growth: 6.6% (2010-2011)

Number Employed in the Sector: 15 million

Average Employee Salary: 1,369,000 RP/month (Q1 2012)

Main areas: Automotives, Electronics, Textiles, Footwear, Food & Beverage, Palm Oils,

Metal Products, Chemicals

Main Export Markets: China

Overview of the Manufacturing Sector

From the 1980s to the 1990s manufacturing provide energy to Indonesian economy. It is a

major source of employment for the country by employing 14.4 million people as per the end

of 2010. Since productivity and growth levels have not matched that of regional competitors

in core industries such as textiles. To take advantage of the country’s wealth of natural

resources next step is to raise Indonesia’s manufacturing competitiveness on the global stage.

Indonesia’s manufacturing sector is highly varied and a reflection of the vast array of natural

resources at the country’s disposal. This ready availability of valuable commodities harm to

the development of value added manufacturing processes and products. The government is

actively trying to address this issue through both incentives and stick measures. The

government is promoting many opportunities in the downstream sector to foreign investors.

In terms of foreign direct investment, manufacturing does continue to be the most popular

sector in the economy. Investment in the sector goes up to the course of 2010 by 12% from

2009 and the first half of 2011 has seen a growth of 5-6%. Under the Coordinating Ministry

for Economic Affairs, Government incentives are as of April 2011 prepared for foreign

investors to establish manufacturing bases in Indonesia for encouraging exports. Such

incentives will include tax holidays for investors in key sectors such as textiles and garments

as well as raw material producers in areas where the country is lacking. More domestic

production facilities of raw materials such as chemicals for the textile and pharmaceutical

industry are a key component for Indonesia to reach the Ministry of Industry target of 8%

growth in manufacturing by 2014. Greater investment in research and development to

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generate innovation and go to more high technology industries is a necessity for the

manufacturing industry. Efforts are taken in the right direction towards the future of

manufacturing to be effective and they must go with financing. Banks are unwilling to lend

towards the manufacturing sector due to its low competitiveness and slow moving towards

growth in labour intensive sectors. As the year progresses to above the 14% in 2010 the

requests for loans is likely to pick up and investment plans are more secure in line with the

announcement of expected government incentives and tax breaks.

Import Export procedure

Import

Import means any goods coming from outside country through overseas into Indonesia

Procedure of Importation

Bearer must inform to custom office before 24 hours about the entrance of a

transportation vehicle which are coming from outside the custom territory. Within the arrival

of 24 hour bearer must submit manifest to Head of the Customs Office which is signed by

bearer. Then after this bearer provide a list of material which is released at custom area. After

approval by the Customs Authority the imports goods can be discharged from the customs

area.

Export

Any goods discharged from the Indonesian customs territory is treated as an Export

Procedure for Export

Exporting company should prepare export Declaration form and announce that goods

are to be exported to the proper custom office except Passenger’s belongings, Transport

facility crew’s belongings, Border crosser’s belongings, Packages exported through PT. Pos

Indonesia weighing less than 100 kg. A common Export Declaration Form(PEB) must be

Supported by proper documents like i.e. commercial invoice, AWB or B/L, P/L, insurance

letter, etc. The PEB should be submitted not later than the time of entry to the customs area.

For export goods with certain characteristics, the exporter shall pay the export duty within

sixty (60) days after the departure of the transportation vehicle. Exports that have been alreay

been reported and received a PEB registration may be cancelled. The cancellation of export

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shall be reported in writing to the Customs Office no later than three (3) working days from

the departure of the transportation vehicle

EXPORT DOCUMENTATION AND PROCEDURES

Exporters should seriously consider having the freight forwarder handle the

formidable amount of documentation that exporting Requires; freight forwarders are

specialists in this process. The following documents are commonly used in exporting; which

of them are actually used in each case depends on the requirements of both our government

and the government of the importing country.

Table 1

Export Procedure Documents

STEP 1:Enquiry 1.Commercial invoice

STEP 2: Performa generation 2.Bill of lading

STEP 3: Order placement 3.Consular invoice

STEP 4: Order acceptance 4.Certificate of origin

STEP 5: Goods readiness & documentation 5.Inspection certification

STEP 6: Goods removal from works 6.Dock receipt and warehouse receipt

STEP 7: Documents for C & F agent 7.Destination control statement

STEP 8: Customs Clearance 8.Insurance certificate

STEP 9: Document Forwarding 9.Export license

Step10: Bank to bank documents forwarding 10.Export packing list

STEP 11: Receipt of Bank certificate

Indonesia’s New Import Regulations and Importer Identification Numbers

Now days, Globalization has become reality and tender chances as well as changes.

The capacity to interact effectively with the multi-cultural world is an important quality

demanded of nation in order to survive and to take advantage from current integrated world.

Foreign investment is very significant among others & also to send or carry foreign fund into

Indonesia, while government plays a key role in protecting its own people excessive

domination by foreign investors and foreign products. To find the harmony between these

two interest key.

In recent times, Indonesian government open a new set of import rules as accommodate in

Decree of the Minister of Trade No.27/M-DAG/PER/5/2012 dated 1 May 2012 concerning

Importer Identification Numbers (AngkaPengenalImportir/API), which came into effect 2

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May 2012 (“Decree 27”). This decree replaces Decree of the Minister of Trade

No.134/MPP/Kep/6/1996 and Decree 45/M-DAG/PER/9/2009 (“Decree 45”).

When Decree 45 issued it impacted on the import arrangement of companies who

hold both API-P for production and API-U for trading. Decree 45 then banned the preceding

practice and demanded that companies take only one type of license.

To Furnish the deep concerns assist by Decree 45, the government then issued the Decree of

the Minister of Trade No.39/M-DAG/PER/10/2010 (“Decree 39”). Decree 39 basically

allows an API-holder to import ready to use goods

They could allot another company which solely hold the API-Under which they

would import certain products, Instead of becoming an importer producer company under

Decree 27. The API-P company would then buy and allot in Indonesia those imported

products together with the products locally made by the API-P company. Those companies

manufacturing and importing telecommunication and electronics products are subject to the

Regulation of the Minister of Trade No. 19/M-DAG/PER/5/2009 (“Regulation 19”).

For protecting domestic industries from excessive imports, Decree 27 has now drawn

certain lines. Among them is that an API-U holder can only import goods that fall under the

same section of the Goods Classification System provided by Decree 27. Decree 27 has put

around 8,000 different imported items into 21 sections. While a section could offer around

400 items on average which is quite extensive, an API-U that has chosen goods under a

section will not be able to import goods under any other section.

As we do not live in a perfect world, Decree 27 will certainly not please everyone. It

has to be taken as an effort by the government to reconcile various different interests in a

workable framework. As Decree 27 also takes other government agencies outside the

Ministry of Trade in its implementation and concerns import matters that in reality involve

complicated technical and operational aspects; it is essential for the Ministry of Trade to set

clear implementation rules embracing the foregoing two aspects. This will better ensure that

all the good faith and efforts taken in formulating Decree 27 are effectively operational with

minimum costs. Globalization loves legal certainty and cost efficiency.

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Import Regulations by Indonesia customs

Free import :Tobacco products : 50 cigars or 200 cigarettes or 100 grammes of tobacco, 1

litre of liquor, A reasonable quantity of perfume, Personal goods up to a value of USD 250

per passenger or USD 1,000 per family

Prohibited : Any commercial or merchandised goods as part of luggage, Infringements will

be charged IDR 25,000 per piece, The use of cardboard boxes as baggage must be dissuaded

Restricted: Chinese medicines and printings, narcotics, firearms and ammunition,

pornography, fresh fruit, cordless telephone are not permitted except for those holding

licence. Those passengers who did not enter on a tourist visa, they must have to pay duties for

their photo and film cameras till this equipment is registered in their passport by the

Indonesian Customs on former occasion

Export Regulations by Indonesia customs

Free export

1000 grammes of tobacco or 50 cigars or 200 cigarettes for persons of 21 years and older,

Less than 2 litres of alcoholic beverages in opened bottles and personal goods up to a value of

IDR 1,000,000

Standards and other technical requirements

There are different standards but the most important is the Standard Information

Agency.

1. Marking, labeling, and packaging requirement.

Imported product must indicate the country of origin.

2. Intellectual property issues.

The WTO TRIPS agreement can only be applied by Indonesia as of 2000.

3. Antidumping, countervailing duties/actions and safeguard measures.

No measure applied to import of EU textile and clothing products.

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Export restrictions

Industry Overview: Textile and Clothing

The textile industry of India primarily produces men’s clothing, knitted and hosiery products.

During 2008-09, the value of India’s textile and clothing export was US $20 billion. Industry

provides employment to 21% of the labor force and contributes 14% to industrial production.

The textile and clothing supply chain comprises several interrelated production stages which

include ginning, spinning, weaving and knitting, dyeing an processing, and garments

manufacturing. In supply chain there are organized and unorganized firms, in which

organized firms includes, large firms and unorganized firms include, small and medium size

firms. successful export oriented hubs include Tirupur, Ludhiana and Panipat, which account

for 80, 95 and 75 percent of the production of total hosiery, woollen knitwear and blankets,

respectively.

Current status of Indonesia

The textile sector in Indonesia is likely to attract investment of just about $155 million in

2013, according to Indonesian Textile Association (API).

Sudrajat said foreign investors only spent $51 million of the total $247 million spent on

textile machinery purchase in 2012.

Indonesia’s garment and apparel sector is highly concentrated on the island of Java,

particularly that of West Java and the island of Batam which is a free trade zone.

The sector employs 1.3 million people as of 2011 making it one of the most important

elements of the country’s manufacturing industry.

Exports of textiles and garments rose by 19.7 per cent year-on-year to $12.1 billion at the end

of 2011 and to $13.7 billion in 2012.

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Laws to be Considered

Ministry of Finance Decree No 241/2010 on the Setting of the Classification of Goods

System and the Imposition of Import Duty on Imported Goods.

The Ministry of Trade Regulation No 39/2010 on Importation of Finished Goods by

Manufacturers.

Ministry of Trade Regulation No.45/2009 regarding import license.

Ministry of Trade Decree 56/12/2008 places restrictions on which ports imports can

be delivered to in an effort to combat illegal trade.

Customs Law 10/1995 and Customs Law 17/2006 gives authority to the Directorate

General of Customs and Excise to examine inspection.

INDIA

Indian Textiles and Clothing exports

There are four types of textile firms in India-- handloom, powerloom, composite mills, and

processing houses. Handlooms include those in factories or households. Powerlooms can be

described as weaving factories. The share of mills in cloth production is steadily declining.

Mills consist mainly of bankrupt and obsolete factories. They do produce and export a certain

quantity of yarn, though the main supply of yarn comes from specialized spinning mills of

relatively recent origin. Almost all textile exports from mills are accounted for by 10-12

private composite mills, which account for about 10 per cent of capacity but well over half of

production.

1. Introduction

India’s textiles and clothing industry is one of the mainstays of the national economy. It is

also one of the largest contributing sectors of India’s exports worldwide.

The textiles industry accounts for 14% of industrial production, which is 4% of GDP;

employs 45 million people and accounts for nearly 11% share of the country’s total exports

basket.

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2. Milestones

i) Exports of textiles and clothing products from India have increased steadily over the last

few years.

ii) India’s Textiles & Clothing (T&C) exports registered a robust growth of 25% in 2005-06,

recording a growth of US$ 3.5 billion over 2004-05.

iii) During the year 2010-11, Readymade Garments account for almost 39% of the total

textiles exports. Apparel and cotton textiles products together contribute nearly 73% of the

total textiles exports.

3. Liberalised trading regime and emerging opportunity

In the liberalized post-quota period, India has emerged as a major sourcing destination for

buyers from all over the globe.

(i) Global exports of Ready Made Garments (RMG)

(ii) Global exports of Handicrafts (HC)

(iii) Global exports of Handlooms (HL)

4. Country-wise analysis

In the global exports of Textiles, India ranked as the third largest exporter, trailing EU-27 and

China, as per WTO data – 2010 (latest). In the global market exports of clothing, India

ranked as the sixth largest exporter as per WTO data – 2010 (latest), trailing Turkey,

Bangladesh, Hong Kong, EU-27 and China.

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Some Of Indian Textile Company In Indonesian Market

Table 2

Company name Product export to Indonesia City

Jaya Shree Textiles

Linen Yarn, Linen Fabric, Worsted Yarn

And Wool Tops

West

Bengal

Chemexcil

Premier Chemical Mumbai

Datalog& Pinter FA.NI Textile Automation And Control Bengaluru

Indo-Thai Synthetics

Viscose Rayon Staple Fiber Thailand

Shahlon Industries Pvt Ltd Polyester Yarn, Textured Yarn

Polyester Fabrics

Surat

All Tex Exim Pvt Ltd Cotton Yarn

• Embroidery Threads

Surat

Saanika Industries Pvt Ltd Dope Dyed Black Yarn

Texturisedyarn

Polyester Draw

Surat

Komal Group Of Industries Nimyarn

Limyarn

Surat

Sahiba Fabrics Sarees

Salwar Suit

Tunics

Surat

Stenmech Engineering Works

Pvt. Ltd.

Stenter Machines

Padding Mangle

Float Dryer

Relax Dryer

Surat

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Case Study on Bajaj Tex World

Bajaj Tex world Pvt LTD is a surat based textile firm located at ring road area of

surat city. The firm is located in surat city since 30 years.The firm has got 3 partners

named named MR SubhashBajaj,MrMukesh Bajaj and Mr Vinay Kumar Bajaj. Bajaj

Tex world is a firm that is into fabric exports to various countries of the world as well

as they are into local trading as well as into trading of clothes into various cities of

india. They export to various countries of the world namely

IndonesiaMalaysia,Dubai, London, Banqok, Karachi,Yangoon. The firm exports

all sorts of fabrics namelyChiffon, Georgette: Silky georgette, Reindier and Kimaya

georgette, Satin, ultra Satin, Orient, Cotton, Crepe and American crepe, Silk, Nylon,

Moss and NSD moss, Lacozi, Barbie and velvet alpine.

Orders taken by Bajaj Tex world

Grabbing of customers

Bajaj tex world does exports generally with the help of agent as middle man as

an agent

The lead is generated by Bajaj Tex World through showing the samples to the

customers.

Then by taking the glance at the samples the customer select the sample

according to their requirement and then they give them the order

Then begans the production process

Production process

After grabbing the customers and taking the order then begans the production process.

The products dispatched to the customers is highly customized. They get the fabrics

made according to the requirements the process starts from getting grey to

manufacturing of final fabrics i.e dyed printed and embroidered according to the

requirements of customers.

Raw Material Textile Plants Apparel plants Distribution Centres Customers

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Export procedure of Bajaj Tex world

STEP1: Enquiry

Any Certificate of Origin required - If so, from what agency

The starting point for Export Transaction is an enquiry.

An enquiry for product should, inter alia, specify the following details or

provide the following data

Size details - Std. or oversize or undersize

Drawing, if available

Samples or swotches

Quantity required

Delivery schedule

Is the price required on FOB or C& F or CIF basis

Mode of Dispatch - Sea, air or Sea/air

Mode of Packing

Terms of Payment that would be acceptable to the Buyer - If the buyer proposes

to open any Letter of Credit, any specific requirement to be complied with by

the Exporter

Requirement of Pre-shipment inspection and if so, by which agency

STEP 2: - Performageneration

After studying the enquiry in detail, the firm provides a Performa Invoice to the Buyer

along with sending of Packing list.

STEP 3: Order placement

If the offer is acceptable to the Buyer in terms of price, delivery and payment terms, the

Buyer will then place an order on the Exporter, giving as much data as possible in terms

of specifications, Part No. Quantity etc. (No standard format is required for such a

purchase order)

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STEP 4: Order acceptance

The firm immediately acknowledges receipt of the order, giving a schedule for the

delivery committed.

STEP 5: Goods readiness & documentation

Once the goods are ready duly packed in Export worthy cases/cartons), the Invoice is

prepared by the Exporter.

If the number of packages is more than one, a packing list is prepared by the firm.

Even If the goods to be exported are excisable, no excise duty need be charged at the

time of Export, as export goods are exempt from Central Excise, but the AR4

procedure is to be followed for claiming such an exemption.

STEP 6: Goods removal from works

Then the goods There are different procedures for removing Export consignments to

the Port, following the AR4 procedure, but it would be advisable to get the

consignment sealed by the Central Excise authorities at the factory premises itself, so

that open inspection by Customs authorities at the Port can be avoided.

The export consignments are removed from the factory of manufacture, following the

AR4 procedure, claiming exemption of excise duty, there is an obligation cast on the

exporter to provide proof of export to the Central Excise authorities.

STEP 7: Documents for C & F agent

The Exporter is expected to provide the following documents to the Clearing &

Forwarding Agents, who are entrusted with the task of shipping the consignments,

either by sea.

Invoice

Packing List.

Any other declarations, as required by Customs

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On account of the introduction of Electronic Data Interchange (EDI) system for

processing shipping bills electronically at most of the locations - both for air or sea

consignments - the C&F Agents are required to file with Customs the shipping

documents, through a particular format, which will vary depending on the nature of

the shipment. Broad categories of export shipments are:

Under claim of Drawback of duty

Without claim of Drawback

Export by a 100% EOU

Under DEPB Scheme

STEP 8: Customs Clearance

After assessment of the shipping bill and examination of the cargo by Customs (where

required), the export consignments are permitted by Customs for ultimate Export.

This is what the concerned Customs officials call the ‘LET EXPORT’ endorsement

on the shipping bill.

STEP 9: Document Forwarding

After completing the shipment formalities, the C & F Agents forwards to the Exporter

the following documents:

Customs signed Export Invoice & Packing List

Exchange control copy of the Shipping Bill, processed electronically

Bill of Lading

With these authenticated shipping documents, the firm will have to negotiate the

relevant export bill through authorized dealers of Reserve Bank,here in our case ING

Vyasa Bank

Under the Generalized System of Preference, imports from developing countries

enjoy certain duty concessions, for which the exporters in the developing countries

are expected to furnish the GSP Certificate of Origin to the Bankers, along with other

shipping documents.

Broadly, payment terms can be:

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DP Terms

DA Terms

Bajaj tex world uses the above two mentioned as payment term. Credit may be

provided to the importer from 30 days to 90 days depending upon their contract.

Step10: Bank to bank documents forwarding

The negotiating Bank (ING Vyasa) scrutinizes the shipping documents and forward

them to the Banker of the importer, to enable him clear the consignment.

It is expected of such authorized dealers of Reserve Bank to ensure receipt of export

proceeds, which factor has to be intimated to the Reserve Bank by means of

periodical Returns.

STEP 11: Receipt of Bank certificate

Authorized dealers will issue Bank Certificates to the exporter, once the payment is

received and only with the issuance of the Bank Certificate, the export transaction

becomes complete.

It is mandatory on the part of the Exporters to negotiate the shipping documents only

through authorized dealers of Reserve Bank, as only through such a system Reserve

Bank can ensure receipt of export proceeds for goods shipped out of this country.

Bajaj Tex world deals in US dollar as an international currency for their export trade

Suppose the order is taken by the firm of 2 lakh meter order is taken at $1 per item then total

would be equal to $200000.

Hedging Done by Bajaj Tex world

Bajaj tex world enters into forward contract with their clients abroad. They fix the dollar rate

in advance and then the payment is received by them at that price only. In order to avoid the

uncertainty or fluctuation in the currency rate.

They book the dollar before handed with the bank in order to minimize their risk in future.

This is known as the forward contract as the the price is predetermined in advance with their

bank name ING Vyasa

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Conclusion

There is a scope of textile industry in Indonesia, as we have interpreted from some of

the graphs and figures above we can conclude that Indonesian textile industry is rising

day by day.

India’s export have increased to 1412.06 INR billion in February 2013 from

1389.82INR billion in January 2013. This is the overall export in various sectors

from this textile contribute 9%

India’s export in textile sectors are done in following countries

1. USA textile export growth percentage 10.93%

2. UAE textile export growth percentage 13.41%

3. Singapore textile export growth percentage 4.25%

4. Indonesia textile export growth percentage 1.73%

5. Malaysia textile export growth percentage 1.60%

The overall percentage of india exporting various by products of textile is 11.61% as

of 2012-2013.

Indonesia’s import was increased by 11.2% from US dollar 4.64 to 5.19 dollar billion

Cotton Fabric is the highest imported textile product contributing 423.4 US Dollar

million, While the least imported product was wool fabrics which was around 21.7

US $ million.

Apparel would continue to grow faster than textiles. Home Textile trade is expected

to grow significantly. Export growth China and India is expected to stabilize after

2012 on account of growing domestic market.

There is an opportunity for Indian textile industry which can expand their market by

going into joint venture or consolidation.

Since the future of the textile and garments sector is based on the production and

export of Apparels, there is a need to focus on the development and growth of this

segment of the sector. Vocational training through ITIs, Textile Design &

Management Institutions specially in the area of Apparel Manufacturing, Quality

Control and Designing needs to be encouraged so that skilled work force is available.

Ministry of HRD along with AICTE and Industry Associations in tandem can develop

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special modules for ITIs and other educational institutions for addressing the current

needs and future requirements of the sector.

Fluctuation in Exchange Rates

It has been found that textile and garments exports have been negatively affected by

fluctuations in exchange rates in the recent years. In order to offset the loss of

international competitiveness of the Indian Textile and garments sector due to the

exchange rate fluctuations, Government needs to evolve reimbursement schemes such

as duty drawback, market development assistance etc., on a continuous basis.

Ministry of Commerce & Industry in consultations with the Industry Associations can

work out appropriate measures to be taken up for the sector

Competition emanating from Other Countries

Though textiles and garments sector is already getting the benefit of various

developmental schemes specifically in the SME sector, it is facing major threat from

other competing countries such as China, Bangladesh, etc., there is a need to further

support the textile and garments sector. Ministry of Textiles and Ministry of Micro,

small and Medium Enterprises along with NMCC and Industry Associations can work

out special packages and strategies for the sector in this regard.

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4.Machinary and Equipment Manufacturing industry

This class consists of operators engaged in the manufacture, alteration and repair of special

industrial machinery and equipment except metal-working and wood-working machinery,

such as food machinery, textile machinery, paper industry machinery, printing-trade

machinery and equipment, oil refining machinery and equipment, cement-making and clay

working machinery, heavy machinery and equipment used by the construction and mining

industries.

The Indonesian Government has identified the M&E industry to be one of the key areas for

growth and development. The growth will focus on the manufacture of high value-added and

high technology M&E.

This industry is categorized into the following classifications:-

o Power generating machinery and equipment

o Metalworking machinery

o Specialized process machinery or equipment for specific industry

o General industrial machinery & equipment, components and part

Sr. No. Industry GDP(%)(2011)

1 Agriculture Industry 14.7%

2 Mining Industry 1.4%

3 Manufacturing Industry

Oil and Gas 3.4%

Food Processing 7.40%

Textile 1.90%

4 Construction 10.20%

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AGRICULTURAL MACHINE AND EQUIPMENT MANUFACTURING IN

INDONESIA

Agricultural Machine and Equipment Manufacturing in Indonesia This class consists of units

mainly engaged in manufacturing machinery for preparing and processing agricultural land

(for example, tractors and ploughing machines) and machines for the first processing of

agricultural crops, includes the manufacturing components for these machines and

agricultural machinery equipment/implements. It also consists of operators engaged in the

maintenance and repair of agricultural machinery.

Company Name: PT. AGRINDO, Ltd.

About Company: PT. AGRINDO, Ltd. is a company with worldwide activities. They

manufacture agricultural machineries, spare part and its equipments. They have committed to

produce quality products and satisfy the customer, They deploy clearly written policy

statement on the objectives.

Product: Rice Milling Machinery, Grain Dryer (Batch), Grain Cleaner, Hand Tractor/Power

Tiller

Company Name: PT Agrindo Maju Lestari

About Company: AML founded in 1995, is one of the leading manufacturer of agricultural

equipment located in Indonesia. Occupying an area of 1800 square meters, the company has

supplied high quality agricultural equipments to the regions and other international market.

Product: Power Sprayer, Water Pump, Jet Cleaner, Hand Sprayer, Brush Cutter

INDIA / GUJARAT COMPANIES

Company Name: Mahindra

About Company: Mahindra began manufacturing tractors in the early 1960s for the

Indian market. It also import and export tractor, harvesters, loaders, etc. The company

gives importance to making farms more prosperous in more than 40 countries on 6

continents.

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Products: Farming Implements: Crop Harvesting Solutions, Rice Farming Solutions,

Sugarcane Farming Solutions

Company Name: B.D.J International

About Company: It is a business entity, actively engaged in manufacturing and supplying a

diversified range of hi-tech Agricultural Farm Equipment. The range of Agricultural

Equipment includes Agricultural Sprayers, Lawn Mowers, Brush Cutter Spare Parts, Brush

Cutters, Chainsaw, Chainsaws Spare Parts, Diesel Engines, Earth Augers, Lawn Mower

Spare Parts, etc.

Products: Agricultural Sprayers, Lawn Mowers, Brush Cutter Spare Parts, Brush Cutters,

Chainsaw, Chainsaws Spare Parts, Diesel Engines, Earth Augers, Lawn Mower Spare Parts.

MINING INDUSTRY EQUIPMENT INDONESIA

Indonesia is a valuable market for U.S. suppliers of mining equipment, technology, and

services. Although several regulatory, environmental and social issues exist; industry experts

believe that prospects for the mining industry in Indonesia are promising. There are business

opportunities for manufacturers and suppliers of coal mining equipment and associated

products and services. U.S. suppliers are encouraged to seek local representation and have a

joint operation with a local company, which can provide after-market support to their

clientele and meet with local content requirements.

Companies Details

Company Name: PT. Inhwa

About Company: PT. Inhwa Machinery & Supply has been in the industrial machine tool

trade for over 50 years. Our diverse range of types of machinery: horizontal and vertical

boring mills, lathes, grinders, milling machines, brakes, shears, punch presses, manual or full

CNC enables PT. Inhwa to be your one source machinery dealer.

Product/Service: Industrial machinery, lathes, boring mills, grinders, brakes

Company Name: PT BEML Indonesia

Product/Service: Mining Engineering, Contract Mining, Manufacture of other general-

purpose machinery, Machinery and Equipment Sales

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Company Name: Pt Southeast Asia Machinery

About Company: Provide clients here in Indonesia and World Wide with quality New and

Used Machinery and Service, having a background within the Mining, Generation, Oil, Gas,

Marine industries here in Indonesia, North America, Europe, South America, Middle East

and West Africa.

Main Products: Mining Equipment, Oil Gas Rigs, Marine Engines, Generation Equipment,

Mining Tyres.

Other Products/Services: Wood Chipper, Mine Tyre Chains, Vehicle Weigh Scales,

Crushers, Mine Trucks, Railway repair and building equipment, environment custom exaust

systems, Engineered forestry products, River trash collection equipment, Water Filtration.

Company Name: Pt Equatorial Karyanusa Indah

About Company: We sale & buy new and used heavy equipment, earth moving equipment,

forestry equipment, crane, generator set, power plant, mining equipment, industrial machine,

outo mobil. We can supply anywhere in the world.

Products/Services: Earth Moving Machinery, Forestry Machinery, Mining Equipments

INDIA / GUJARAT

Company Name- Voltas Limited

About Us:

Voltas Limited (a premier engineering service provider company-A TATA Enterprise) are

the sole distributors for M / s TEREX-PEGSON & POWER SCREEN in India for

distributing their world-class machinery. Voltas also having own fabrication unit at Thane,

Mumbai to produce Wheeled mounted Crushing & Screening Plant for aggregate and other

minerals.

Product/Service:

Crushing and Screen Plant, Crusher & Vibrating Screen, Jaw Crusher Cone Crusher Vsi

Company Name: L&T

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About Company: L&T Construction & Mining Machinery comprises Construction

Equipment Business, Mining Equipment Business, Construction & Mining Tipper Business,

Hydraulic Equipment Business and Product Support & Spare Parts for all these equipment.

Products/Service:

Mining Equipment Business distributed and provides after-sales support to a wide range of

mining equipment from komatsu. The range includes large size hydraulic Excavators with

bucket capacities up to 48000 liters, Wheel Loaders with bucket capacities up to 20000 litres,

large-size dozers up to 1150 HP, and other mining equipment from Komatsu’s wide range.

OIL & GAS EQUIPMENT IN INDONESIA

The market for oil and gas equipment in Indonesia remains attractive and has a promising

long-term outlook. The country’s oil production is declining by 12% per year due to the

ageing oil fields and the lack of new oil fields exploration. . The GOI has recently shifting

paradigm in the oil and gas industry. Prior to 2002, oil production is still dominated, but since

then gas has been dominating the country’s production. The GOI has shifting their focus from

oil to conventional gas & unconventional gas (coal bed methane, shale gas, oil sand, tight gas

and biogenic gas) and from western part to the eastern part of the country that has huge

potential reserves of oil and gas, mainly deep sea areas.

Company Name: PT Trakindo Utama

About Company: PT Trakindo Utama is the authorized dealer in Indonesia for Caterpillar

products, the world's largest manufacturer of mining, forestry, agriculture and construction

equipment, diesel and natural gas engines, industrial engines and generator sets.

Product/Sector:

Exploration and Drilling

o Exploration and Drilling Companies

Production

o Pertamina

o Product Sharing Contractors

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INDIA / GUJARAT

Company Name: Shree Gopala Enterprises

About Company: We are one of the leading Exporters and Manufactures of Gas Welding

Equipments and Aluminum Mig/ Tig wire.

Products: Gas Welding Equipment, Profile Cutting Machines, Cnc Cutting Machines

FOOD PROCESSING MACHINERY AND EQUIPMENT IN INDONESIA

The processed food and food processing machinery and equipment sectors in Indonesia is

growing fast, making them attractive destinations for multinational companies and

prospective investors. Food exports are also encouraged, as they assist in boosting

economies, which is another reason for the growing importance of the processed food sector.

The agricultural sector supports the processed food sector by allowing access to a steady

input of required raw food products. Food processing machinery and equipment within

Indonesia are mostly imported and distributed by players in the food industry.

Companies Details

Company Name: PT. Sumber Cipta Teknik

About Company: PT Sumber Cipta Teknik was established in 1986 in Surabaya mainly in

Industrial Machinery Supplies. We produce various kinds of machinery, and most of all, are

machinery in connection with Food Industry. PT. Sumber Cipta Teknik specialized in shrimp

crackers automatic cutting machine. However, we also have cutting machine for fruit chips

(such as apple or carrot), potato, vegetables, saussage, and tobacco leaf.

Product/Service: Food processing machinery, manufacturing tools, shrimp cracker, cashew

nut, white pepper, fresh ginger

Category: Agriculture - Fresh Vegetables

Company Name: Sanco Indonesia

About Company: PT Sanco Indonesia is a rapid developing trade company with mission to

provide the best solution for our valuable clients. Sanco Machinery gained trust from PT

Kreasi Sanadi Multi one of the biggest Indonesian machinery manufactures as its main

principal and has proven itself as one of the top machinery trading agents who owns an

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exclusive right to promote and distribute the products not only from local company but also

from foreign machinery manufacturers.

Product/Service: Wafer Stick Production Line, Wafer Stick Machine Accessories, Instant

Cereal Machine.

Wafer Flat Production Line, Egg Knock & Egg Yolk Separator Machine - Made in Taiwan.

Company Name: Bogasari Flour Mills

Business Sector(s): Flour Milling, Manufacture of other general-purpose machinery, Food

Processing Machinery Manufacturing

Products/Services: Corn flour processing complete set equipment (6FYDT-8), Wheat flour

mill equipment

INDIA / GUJARAT COMPANIES

Company Name: Kailash Engineering Works

About Company: Manufacturer Exporters / Wholesale Suppliers Of automatic papad

making machine, semi automatic papad making machine, automatic chapati making machine,

pulverizers machine, spice mixtures and oil coating machine, sieve machine, churner

machine, filter turmeric machine, hydro filter machine, lova cutter

Products: Papad Making Machine, Papad Cutting Machine, Papad Dryer Machine, Papad

Mixture Machine, Dough Cutting Machine, Gas Furnace, Chapati Making Machine

TEXTILE MACHINERY AND EQUIPMENT INDUSTRY IN INDONESIA

Company Name: PT. Mitra Saruta Indonesia

About Company: We, PT. Mitra SARUTA Indonesia, is manufacturer and exporter of

KNITTED WORKING GLOVE and OPEN END YARN.

Product/Service: Denim Clips, Dropping, Cotton Yarn Waste, Pneumafil

INDIA / GUJARAT

Company Name: Swati Industries

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Swati Industries was formed in 1989 and over the two decades, it has acquired distinguished

technical expertise in its field. Today, our products are exported worldwide under the brand

"Swatitex".

Products: Jumbo Bag Series, Gold Wider Series, FIBC Machine Winder, Zipper Series,

Warping Machine, Gold Economy Series, Gold Super Series, Rolling Machine, Economy

Series, Heavy Series

Company Name: SINGHS INDUSTRIES

About Company: Incorporated in the year 1965, Singhs Industries is a professionally

managed and technically efficient organization.

Products:

Wire Nail Machine,Wire Drawing Plants,Barbed Wire,Razor (Concertina Tape) Barbed Wire

Plant,Hollow (Pop) Rivet,Diamond Mesh,Expanded Metal,Fasteners Machine,Bolt Making

Machine.

CONSTRUCTION MACHINERY AND EQUIPMENT IN INDONESIA

Indonesia’s construction sector has been performing well in recent years driven by strong

economic activity and high levels of investment. Indeed, fixed investment has soared over the

past decade, with its share of total GDP rising from 19.5% in 2003 to a historic high of 33.2%

in 2012. Infrastructure construction will be the leading sector in terms of growth, but the

other construction sectors, particularly residential and commercial construction, will also see

healthy growth given the positive economic outlook and the rapid expansion of the country’s

middle class.

Company Name: MAM INDO TRADING

About Company: We are a company who deals in used heavy equipments dealing with all

brands (CATERPILLAR, KOMATSU, and Hitachi). We are specialized in dozer, grader,

wheel loader, excavator and crane. We rebuilt D7G to new. All our equipment are fully

checked and serviced. We sell to dealers and contractors in the USA, Europe, MIDDLE

EAST AND Africa.

Product/Service: Dozer, Excavator, Wheel Loader, Grader, Crane, Truck

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Company Name: PT.Miraitech Cipta Machinery

Product/Service: used marine engine, woodworking machine

Company Name: PT Hitachi Construction Machinery Indonesia

Engineering Products:

Power Plant: Intake Filtration & Exhaust Sys

Material Handling: Cranes, Conveyor Systems

Rolling Mill: Roller Changer, Cooling Conveyor

INDIA / GUJARAT

Company Name: S.P.Enterprise

About Company: We specialized in wide range of road and civil construction equipments

like Asphalt Drum Mix Plant, Wet Mix Macadam Plant, Asphalt Paver, Bitumen Sprayer,

Concrete Batching Plant, Concrete Mixers and other construction machinery.

Products: Concrete Batching Plant, Road Broomer, Chip Spreader, Wet Mix Macadam

Plant, Trolley Mounted Bitumen Sprayer, Skid Mounted Bitumen Sprayer, Hydrostatic

Asphalt Paver, Multiple Cold Aggregate Feeder Bins, Asphalt Drum Mix Plant, Asphalt

Plant.

Company Name: L&T

About Company: L&T Construction & Mining Machinery comprises Construction

Equipment Business, Mining Equipment Business, Construction & Mining Tipper Business,

Hydraulic Equipment Business and Product Support & Spare Parts for all these equipment.

Construction Equipment Business

Construction Equipment Business markets and provides service support for Hydraulic

Excavators manufactured by L&T-Komatsu limited, a joint venture with Komatsu Asia &

Pacific Pte Ltd, Singapore, a wholly owned subsidiary of Komatsu ltd, Japan. The range

comprises models in the 7te to 60te class powered by diesel engines ranging from 54HP to

320HP. The 20te and 60te models are also offered with electric motors.

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5.Processed Food Industry

The size of global processed food industry is estimated to be valued around US $3.6 trillion

and accounts for three-fourth of the global food sales. Despite its large size, only 6% of

processed foods are traded across borders compared to 16% of major bulk agricultural

commodities.

Over 60% of total retail processed food sales in the world are accounted by the U.S, EU and

Japan taken together. Japan is the largest food processing market in the Asian region, though

India and China are catching up fast and are likely to grow more rapidly. Leading meat-

importing countries namely Japan and South Korea have a developed processed food

industry.

Processed food sales worldwide are approximately US$3.2 trillion (2007). In the world,

consumers spend approximately US$10 trillion annually for food. Over 16.5 million people

are employed in the food industry all over world. Nearly 10 percent of the world Gross

Domestic Product (GDP).

Fruits and vegetables have recorded the highest growth, around 20% followed by meat

processing (13%) and dairy processing (4%).

Food processing is the transformation of raw ingredients into food, or of food into other

forms. Food processing typically takes clean, harvested crops or butchered animal products

and uses these to produce attractive, marketable and often long shelf-life food products.

Benefits of food processing include toxin removal, preservation, easing marketing and

distribution tasks, and increasing food consistency. At the Same time Any processing of food

can affect its nutritional density, the amount of nutrients lost depending on the food and

method of processing.

Canned and frozen fruits and vegetable

Packaged foods labelled “natural” or “organic,” such as cereals, fresh meat and

poultry, and jarred baby foods

Foods with health and nutrition claims on the label, such as “may reduce risk of heart

disease,” “low in fat” or “high in calcium”

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Foods fortified with nutrients such as fiber, vitamin D and omega-3 fatty acids

Foods prepared in quick-service and fine-dining restaurants, cafeterias and food

courts, sports arenas, coffee shops and other locations.

Processed Food Industry in Indonesia:

Indonesia has a large population of 225 million consisting of relatively young people. The

market opportunity for the food industry in Indonesia is still wide open as the Indonesian

people's dominant expenditure is on the consumption of food.

Several factors contributing to the growth of the food processing industry are the introduction

of new flavours and products, aggressive promotional activities, growth of modern retail

outlets, and growing health awareness.

Rice is a staple eaten at every meal. However, noodles from imported wheat are a popular

substitute and use of wheat continues to grow. Dairy products continue to offer opportunities

for U.S. milk powder to be mixed with fresh milk and as an ingredient. Indonesia currently

only produces about 25 percent of milk production needs.

The FPIs, particularly the small ones, are scattered throughout the country. The main

concentration is in Java (72.3 percent) followed by Sumatra (13.9 percent) and other areas

(13.8 percent). On the contrary, the large and medium FPIs are usually distributed in areas

where facilities and infrastructures are sufficiently available.

The Indonesian food processing industry serving a population of 225 million offers

significant market potential for U.S. suppliers of food and ingredients. In 2012, the product

value of the Indonesian food processing industry was $41.7 billion, up 17 percent from 2011.

In 2012, Indonesia import $9.2 billion of agricultural, fish and forestry products with 16

percent coming from the United States. Australia is the second-largest supplier, accounting

for 12 percent, followed by Thailand with 10 percent. Other suppliers do not account for

more than 10 percent of imports individually. In 2012, over 40 percent of imported products

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by value were major inputs for food processing, such as wheat, sugar, dairy, soybeans, wheat

flour, and beef.

Processed Food Industry overview in India:

India is the world’s second largest producer of food next to China, and has the potential of

being the biggest with the food and agricultural sector. The food processing industry is one of

the largest industries in India-it is ranked fifth in terms of production, consumption, export

and expected growth.

The food industry is on a high as Indians continue to have a feast. Fuelled by what can be

termed as a perfect ingredient for any industry – large disposable incomes - the food sector

has been witnessing a marked change in consumption patterns, especially in terms of food.

The size of global processed food industry is estimated to be valued around US $3.6 trillion

and accounts for three-fourth of the global food sales in 2015. Despite its large size, only 6%

of processed foods are traded across borders compared to 16% of major bulk agricultural

commodities. Indian food-processing industry is mini scale in comparison and is estimated to

be US $40 billion and is likely to grow at over 10%, on the basis of an expected GDP growth

rate of 8-8.5% p.a in near future.

India has a strong agricultural production base with diverse agro-climatic conditions and

arable land of 184 million hectares. It is one of the major food producers in the world and has

abundant availability of wide variety of crops, fruits, vegetables, flowers, live-stock and

seafood. As per the available information, it produces annually.

90 million tonnes of milk (highest in the world);

150 million tonnes of fruits and vegetables (second largest);

485 million livestock (largest);

204 million tonnes of food grains (third largest);

6.3 million tonnes of fish (third largest);

489 million poultry

45,200 million eggs.

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Processed Food Industry in Gujarat:

Gujarat is endowed with abundant natural resources in terms of fertile land, varied soil and

climatic conditions, river canal network, excellent State Government support to hi-tech

agriculture and its value-added products and most important the enterprising farmers. The

State tops the Agriculture Growth table in the country growing at Cumulative Average

Growth Rate (CAGR) of 10.7% in last decade.

The production of milk in the State has crossed 9.0 million tons during 2010-11. There are 17

cooperative dairy plants and 25 private dairy plants engaged in production of value-added

products of milk. The State ranks first in marine fish production and contributes 28% of

national export in quantity and 15% in terms of value. Gujarat State Horticulture Mission

(GSHM) is implementing a National Horticulture Mission (NHM) in the State with a view to

double the horticulture production and income of the farmers by adopting end to end

approach with simultaneous development of post harvest infrastructure and marketing

facilities.

Processed Food Industry by sectors:

Indonesia Processed Food Industry by sectors:

a) Agri-Food, b) Meat & Poultry, c) Fruits and vegetables, d) Dairy, e) Beverage.

Indian Processed Food Industry by sectors:

a) Dairy, b) Fruits & Vegetables, c) Grains & Cereals, d) Fisheries, e) Meat & Poultry, f)

Consumer Food.

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Processed Food Industry: Contribution to the Economy:

Indonesia:

The Indonesian food processing industry serving a population of 225 million offers

significant market potential for U.S. suppliers of food and ingredients. In 2012, the product

value of the Indonesian food processing industry was $41.7 billion, up 17 percent from 2011.

The industry consists of businesses of all sizes. About 6,100 large and medium-size

producers account for over 80 percent of output and over 20 percent of the 3.36 million

employees. The remaining 20 percent of processed food is produced in homes and sold on the

street in roadside outdoor small restaurants, small roadside retailer kiosks called warungs, or

on the street by vendors with small carts called kaki limas. Warungs, small restaurants along

the road, and kaki limas are ubiquitous in Indonesia and provide a variety of meals and

popular snacks for Indonesians. In Indonesia, giving food as a gift is a tradition and remains

popular and snacking is very popular.

India:

The Gross Domestic Product (GDP) at 2004-05 prices in India has gone up to Rs.44,93,743

crore in 2009-10 from Rs 32,54,216 crore in 2005-06, with Compound Annual Growth Rate

(CAGR) of 8.40%. Contribution of FPI sector has increased to Rs. 66,078 crore in 2009-10

from Rs. 47,689 crore in 2005-06 with CAGR of 8.49%. CAGR for total manufacturing

sector during the same period has been 9.35%. India ranks number one in the world in

production of Milk (Fresh, whole, Buffalo), Pulses, Ginger, Chick Peas, Bananas Guavas,

Papayas and Mangoes.

Total Export of Indonesia:

Indonesia's top export destinations for Agri-food and seafood products are its geographical

neighbours: India (18.4%), China (9.7%), and Malaysia (8.2%). The U.S. and the Netherlands

are also top destinations, each accounting for 8.5% of total Agri-food and seafood exports in

2009 (Global Trade Atlas, 2010).

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Total Import of Indonesia:

Major imported products are Red meats, prepared/preserved, Dairy products (excl. cheese),

Fresh vegetables, Fresh fruit etc. in which dairy products are most imported to Indonesia. The

least imported products are wine and beer, fruit and vegetable juices.

Total Exports to India

Food and Fibre exports to India were valued at US $164 million in 2009-10. The key exports

to India were animal fibre mainly wool (57%) and horticultural products mainly almonds

(21%).

Total Import of India

There is growth in the India’s import to Indonesia Animal and vegetable fats and oils and

their cleavage products which was 2.77 US $ million in the year 2011. There is variable

changes in the India’s import to Indonesia for vegetable products which was 0.86 US $

million in the year 2011.

Rules and Regulation for Processed Food industry:

In Indonesia:

Indonesia has cut its tariffs on food and other imports sharply during the last ten years.

Effective from 1 February 1998, tariffs on all food items were reduced to a maximum of 5%,

with just a few exceptions.

The ‘bound’ rates, which are the maximum tariffs Indonesia has committed to as part of its

membership of the WTO, are significantly higher. For most food products, the bound rate is

between 27% and60%, but the bound rates are significantly higher for rice (160%), milk and

cream (210%) and alcoholic drinks (over 100%).

An income tax is levied at 2.5% of the CIF value of imports. Value added tax (VAT or PPN)

is levied on almost all goods, including imports, at a rate of 10%. VAT applies to processed

food products but not to fresh foodstuffs. A luxury tax of between 10% and 75% is levied on

certain products—whether imported or produced domestically.

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In India:

Since liberalization several policy measures have been taken with regard to regulation &

control, fiscal policy, export & import, taxation, exchange & interest rate control, export

promotion and incentives to high priority industries. Food-processing and agro industries

have been accorded high priority with a number of important relieves and incentives. Some

of the import regulations are

Automatic approval to FDI up to 100% equity in FPI sector excluding alcoholic

beverages and a few reserved items.

Quantity restrictions on all food products have been removed. Peak rate of customs

duty has been reduced from 30% to 25% (excluding agricultural and dairy products)

and duty structure on designated items has been rationalized.

Customs duty on refrigerated goods transport vehicles has been reduced form 20% to

10%.

Excise Duty of 16% on dairy machinery has been fully waived off and excise duty on

meat, poultry and fish products has been reduced from 16% to 8%.

Minimize wastage at all stages in the food processing chain by the development of

infrastructure for storage, transportation and processing of agro-food produce.

In budget 2007-08, excise duty has been waived on all kinds of food mixes including

instant mixes, Soya Bari (food supplements) and ready to eat packaged goods as well

as on biscuits.

Investment opportunity in India:

India is the world’s second largest producer of food next to China, and has the

potential of being the biggest with the food and agricultural sector.

Due to its diverse agro-climatic conditions, it has a wide-ranging and large raw

material base suitable for food processing industries. Presently a very small

percentage of these are processed into value added products.

Rapid urbanization, increased literacy and rising per capita income, have all caused

rapid growth and changes in demand patterns, leading to tremendous new

opportunities for exploiting the large latent market. An average Indian spends about

50% of household expenditure on food items.

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Very good investment opportunities exist in many areas of food processing industries,

the important ones being: fruit & vegetable processing, meat, fish & poultry

processing, packaged, convenience food and drinks, milk products etc.

No industrial license required for food and agro processing industries except for

alcoholic beverages and items reserved for small scale sector, which are: Pickles &

Chutneys, Bread, Pastry, Hard boiled sugar candy, Rapeseed Oil, Mustard Oil,

Sesame Oil, Ground nut Oil, Sweetened Cashew nut products, Ground and processed

spices other than spice oil and Oleoresin spices, Tapioca sago and flour.

Food processing industry declared a priority sector. New Exim Policy places greater

thrust on Agro based Industries.

Import of food processing machinery allowed freely with low level of duties (25-

30%). Custom duty under Export Promotion Capital Goods (EPCG) Scheme with

specific export commitments is only 5%.

Liberal corporate tax policy for export earnings as well as for domestic sale.

Corporate tax reduced from 50% to 35%.

Quantitative Restrictions on all food products removed. Customs duty on majority of

the products at 35%.

300 Million Upper middle class consumers consume processed & packaged food.

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6.Agricultural Industry

Indonesia has a mixed economy which both the private sector and government play

significant roles. According to WTO data, Indonesia was the 27th biggest exporting country

in the world 2010, moving up 3 places from a year 2011.

Indonesia's main export markets (2009) are Japan (17.28%), Singapore (11.29%), the

US (10.81%), and China (7.62%). The major suppliers of imports to Indonesia are Singapore

(24.96%), China (12.52%), & Japan (8.92%).

The business development in Indonesia has, for many years, been liked to political influence

and patronage, it has been virtually impossible to make progresses on any major project

without the right level of influence with senior people in the relevant government ministry

and the closer one’s contacts to the president, the better.

Indonesia with a population of 230 million and a rapidly growing economy represents a

significant business opportunity in such areas as automotive, electrical goods, infrastructure

and retail. To as this market though, you need to understand the business culture.

The world’s fourth most populous country is Indonesia.

Indonesia is the 3rd largest democracy in the world.

Indonesia poverty over 100 million people live on less than $2 per day.

The majority of Muslims in Indonesia are Sunni. 9% of the population was Christian, 3%

Hindu, and 2% Buddhist & other. Most Indonesia Hindus are Balinese, & most Buddhists in

modern day Indonesia are ethnic Chinese. Thought now Hinduism, minority religions &

Buddhism remain defining influences in Indonesian culture.

Indonesia has about 300 ethnic groups with cultural identities developed over centuries, &

influenced by Indian, Arabic, Chinese, & European sources.

Indonesia GDP was depending on the 3 major sectors

1). Agriculture,

2) Industry and

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3) Services

Contribution of GDP

Agriculture: 14.9%

Industry: 46%

Services: 39.1%

In Indonesia GDP growth was increase 3 % in last 5 year In GDP composition of agriculture

sector. Agriculture sector contribution is 14.9 % which means it was very good percentage

contribution of any country.

Indian-Indonesian relations :-

An Indian-Indonesian relation refers to the bilateral relations of India and Indonesia. The

Indonesian-Indian relationship stretch back for almost 2 millennia In 1950, the first President

of Indonesia - Sukarno called upon the peoples of Indonesia and India to "intensify the

cordial relations" that had existed between the two countries "for more than 1000 years"

before they had been "disrupted" by colonial powers. Fifteen years later in Jakarta,

government-inspired mobs were shouting: "Down with India, the servant of imperialists" and

"Crush India, our enemy." Yet in the 1966, the foreign ministers of both countries began

speaking again of an era of friendly relations.

India had supported Indonesian independence and Nehru had raised the Indonesian question

in the United Nations Security Council.

India had an embassy in Jakarta and Indonesia has an embassy in Delhi. India regards

Indonesia as a key member of ASEAN. Both nations had agreed to establish a strategic

partnership.

According to a 2013 BBC World Service Poll, 51% of Indonesians view India's influence

positively, with 21% expressing a negative view, one of the most favorable perceptions of

India in the world

India is the 2nd

largest partner with the Indonesia in ASEA. India is the largest buyer of crude

palm oil from Indonesia. India’s exports to Indonesia are petroleum products,

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telecommunication equipments and parts, hydrocarbons and oil seed, derivatives, motor

vehicle for goods transportation, cotton, animal feed, alloy steel, flat rolled product.

India has most substantial investments in Indonesia are the steel, textiles, banking,

automotive and resources sectors. In auto-mobile sector Bajaj & TVS Company, steel sector

TATA GROUP, Essar, RELINECE GROUP also performing. In FMCG sector the Godrej

was there in Indonesia. And so many Indian company are performing in Indonesia

Indonesia Intending to improve relations with India, the Southeast Asian archipelago would

also start air traffic of the state owned airlines Garuda Airlines from June this year, he said.

"Chennai has a lot of potential in business terms and we don't want to be left behind.

Indonesia has made a proposal to open a Consulate in Chennai; Indonesia already have open

a consulate in Mumbai.

AGRICULTURE SECTOR

Indonesia is an agricultural country and has a great forest area and an exceedingly fertile

land. Coconut Rice and bananas grow almost everywhere, besides palm oil, cotton, cocoa,

rubber, coffee and tea. There are variety of fruits is beyond description. Many of fruits are

unknown in India and elsewhere. Pisang and Raja are type of banana which grows almost 1

foot in length.

Coconuts Rice, bananas, soy beans, tea, coffee, sugar rubber, palm oil, cane, cassava, spices,

cocoa, peanuts, shrimp copra, and poultry, fish, beef, and eggs.

Main items of India’s Exports to Indonesia are telecommunication equipment and parts,

Petroleum products, oil seed, hydrocarbons and derivatives, animal feed, cotton, flat rolled

product, motor vehicle for goods transportation, alloy steel while the main items of India’s

imports from Indonesia are Fixed vegetable fats & oils, natural rubber, Coal, Copper,

alcohols & phenols, pulp & waste paper, hydrocarbon, medicinal and pharmaceutical

products, fertilizers, machine tools, paper and paperboard, dyeing/tanning extracts, carboxylic

acids, other chemical products.

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Proportion of total production of food crops such as rice, corn and other food ingredients

products amounted to 60%. From total production of the agribusiness sector in Indonesia,

about 52% of them came from Java island, especially from East Java, Central Java and West

Java.

The second commodities which have the highest proportion are plantation and horticulture

commodities by 16%. Commodities in the plantation sector are dominated by region of

Sumatra approximately 66.8%, the highest is in the province of Riau. While horticultural

commodities is concentrated in Java and Sumatra (Java 54.6% and Sumatra 25.9%). The

highest production area of horticulture is West Java Province.

Fisheries sector has a proportion of 6% of total agribusiness in Indonesia. The production

distribution is relatively equitable, although East Java has the highest fisheries production

activity that is about 9.3% of the total national fisheries production.

Livestock production activities amounting to 66.5% in Indonesia located in especially in East

Java Province, Java, followed by West Java province.

Main Agricultural Products

(1) TEA:-

Tea is an important commodity with many benefits to human life. Drinking tea has

become a culture in Tea is an important commodity with many benefits to human life.

Drinking tea has become a culture in countries like Japan, Britain, and China and the catching

it contains is a cure to a number of illnesses.

As a commodity, tea sustains pickers, lives of growers, factory workers as well as brings in

foreign exchange to tea producing countries. Global tea production and consumption keep

growing.

Indonesia is tea eight largest tea producers in tea world, after India, China, Sri Lanka and

Kenyat. Approximately 65 percent of the Indonesian tea production is exported.

The Indonesian tea sector is highly fragile to changes and impact from the condition and

structure of the international market. The tea price is vary fluctuating but tends is keep falling

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in Indonesia over the last nine years. The highest price in the period was US $ cent 170.25

per Kg in 2005 and the lowest US$ cent 95.49 in 2012.

Tea high production has attracted multinational enterprises to enter the Indonesian tea sector.

It’s operating with huge capital; the multinationals are holding more power to influence the

whole supply chain in the tea sector, either for good or for worse. They certainly play main

roles in developing the tea industry and trade.

Indonesian Tea Sector

Tea was introduced in 1686 by Dr. Andreas Cleyer ornamental 1st plant. In 1728, the Dutch

colonial government brought in tea seeds in large amount to grow in Java but it is effort

ended in failure. Dr van Siebold initiated another import of tea seeds from Japan, in 1824.

Jacobson started up the 1st tea plantation in 1828, an initiative was comes later brought

commercial benefit to the Dutch colonial government and led to its policy of Kultuurstelsel

tea became one of the plants that people are obligated to grow.

In Indonesia, nearly 90% of farmer tea is processed into green tea and later into jasmine tea,

while 10% into black tea. Green tea is produced in bulk mainly in West Java. Jasmine tea is

produced mainly in Central and East Java.

Of tea produced by state-owned plantations (PTPN), 82% is processed into black tea and only

18% into green tea. The black tea is mostly of the orthodox kind and a small portion of CTC

(Crushing, Tearing and Curling) and 90% of the black tea is for export.

With export volume is move between negative and positive growth, the sector gained a

positive growth in 2003 only to decline again the following year to 88,176 tons, due to a

number of factors, but mainly the falling consumption in England and other European

countries.

There are some factors influencing Indonesian tea export.

1. Global tea demands and supply worldwide

2. Type and quality of tea production

3. Tea price

4. Tariff barrier

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Indonesia is the major producer of the tea and they not import from the other country but the

main countries of export destination are Russia, Great Britain, and Pakistan. India is also the

exporter country.

(2) RUBBER:-

Asia is now home to around 92% of the world supply of natural rubber, and raw material for

the production of thousands of articles of everyday use. Tier is prominent among them. The

continent provides major portion of the vehicles in use around the world and around 70% of

the global requirement of tires to make them mobile. More than 50% of the synthetic rubber

produced and consumed in the world also is now in Asia.

In the production of other rubber-based articles like auto rubber components, rubber -based

industrial and footwear products, engineering products, latex-based products like latex foam

and fiber foam, gloves, latex thread, condoms, nipples, catheters, sport goods like bladders,

balloons and balls, the situation is not different. Moreover, South and South-east Asia form

the hub of nearly 90% of the dipped products reaching the world market.

Indonesia is the 2nd

largest natural rubber producing country after Thailand. India is 4th

largest rubber producing country.

Natural Rubber:

World total of rubber plantations was around 6.1 million hectares in 1985. This rose to

11,500,000 ha. In 2010, Asia has the most ideal land mass for Heave rubber cultivation in the

world, mainly the Sabah, Sarawak and Thai-Malay peninsula in Sumatra, East Malaysia,

Kalimantan and Java in Indonesia, southern part of India and the South-western part of Sri

Lanka.

The continent’s share in world rubber plantations is 91% at 10,489,000 hectares. Indonesia

with 3,445,000 hectares is the single largest rubber cultivating country in Asia. At the world

level, the country has the largest share around 30% of the total.

World production of natural rubber was 4.4 million tones in 1985, in which the share of Asia

was as much as 91% at 4.0 million tones.

Synthetic Rubber:

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Asia has come a long way during the past 25 years in the production of synthetic rubber. The

1985 production of 1.57 million tones of SR was only around 17.6% of the world output of

8.94 million tones.

The Asian majors in SR production are Japan, China, South Korea and Taiwan while

Thailand, India, Malaysia, Indonesia and Iran follow with modest production.

Indonesia Rubber Sector:

Indonesia is the world’s 2nd

largest natural rubber exporter after Thailand, while having the

largest area of rubber plantations. The sector has been revitalized since the beginning of 2010

as global demand has picked up dramatically.

Indonesia’s rubber plantations are mainly dominated by small hold farmers which make up

for 86% of the 3.5 million hectares of land under cultivation, with the remainder split more or

less equally between private companies and state plantations.

Indonesia having the largest area of rubber plantations in the world, low productivity was

reduce growth of the sector and held it back from achieving the top spot as a global producer

and exporter. According to the Rubber Association of Indonesia, GAPKINDO, plantations in

Indonesia produce an average of 800 kg–1,000 kg per hectare, compared with up to 1,550 kg

for Malaysia and Thailand.

Indonesia therefore holds the potential to eventually become the world’s largest rubber

producer should the key issues of productivity and land fragmentation be addressed. Moving

up to higher value rubber will increase returns and allow small hold farmers to reinvest in

new technology to increase output for the future as global demand continues unabated.

(3) Sugar:

Sugar production and refinery is mainly carried out in Java by state owned plantations,

private sector companies and community plantations. Of the country’s 64 sugar cane

factories, 54 are operated and managed by SOEs (Ministry of Industry).

In the private sector, the 5 main players including Angels Products and Jawamanis Rafinisi

are operating at an estimated 70% of capacity due to feedstock capacity.

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The government is actively collaborating with both state and private sector actors to

accelerate the sugar industry. In 2010, $5 million USD was distributed to nine sugar

companies for investment into new equipment.

Other opportunities include a 35 thousand hectare sugar plant in Northern Aceh that requires

up to 1 trillion RP in investment. The private sector has been active with the announcement at

the beginning of 2011 of a further 1 trillion RP sugar mill in Purbalingga, Pukateja in Central

Java by PT Putra Giri Manis

Opportunities in Indonesia’s Sugar Industry

Despite being the world’s second largest sugar producer and exporter in the 1930, Indonesia’s

sugar industry has been in a state of decline.

Production output decreased by 30% over the course of 1995-2000 due to the closing of

several out of date mills on advice from the International Monetary Fund (IMF). Production

figures have improved again since 2004 to over 2 million MET and reaching 2.39 MET in

2010.

Indonesia is South East Asia’s largest consumer of sugar and the world’s 3rd

largest importer

for raw sugar. Total demand stood at 5 million MET for 2010 with imports making up the

remainder mainly from Thailand, Australia and Philippines.

Production levels have failed to keep pace with the increased demand in domestic

consumption and industrial use which is estimated to reach 5.8 million MET by 2014.

(4) RICE:

Indonesia ranks 3rd in the world in regards to total rice production, but has also been the

world’s seven largest rice importer over the past 5 years – on average requiring over 1.2

million tons of imports per year. Of the top 10 global rice producing nations, only the

Indonesia and Philippines also rank in the top 10 of all rice importers.

The Indonesian government also estimates that its people rely on rice for roughly 50 and 40

percent of their daily caloric and protein requirements, respectively. For this country of 249

million people the status of its domestic rice supply is synonymous with its food security.

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However, in this recent year total rice consumption has been rising faster than production, as

the growth rate of national rice area and yield has faltered.

Indonesia will not import rice in 2012. And instead maintain high stock levels by buying 4

million tones of the staple grain from domestic sellers, state procurement agency Bulog said.

India, the world's second-biggest producer and consumer of rice, is willing to sell 500,000

tons from government stores as warehouses are overflowing after bumper harvests. It has also

sought a cut in Indonesia's export tax on palm oil, which threatens to hurt local refiners. India

is the world's biggest vegetable oil importer.

Gulf region are remains the major markets for Indian basmati rice and inside Saudi Arabia,

Gulf accounts for the major chunk of basmati imports from India. Pakistan is the sole

competitor for India in the international market for basmati rice.

India's major markets for basmati rice exports have been Australia, Saudi Arabia, Belgium,

Bahrain, France, Austria, Germany, Canada, U.K., U.S.A., Belgium, Yemen, Denmark,

Kuwait, Oman, Netherlands, Italy, Jordan, Indonesia etc. Infect, Saudi Arabia traditionally

has been the largest market for Indian basmati rice.

(5) PALM OIL:

Indonesia is the world’s biggest producer of palm oil. It is set to surpass India as the largest

user next year as economic growth demand. Consumption may climb 13 % to 8.5 million

metric tons from 7.6 million tons this year

The majority of Indonesia's palm oil production is exported. The most important export

destination countries are India, China, Singapore, Malaysia and the Netherlands.

Almost 75 percent of Indonesia's oil palm plantations are located on Sumatra where the

industry was started during the Dutch colonial days.

Palm oil imported into India is used in various forms- consumed directly as 'palm oil' after

refining, used in the manufacture of Vanaspati oli, for blending with other crude oil, kernel

oil and vegetable oil for industrial purposes, etc. It is imported mainly through the ports of

Kandla, Mangalore, Kolkata, Mundra, Chennai, Mumbai, and Kakinada, Cochin.

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India, the world’s biggest cooking oil consumer after China, will tax crude palm oil imports

for the first time since 2008 after a slump in prices spurred record shipments, hurting

domestic oilseed growers.

Palm oil represents almost 80 percent of India’s cooking oil imports. Purchases were a record

10.2 million tons in 2010-2011, according to the Solvent Extractors’ Association of India.

The country buys palm from Indonesia & Malaysia and soybean oil from Brazil & Argentina.

Edible oil imports were placed under the OGL system in 1995; private traders were permitted

to import any quantity of vegetable oils, subject to a tariff. The tariff was initially set at 65

percent on all edible oils—still relatively high, but it’s significantly below the implied tariff

when imports were under quantitative controls.

(6) SOYA BEAN:

Soybean is known as the “GOLDEN BEAN” of the 20th Century. Though, Soybean is a

legume crop, it is widely used as oilseed. Due to poor cook ability on account of inherent

presence of try sin inhibitor; it cannot be utilized as a pulse. It is now the 2nd

largest oilseed in

India after groundnut.

Soybean has great potential as an exceptionally nutritive and very rich protein food. It can be

supply the much needed protein to human diets, because it contains above 40 % protein of

superior quality & all the essential amino acids particularly lysine, tryptophan and glycine,

similar to cow’s milk and animal proteins.

Soybean also contains about 20 per cent oil with an important fatty acid, lecithin and Vitamin

D and A. The 4 percent mineral salts of soybeans are fairly rich in phosphorous and calcium.

(7) COFFEE:

Indonesia's coffee history came from the story Muslim pilgrims returning from the Middle

East brought coffee beans to India in early 1600.

Indonesia is the third largest producer of coffee in world, with exports of 1086643 (in 60 kilo

sacks) in 2012.

Coffee in Indonesia began with its colonial history. Coffee has played an important part in the

growth of the country.

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Indonesia’s coffee industry is represented by two associations.

The Association of Indonesian Coffee Exporters (AICE), also known by its Indonesian

acronym “AEKI”, is composed of Arabica and Robusta coffee exporters. AICE was founded

in 1980 and it issues compulsory export licenses for coffee.

Export coffee is sold through the New York Coffee Exchange (NYCE). The main markets are

the Western Europe, United States and Japan.

(8) COCONUT:

Coconut is a strategic commodity not for its economic value but also in terms of its social and

cultural importance in Indonesia

About 98% of the total area is predominantly in the hand of small scale farmers. Such

cultivation involved about 3.1 million farm families.

In India there are approximately 5 million farm families growing coconuts, with a further ten

million people dependent, on coconut for their livelihood through processing and sale of the

crop

Indonesia is highest producing country of the world in coconut. India is also giving good

competition to Indonesia in producing coconut. India is 3rd

producing country in coconut.

China is still the major buyer of coir products in the world market. For raw coconut fiber, the

country used about 64% of the total import demand amounting to 272,000 MT in 2010.

A growing export of coir products from Indonesia to China, especially raw fiber, was also

noted during the period from January to July 2011.

The import demand of China grew at a rate of 25.5% per annum during the period of 2005-

2010. In the period of January-August 2012, China imported around 39,644 tons of mattress

fiber from Sri Lanka

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(9) COTTON:

Cotton is an important agricultural commodity, traded all over the world. India has

progressed substantially in improving both production and productivity of cotton over the last

five years, transforming from a net importer of cotton, to becoming one of the largest

exporters, shipping 5.5 million bales in 2010-11, second only to the USA.

The value chain of cotton right from the farmer level till the end-user level is beset by

problems of inefficiency, wastage, contamination in the form of trash content, as well as

unsustainable use of inputs, such as water, pesticides and fertilizers.

The introduction and uses of new technologies and expansion of the area under cotton has

resulted in significant production gains in the world.

About 70% of the global cotton production comes from 4 countries, which include China

(27%), India (22%), USA (13%) and Pakistan (8%).

China is the largest cotton producer, consumer and importer. The top consuming countries

after China are India, Pakistan, Brazil, USA and Bangladesh.

Indonesia produces only 0.3 percent of its total domestic market demand for cotton. Cotton

producers in Indonesia receive little support from the Government of Indonesia (GOI) and

cotton farmers generally find greater economic incentives to grow other crops. Increased land

conversion to produce nonagricultural uses also reduces the area dedicated to cotton.

According to a local industry publication, the Indonesian textile product and textile sector

employs about 1.8 million workers, which equated to just over 10 percent of the total

Indonesian manufacturing work force in 2012.

According to data from BPS, during the period of January to December 2012, the Indonesian

textile and related product exports amounted to 6.68 % of total Indonesian national exports.

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(10) ONION:

India is the 2nd

largest producer of onion in the world next to China.

According to 2010 FAO estimates, India contributes nearly 19.25 percent of world onion

production. Though the second largest onion producer, India significantly lags behind in the

productivity or yield of the onion.

The Republic of Korea has the highest onion productivity of 63.84 tones/ha in the world

followed, by USA (55.26 tones/ha), Spain (46.51 tones/ha), Japan (45.52 tones/ha) and

Netherlands (45.10 tones/ha). The yield of onion in India (14.21 tones/ha) is lowest among 20

countries after Indonesia.

India is a traditional exporter of fresh onion. Soon after Independence in 1951-52 the country

was exporting over 5 thousand metric tons (MT) of onion worth Rs 106.69 lacks. Exports of

onion started expanding rapidly during the 1960s and reached a high of 512 thousand MT in

1996-97.

Exports of onion from India are regulated and permitted only through certain designated

canalizing agencies. One of the prime agencies is the NAFED, which is the sole agency for

exports of onion from India.

Indonesia is the fifth country in rank for the export of onion from India in 2012.

(11) MANGO:

Mango is the most important fruit of India and is known as “King of fruits”

The main mango producing states in India are Uttar Pradesh (23.86%), Andhra Pradesh

(22.14%), Karnataka (11.71%), Bihar (8.79%), Gujarat (6.00%) and Tamil Nadu (5.09%).

Total export of mangoes from India is 58.22 thousand tons, valuing Rs. 163.92 crores during

2010-11. India exports mango to over 40 countries worldwide.

Mango covers an area of 4946 thousand ha with a production of 37.11 million tons in the

world during the year of 2012. India occupies top position among mango growing countries

of the world and produces 40.48% of the total world mango production.

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The major mango producing countries in the world during 2012 were Thailand (2550

thousand tons), Pakistan (1784 thousand tones), Mexico (1633 thousand tones) and Indonesia

(1314 thousand tones) respectively.

India exported 26766 tons of mangoes to WANA countries during 2010-11. The major

country market of India’s Mangoes in WANA Region during the period were UAE (22013.88

tons), Saudi Arabia (2388.63 tons), Kuwait (731.24 tons), Qatar (816.10 tons) and Bahrain

(623.69 tons) respectively.

India exported 31542.26 tons of mangoes to South Asia countries during 2011-12.

Bangladesh and Nepal were the major countries of South Asia and Imported 27599.49 tons

and 3925.75 tons of India’s mangos during the period.

EU countries import mangoes varying from 2, 50,000 tons to 3, 50,000 tons every year.

ASEAN countries are imported 64930 tons of Mangoes from world during the year 2010.

Major importers were Malaysia (23,521 tons), Singapore (16,027 tons) Vietnam (7212 tons),

Indonesia (1103), and Thailand (262 tons).

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7.Automobile Industry

Preliminary with the first chapter, the history of World’s automobile industry is mention. For

most of the history of automobiles, a car was anticipated to do little more than travel from

place to place with some degree of dependability and economy. Then the governments got

implicated in automobile design. Actually, the federal and diverse state governments started

requiring certain safety objects as the technology became realistic, such as electric lights,

safety glass and superfluous throttle return spring. But beginning with the foundation of the

Federal Motor Vehicle Safety standard in 1966 and the U.S. ecological Protection Agency in

1973, the very mission of the automobile began changing.

However automobile companies now days have most portion in market. In 1999 Ford sold

more than 7.2 million vehicles worldwide, a company record. General Motors posted record

earnings in 1999 of $8.53 per share, which nearly double the $4.32 per share earned in 1998.

Daimler Chrysler reported a net income of $5.8 billion in 1998, a 19% gain over 1998.

Worldwide sales were up, and operating profit of $11.1 billion was a 28% improvement.

Nissan Motor Co. Ltd. is building a $930 million vehicle manufacturing plant in Canton that

will encompass 2.6 million square feet and produce about 250,000 units annually.

The convergence of government policies, economy’s growth, and people’s purchasing power

has all contributed to the phenomenal growth of Indian Auto industry.

Growth in the road infrastructure increases demand for vehicles

Industrial and agricultural output increase has reflected in higher GDP and overall

growth of the economy which is about 9% in the last three years. Higher GDP means

more purchasing power.

Rise in the industrial and agricultural output indirectly helps Indian Auto industry.

Indian highways and roads have improved a lot in quality and connectivity in the last

20 years. Projects like the Golden Quadrilateral aim to make even remote areas

accessible by road.

Growth in the road infrastructure increases demand for vehicles

Industrial growth in the 70s, IT boom in the 1980s and BPO boom in the 1990s have

transformed the Indian middle class. The present generation is able to earn the same

levels of salary that their parents were earning after years of work.

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Rise in the Per capita income increases two/four wheeler sales

Joint families in towns and villages have given away to migration of the younger

generation to cities in searched of better opportunities. The new-age educated

migrants and nuclear families (many with double income couples) have a higher

purchasing power.

Urbanization changes the face of Indian auto industry

Post 1980s, a surging economy has created millions of new jobs in the private sector.

This has lead to allot of prosperity in the working class and the middle income

households.

Rising working class and middle class contribute to increased demand of automotives

Then the history of India automobile industry is described. From the policy standpoint, the

Indian automobile industry can be viewed in terms of the pre-1991 (before liberalization) and

post-1991 (after liberalization) phase. From 1888 Motors Spirit attracted a substantial import

duty. In 1919 at the end of the war, a large number of military vehicles came on the roads. In

1935 the proposals of Sir M Visvesvaraya to set up an Automobile Industry were disallowed.

1942 Hindustan Motors Ltd incorporated and their first vehicle was made in 1950. In 1944

ruler Automobiles Ltd incorporated and in 1947 their first vehicle was produced. In 1947 the

Government of Bombay conventional a scheme of Bajaj Auto to replace the cycle rickshaw

by the auto and meeting started in a couple of years under a license from Piaggio.

Manufacturing Program for the auto and scooter was submitted in 1953 to the Tariff

Commission and approved by the Government in 1959.

Only seven firms namely Hindustan Motors Limited, Automobile Products of India Limited,

Ashok Leyland Limited, Standard Motors Products of India Limited, Premier Automobiles

Limited, Mahindra & Mahindra and TELCO received support. M&M was developed jeeps.

Few more companies came up later. Government unremitting with its protectionism policies

towards the industry. In Moped segment there were 23 firms engaged in their manufacture

but the effective oligopoly of Kinetic Engineering Ltd., SCL 82 and Majestic Auto remained

intact. This segment had less collaboration.

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Opening with mid-1991 the government of India has made some radical changes in its polices

bearing on trade, foreign investment, exchange rate, industry, fiscal affairs and so on. The

Indian Automobile market in broad and Passenger Cars in particular have witnessed

liberalization. Many multinationals like Daewoo, Peugeot, General Motors, Mercedes-Benz,

Honda, Hyundai, Toyota, Mitsubishi, Suzuki, Volvo, Ford and Fiat entered the market.

The next is all about the in audience condition of Indian Automobile Industry. The

automobile industry in the motherland is one of the key sectors of the economy in terms of

the employment opportunity that it offers. The industry directly employs close to around 0.2

million communal and indirectly employs around 10 million people. The prospects of the

industry also has a attitude on the auto-component industry which is also a major sector in the

Indian economy openly employing 0.25 million people.

Several companies in the Industry were recognized sick during their life; because they have

approach under the bad Industrial Companies (Special Provisions) Act, 1985. Thus, they have

been referred to the Board of Industrial and Financial Reconstruction (BIFR). Finally 26

companies in the industry have been listed in Bombay Stock Exchange (BSE); and only 18 of

them were listed in 2001 or before that date and were not delisted of BSE or not referred to

BIFR.

Major development and speculation in Industry is also mentioned. Honda Car India, the

wholly-owned subsidiary of Honda Motor Co, plans to set up a Greenfield diesel engine

factory at its second industrial position in Rajasthan. Luxury car makers like BMW, Audi are

planning more 'Made in India' products to boost the number of offerings in the sub Rs 2.5

million (US$ 46,729) category to expand market. The luxury carmakers are planning to tap

the younger customers with lower price points. VE Commercial Vehicles Ltd (VECV), a

joint venture between Sweden's Volvo Group and household Eicher Motors, will invest Rs

1,200 crore (US$ 224.30 million) by 2014 for expanding production ability and budding new

products.

Government also helped in the development of the industry. The GoI plans to drive the

supply of vehicles mechanical by energy over the next eight years. It is predictable that there

will be a demand of 5-7 million electricity-operated vehicles by 2020. The GoI allows 100

per cent foreign direct investment (FDI) in the automotive industry through automatic route.

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Additionally, the opportunity of another fuels like hydrogen and bio fuels needs to be

promoted to ensure sustainability of the industry over the long term. In addition, the US-

based car major, Ford aims to make India its export heart and plans to sell its products in

more than 50 countries over an era of time. The company has committed a total investment of

US$ 2 billion in India so far (November 2012). The comfort car market of India is set for

increase over the medium and long term, according to Mr Philipp Von Sahr, President, BMW

Group India. The market is about 30,000 cars a year and is raising steadily, added Mr Sahr.

The Automobile Industry of India performed well in past years. The increase rate for overall

domestic sales for 2011-12 was 12.24 percent amounting to 17,376,624 vehicles. In the

month of only March 2012, domestic sales grew at a rate of 10.11 percent as compared to

March 2011. The overall money-making Vehicles section registered growth of 18.20 percent

during April-March 2012 as compared to the same period last year. While Medium & Heavy

Commercial Vehicles (M&HCVs) registered a growth of 7.94 percent, Light Commercial

Vehicles grew at 27.36 percent. In only March 2012, marketable vehicle sales registered a

growth of 14.82 percent over March 2011.

Then the succeeding chapter is about Indonesia. The advance of the automotive industry in

Indonesia was started in 1964 by assembled parts and components of automobile imported in

SKD bases. Throughout the period of 1994-1997, development of the industry has reached

standard growth of 20 per cent annually.

There is a choice of reasons to do business in Indonesia. Indonesia with 240 million of

population is the biggest economy in Southeast Asia, is one of the promising market

economies of the world, and also the member of G-20 major economies. Indonesia has

become center of structure for ASEAN market from a number of global automobile industries

(Volkswagen, Hino, Geely, Toyota, Honda, Daihatsu, etc). Indonesia is 3rd world principal

customers in motor vehicle after China and India. The auto market in Indonesia is still key

bazaar in ASEAN with the quantity of vehicle to achieve 20 million units of cars and 50

million units of motorcycles.

The global economic crisis had a major impact on Indonesia’s automotive division as

command for vehicles and motorcycles drop marking the end to an era of improvement after

the Asian crisis. In 2008 car sales stood at 603,800 and experienced a sharp drop to 486,100

in 2009 and then rebound strongly in 2010 to 764,710. Such enlargement has been due to the

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accessibility of credit coupled with strong consumer self-confidence that has once again

positive that ‘essential purchase’ is it for a motorbike or car. The motorcycle market is

subject by two brands, namely Honda and Yamaha each with around 46% market share that

are represent by PT Astra Honda Motor and PT Yamaha Motor Kencana. Motorcycle sales

stood at 7,369,249 in 2010, a 26% increase from 2009 and are expected to reach 8 million in

2011 according to the Indonesia Motorcycle Industry Association.

Developing a domestic construction base for environmentally friendly and low cost cars has

been a key goal of the government through the Ministry of Industry. A plan is being put

together that will incentivize car makers to invent automobiles for the low earnings market at

40 million RP and 80 million RP for a ‘green’ hybrid car. Such cars would be nearby made,

with 80% of mechanism being both engineered and fashioned in Indonesia. Fuel expenditure

would not exceed 22 km per litter and would meet Euro 3 emission standards with a target of

400,000 units to be formed annually. The industry confidence in rising sales of both

motorcycles and cars appears justified when looking at growth statistics in the past 2 years.

Regional and global automotive market demand.

From 2006, world automotive market demand tends to decrease; car market in 2008

was only 63.1 million units (growth trends = -1.12 % / year)

But Asia and ASEAN demands for car were increased, where in 2008 Asian was 19,4

million units (growth trends = 5.62 % / year) and ASEAN was 1,77 million units

(growth trends = 8,90 % / year)

Growth from 2006 up to 2008: Indonesia = 37.92 % ; Thailand = -5.12 % ; Malaysia

= 5.68 %.

During the last 5 years, Indonesia’s market and production for cars and Motorcycle

has grown around 7-8% each year.

• For 2010, market demand for cars in Indonesia is predicted to be around 750.000

units, while Motorcycle is predicted 7. 4 million units

• Production of European Premium Sedans was 2.824 in 2009 and predicted will be

around 5000 this year or grew 6,78% / year in the last 5 years

• Sales of European Premium Sedans in 2010 is predicted to be around 6.000 unit, or

grow around 4.84% during the last 5 years

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Indonesian automobile industry strategy

1. Indonesian Economic Condition and the Role of Manufacturing Sector

- Manufacturing Industries Sector contribute 27% to Total PDB (Product Domestic Bruto).

- In manufacturing industry: 30% contribution from Food, Beverages and Tobacco; 28%

from Transportation, Machineries and Apparatus

2. Role of Automotive Industry & Its Position in the National Industrial Policy

Development

- Future Industry’s Structure (Year 2025) Transport Equipment Industry will be one of

important pillar (Future prime /Leading Industries).

- 32 out of 365 Industries are prioritized including Automotive (Auto & Auto parts) industry.

3. Present Condition of Automotive Industries

- Motor Vehicle Projection of 2008: Sale 540.000 units; Production: 520.000 units compared

with 2007: Sales 433.341 units; Production 411.638 units

- Motor Cycle Projection of 2008: Sales 5.358.000 units; Production 5.384.000 units

compared with 2007: Sales 4.668.264 units; Production 4.722.521 units.

- Motor Vehicle Export Projection of 2008: CBU 80.000 units; CKD 140.000 sets; compared

with 2007: CBU 60.267 units; CKD 105.642 sets compared with 2006: CBU 30.974 units;

CKD 105.917 sets.

- Motor Cycle Export of 2007: 25.632 units; compared with 2006: 25.632 units.

4. Structure of Automotive Industry

Assemblers First Tiers Components Manufacturers: ±600 (Foreign majority, local minority).

Second & third tiers part and components mfg.: still limited in number and capabilities.

Supporting Industries: Still very limited in number and capabilities Raw material: (import

dependency).

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5. Role of Supporting Industry:

Enhance component industry involving local firms.

Develop technological capability (R&D, product development).

Build supporting infrastructure (Car Terminal, product testing facilities, etc.)

6. Challenge for Future Development

Effectively deal with increasing competition from foreign companies as a result of trade and

FDI liberalization through FTAs (increased competition from China and India).

Increase productivity.

Upgrade product (technical level).

Development of supporting industry.

Improvement of consumers’ evaluation (recognition).

7. Prospect and Future Development

VISION: Indonesia as a production base of automotive industry and world class component.

MISSION: Strengthen automotive industry structure through improvement of component

industry and technology infrastructure. Improvement of automotive industry competitiveness

by increasing HR capability and industry management. Mastering technology and R&D of

automotive industry.

Presently there are 19 car assemblers operating in Indonesia, producing 22 brands of

automobile. Total power of the assembling manufacturer is more than 700,000 units per year.

Since Indonesia regain investment grade position from Fitch Rating, the investments of many

sectors are increasing fast. A number of automakers together with Toyota, Honda, Daihatsu,

Mitsubishi, General Motors, Ford and Tata have raised their investment in Indonesia. Among

the factors behind Indonesia is its 240 million of population, who build up as much as 40 per

cent of the total ASEAN population. This reflects the growth opportunity of the country's

auto industry, support by the fast economic growth that drive up demand. There's more

demand than supply for automobiles in Indonesia, in particular for vehicles with engines

below 2.5-litres as well as for light trucks 10 tonnes and under. Indonesia takes the lead as the

largest automotive market in the connection of Southeast Asian Nations region, with 2011

sales growing 16.4% from like-2010 to 890,410 units, an analyst reports.

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Car sale in Indonesia grew almost 20 percent in the opening neighborhood this year

compared to the equal era in 2012, with the market split of Astra International, the country’s

main automotive distributor, reduced due to fierce rivalry from its rivals. The first-quarter

sales increase pace was higher than the 11 percent pace the market recorded in the same

period last year. Carmakers introduce new models and face-lift versions early this year, in

part in expectation of a slowing in sales due to tighter auto-financing rules, sky-scraping

production costs due to wage increases, and more expensive imported materials. For cars, the

minimum down payment was increased to 30 percent of the selling price, while the must for

motorcycles was raised to 25 percent.

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8.Petroleum Sector

Petroleum Industry is very significant in today’s world. Major products of oil refineries are

Asphalt, Liquefied Petroleum Gas, Diesel Fuel, Lubricating Oils, Fuel Oils, Paraffin Wax,

Gasoline, Tar, Jet Fuel, Petrochemicals and Kerosene. It’s helpful to global processes such as

exploration, extension, refining, transporting, etc. The main product of petroleum is fuel oil

and gasoline. Petroleum products are very helpful for chemical, Pharmaceutical and even

production Industries. The world consumes 30 billion barrels (4.8 km³) of oil per year, with

developed nations being the largest consumers. The United States consumed 25% of the oil

produced in 2007. Major developed countries, such as United States’ government provides

even subsidies for exploration of crude oil.

Oil production requires drilling a well into land or seabed, but as oil is came to be extracted

from deeper formations, investment went up, and exploration passed into the hands of

companies which could raise capital. As other gulf countries, oil seeped out of the soil in

India as well; British travelers in Assam reported such pools from 1825 onwards. A more

efficient and reliable distillation process came out of a series of inventions after 1846. The

last invention was the invention of oil fractionation in 1854 by Benjamin Silliman, a

professor of science in Yale. India did not produce refinery products till independent. In

December 1953, the Indian government entered 25:75 joint ventures with Standard Vacuum

for survey of 10,000 square miles in West Bengal. The Indian petroleum refining industry is

extremely open; trade flows are large compared to production and there is considerable

overlap between oil production and refining internationally, and to some extent in India.

The Indian petroleum industry’s imports three-quarters of the crude it refines .It exports

refinery products its net exports are roughly 10% of production. The Indian government

operates with cross-subsidies to insulate domestic from international prices; such cross-

subsidies have serious cause on the finances of the Indian companies which influence

competition amongst them. The oil companies, both public and private, are so large a part of

the economy that the cross-subsidy regime can’t be sustained in all circumstances.

The principal products of crude oil’s boiling points, are petroleum gas (20ºC), naphtha

(40ºC), petrol (70ºC), kerosene and jet fuel (120ºC), diesel (200ºC), lubricant (300ºC), and

furnace oil (370ºC); solid petroleum coke collects at the bottom after the liquid fractions are

removed.

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Gujarat is looking forward to become ‘Petro Capital’ of India. It accounts 54% of India’s

onshore crude and it has about 46% of India’s installed refining capacity and 60% of India’s

total crude oil import facility. The government has investments worth USD 5.7 in Gujarat.

Gujarat also have well established LNG terminals and distribution gas network at Dahej and

Hazira which have led to a strong local consumer base. Cooperatives such as IIFCO,

KRIBHCO, and power companies like NTPC and GEB and industrial majors such as

Reliance have led to a vibrant energy sector in Gujarat. In terms of refining capacity

Jamnagar refinery is largest in India and also biggest grassroots refinery in the world.

There are constraints faced by chemical sector in Gujarat which are same that are faced by

Indian oil and Gas industry, as the sector is regulated by government itself. As there is a

strong global inter linkage, any international event in the sector directly affects the Indian Oil

and gas sector.

The first commercial production began in 1885 and most of its resources remained untapped

until Indonesia gained its independence in 1945. Three groups emerged in the first half of

20th

century under foreign ownership: Shell/BPM, STANVAC, and Caltex.

State consumption is decrease because of land, water and natural resources are controlled by

the State and utilized the greatest benefit and welfare of its people. in Indonesia's economic

oil and gas played an instrumental role because the oil production is second to the china.

The petrochemical industry in Indonesia and globally is continuously fluctuated due to

financial crisis and ensuing global recession. peak in mid-2008, the oil price misshapen by

more than 70%. With market confidence returning recovered in 2010 crude prices

approximately US$90 per barrel. Along with this recent volatility, oil and gas sector decrease

in 2009 but it is only a fraction of the global spend despite generally geological prospects

favorable.

Indonesia holds oil reserves of 4.2 billion barrels and ranks twenty first among world oil

producers approximately 1.2% of world. Indonesia becoming a net oil importer in late 2004

due to declining oil production and increased consumption along with high oil prices, natural

maturation of producing oil fields led the Government to withdraw from the Organisation of

Petroleum Exporting Countries (“OPEC”).

currently most oil production and exploration is carried out in the basins of Western

Indonesia. The Government hopes to encourage increased exploration for that they

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encouragement of 3D seismic surveys which focused on developing oil reserves in eastern

Indonesia’s frontier and deep-sea areas.

If we take about law and regulations of crude oil in Indonesia, the Indonesian government is

highly encouraging their units for extraction of the nation’s oil and gas resource in a manner

that produces get a maximum benefit and income for the state. For their maximum

implementation their government has made the Indonesian Production Sharing Contract

(PSC) in 1966. In this PSC contact foreign players can explore, develop and market resources

under the general supervision of BPMIGAS. The ultimate goal for developing the PSC is

based on ‘production sharing’ concept. The investor does not share the profits of venture, but

shares the production. The PSC has evolved through a number of generations in line with the

Indonesian Government's belief the importance of assuring a reasonable ROR to investors in

the face of an ever-changing business environment.

Now let’s move in-depth to Indonesian crude oil. Sumatra accounts for more than half of

Indonesia's oil production, coming from Riau province, in West and Central Sumatra, from

Aceh province in the North, which also oversees the administration of Natural islands, and

from South Sumatra. The growth in Indonesian oil production was dramatic leading up

to its first peak in 1977, more than 1.6 million barrels per day. After that the product was

fall due to less advance technology and other required skills and through this of new fields

reversed the trend and back up to peak volume again in 1995. Since then, production has

declined steadily, due to diminishing yields from the nation’s mature oil fields.

Production fell below 1.0 million barrels per day in 2007.

As of January 2012, Indonesia has 3.9 billion barrels of proven oil reserves. The most

significant recent discovery with the potential to counteract some of Indonesia's production

dropping is the Cepu Block of East and Central Java, which contains 3 significant fields–

Banyu Urip, Jambaran, and Cendana. Moreover, in August 2011, “ExxonMobil” announced

a new oil discovery at an exploration well in the block.

Aging infrastructure and fields suggest that in the short-term, the country will continue to

struggle to meet production targets. The BPMigas as well as Indonesian government

introduced policies aimed at increasing investment in the country's upstream sector, in

particular by creating investment incentives and improving the flexibility of the PSC bidding

process. However, Western market analysts still believes the upstream investment

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environment to be risky, and licensing rounds from the past few years have been negligible.

The government only managed to award 21 of the 43 blocks offered in 2009, and 10 out of 36

blocks offered in 2011.

Indonesia's refinery output primarily serves the growing domestic market. Indonesia has a

refinery capacity is only 1 million bbl per day, according to OGJ. 8 refineries owned by

PT pertamina make up the country's refinery capacity, the majority of which is located on

Java and Sumatra Islands. The 3 largest refineries are ‘Cilacap’ in Central Java, ‘Balikpapan’

in East Kalimantan and ‘Bolongan’ in West Java which production statistics are 348,000 bbl

per day, 260,000 bbl per day and 125,000 bbl per day respectively.

A strong population growth, economy & continued state subsidies for fuels worked together

to push domestic oil demand beyond supply. Consumption of refined products grew at a

fairly steady 4.5 percent annual growth rate between 1991 and 2005. BPMigas reported

that fuel subsidies distort the efficient allocation of energy and resources and hinder

investment in energy infrastructure. To meet the demand of country, Indonesia normally

imports crude oil from Saudi Arabia, Malaysia, Nigeria, and some of other countries that is

Australia, Azerbaijan, Iran, Qatar and from other few countries. In 2011, Indonesian has

imported 27% from Arabia, 13% from Malaysia, 11% from Nigeria, 7% from Australia and

remaining other percents from Azerbaijan, Iran, Qatar and few other countries.

Indonesia has no international oil pipelines and few domestic ones. The country exports some

fuel oil, particularly to post-Fukushima Japan, as a power-generation fuel. Most petroleum

trade is in the form of imports, chiefly motor gasoline and diesel for Indonesia's transport

sector. In 2011, Indonesia imported around 460 thousand bbl/d of crude oil. The other

reason for ups and downs of petroleum sector in Indonesian is as following.

As per IMF, Indonesia sustained relatively strong economic and financial performance

throughout the global recession, with an average GDP growth rate of just under 6 % p. a for

the past 5 years. A combination of market reforms, healthy growth, & most important is

stable government encouraged rapid investment, mainly in the commodity sector. Fitch &

Moody's Ratings both upgraded Indonesia's Sovereign Risk Rating to "investment grade"

status between late 2011 and early 2012.

Indonesian jet fuel demand and supply reasons: The overall major reason found for jet

fual is fluctuation in airlines industry. The Gulf Coast jet fuel differential has fallen 2.45

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cents on the week. The demand is continuously increase of jet fuel as it is the alternative

source for diesel for aviation industry. The overall production of jet fuel is decline due to the

global crude complex.

The price of jet fuel is increases because it contains liquid which have valuable price then the

purely gas contain fuel.

The single largest entity impacting the world's oil supplies is the Organization of the

Petroleum Exporting Countries (OPEC), a consortium of 13 countries: Algeria, Angola,

Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab

Emirates and Venezuela.

In 2001 the production decreases because the USA increase the price of the fuel and gases.

In 2005 the production was increase because the market up and the prices were changed as

per the days. At the same time the production were decreased in 2006 because OPEC reduces

the prices of fuel and oil.

The inflation is also a major reason for the prices and production of fuel that impacted on

global economy.

Indian jet fuel demand and supply reasons: In Indian scenario the production of the fuel is

continuously increases as the passing of years. The main reason is, we can say that India is

developing country and it is less affected by the inflation.

The other reasons are increasing technological development that decreases the cost of the

fuel. The increasing demand of air line industry is also other reason for high production of jet

fuel and oil industry.

The taxation policy for the fuel industry also impacts the demand for the production and

consumption of fuel in India. It is facilitating the production of the jet fuel.

The consumption of kerosene is continuously increase in india because the purchase of

kerosene comes in public sector. In india the kerosene consumption is larger in rural areas

and also in households. The price of kerosene is also major factor of high consumption in

india.

Production and consumption is continuously fluctuating as per the demand and market. The

main reason for consumption is use of kerosene in daily cooking and for lighting purpose in

below poverty areas as it is available in cheaper prices.

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The consumption of kerosene is high to moderate in Indonesia because a much smaller

portion of kerosene was used as lighting fuel by households, fishermen and small industries.

From government’s perspective, the kerosene subsidy had a very big role in the state budget.

From 2001-2011, despite the parliamentary imposed quota on the volume of usage.

The major factor for the increase in kerosene consumption was increasing in petroleum

prices. The huge subsidy provided a strong incentive for establishing the kerosene

conversion program to gradually reduce the petroleum subsidy.

when the program began, in 2007 and 2008 despite the decrease in volume the subsidy still

increased because of the increasing international oil price.

Liquefied Petroleum Gas is a flammable gas which is used for several purposes all over the

world. LPG is used in chemical industry, also used as a fuel in vehicles and its main use lies

as the cooking gas. There are various companies in India which are in the business of

manufacturing the LPG gas in India. Some of the LPG manufacturing companies are Bharat

Petroleum Corporation Limited (BPCL), GAIL (India) Ltd, Hindustan Petroleum Corporation

Limited, Indian Oil, ONGC, etc.

It was found that Indonesia used to export LPG to companies like Japan till the year 2005.

However, since then exports have decreased as domestic consumption have increase and

Indonesia has imported same amount of LPG as it have exported in the year 2008.

The main key driver of change in LPG sector was due to successful campaign held by

Indonesia government to convert household users from kerosene to LPG for cooking. The

campaign was successful as because of it there was a rise of LPG demand from 1.8 MT in

2008 to 3 MT in 2009. Still the demand is increasing for LPG and the production is not at par

with demand so Indonesia is importing LPG from gulf countries.

No trade relation is possible in LPG sector between Indonesia and India. The reason being

India and Indonesia both are majorly importing LPG from gulf countries and both do not

produce enough LPG so that it can satisfy their own national demand. Their production is

very low as compared to demand of LPG so they both are importing LPG from gulf

countries. So there can be no trade relation between India and Indonesia:

The UPA government effected one of the steepest fuel price hikes ever by raising the prices

of petrol by Rs 4 a litre and diesel by Rs 2 on Thursday.

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This means, apart from a hike in cost of transportation, the prices of vegetables and food

items will go up. The hike will have an adverse impact on the monthly budget of middle-class

people. The truckers and transporters promptly announced they would pass on the burden by

raising freight rates.

India Inc welcomed the government's decision to raise fuel prices, saying the move

would help oil companies reduce their huge subsidy burden.

Harshpati Singhania, president of the Federation of Indian Chamber of Commerce and

Industry (FICCI), said the decision to raise fuel prices would have "major positive

implication" for fiscal deficit management

“The use of vegetable oils for engine fuels may seem insignificant today. But such oils

may in the course of time become as important as petroleum and the coal tar products

of present time."

Biofuels offer an attractive alternative to fossil fuels, but a consistent scientific framework is

needed to ensure policies that maximize the positive and minimize the negative aspects of

biofuels. Numerous countries are moving towards the partial and gradual replacement of

fossil fuels with biofuels, mainly ethanol and biodiesel. The increased move towards biofuels

is spurred by global political, economical and environmental events, especially rising crude

oil prices. Current sky touching hike in oil prices from US$60 and US$70/barrel in 2006 to

current (July 2008) price of US$ 140 a barrel has threatened the economic stability of oil-

dependent countries and of the world at large. The International Energy Agency projected

that biofuels would be competitive with petroleum at petroleum prices of between US$60 and

US$100 a barrel. That point has been crossed, and markets seem to be internalizing

expectations of unstable and perhaps rising future oil prices. The competitiveness of biofuels,

however, depends heavily on the relative prices of oil and of agricultural feedstock for

biofuels. Agricultural commodity prices increasing less than prices of other raw materials,

biofuels have become competitive with petroleum in many developing countries’ farm

systems, even with today’s technologies.

.

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9.Metal Industry

India Basic Metals Industry

India has lot of natural resources in form of minerals like copper, chromate, iron ore,

bauxite, manganese and gold. As a result, India basic metals industry is one of the

many booming industries of the India.

India basic metals industry experienced big changes in the 90s with the onset of the

liberalization and open market policies of the India. The India basic metals industry is

growing up with the innovative different kind of techniques as it is helping the

product market to enlarge. Open hearth, oxygen furnaces, blast furnaces, electric arc

furnaces, etc. these all are the famous method used for the production.

The major players in the India basic metals industry:

Tata Steel

IISCO

Comcast

Electro herm steel division

Jindal

Acme Impel

Electro steel castings

Sage Metals Limited

Deccan Gold Mines

JSW steel

Hindalco Industries Ltd

S C Shah Enterprises

India Brass

Madras Aluminum Company

Angles Aluminum Corporation

Steel Authority of India Limited (SAIL)

Sachet Metals Limited

Anna Aluminum

Swastika Traders

Tirupati Steel Traders

The Indian Stainless Steel Development Association (ISSDA)

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Sri Venkateshwara Metals

Tao

The Indian Institute of Metals

Indonesia Steel Industry:

Indonesia is one of the largest producers of tin. Because of lack of raw materials to produce

steel, Indonesia’s steel consumption growth is forecast to slow to 5 percent this year, to about

9 million tons, from 32.5 percent in 2012. steel industry of Indonesia’s imports 70 percent of

the scrap material for its raw material. tin production of the Indonesia also declined in 2010

both production of concentrate and metal. the main factor was Unfavorable climate causing

for the decline. The production fell when the price of that commodity rose sharply. Metal

mining companies in Indonesia consists of local and foreign companies. Some of the

companies have started production, but other are still in the process of construction and

explorations.

Supply of basic materials in Indonesia

At a view point of the supply the country's steel industry has faced shortage in supplies of

basic materials as a result of global crisis. The shortage in supplies has resulted in a price hike

of the basic material and the downstream products.

Indonesia already produces slabs but the production is not enough to meet the domestic

requirement. The only producer produced only 1.014 million tons of slabs in 2011 or 54.76%

of its installed capacity. The production fell short of the domestic requirement of 1.8 million

tons per year. Imports, therefore, per year requirement around 7, 00,000 tons.

Steel Industry of Indonesia

Steel market in Indonesia is approximately to raise 7.9% on-year in 2012 to 10.25 million

tons. If the prices of steel reach US$ 690-US$ 720 per tons in the world market, the market

value in Indonesia is expected to reach US$ 7.38 billion or Rp 66.4 trillion in 2012.

The steel market value of the Indonesia in 2012 is forecast to grow 4.2% to rs. 63.7 trillion.

Growing demand is expected from the construction and manufacturing sector with economic

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growth predicted at 6.5% this year. The construction sector is approximately expanded to

7.3% and the manufacturing industry is predicted to grow 6.5% in future.

Metal company of the Indonesia:

Company company

Pt. Padangag Rojaya

Solarus Energy

Pt. Indoferro

Cv. Energy Drill

Enps

Kolon Global Corp

Pt Subur Djaja Teguh

Pt. South East Asia Pipe Industries

Pt Wahana 88 Nusantara

Borneo Coal & Minerals Indonesia

Pt Puncak Sinergy Perkasa (Psp)

Pt Jatim Taman Steel Mfg

Pt. Ispat Indo

Bakrie Pipe Industries

Pt. Khrisna Bali International Cargo

Pt. Gasuma Corporindo

Cv. Marzuk Prima Kharisma

Riduan Goh

Ompa Consulting Ltd

Pt. Indonesia Metal And Mineral

Tekpak Indonesia Pt

Trindo Pratama Pt

Indonesia Natural Resources - Indonares

Buwi Group

Pt Genma Indonesia

Ozley Chemicals Pty Ltd

Hannes International Trade Corporation

Pt. Tambang Batu Bara Nusantara

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Metal company of India:

Company company

Khyati Metals

Fieldman Control System

Mapple Stainless Processing Pvt. Ltd

Stokerconcast.co

R R Steel Industries

Supreme Rolls & Shears Pvt Ltd

Lpg Spheres

Preet Lathe

Lpg Filliing Station

Bharat Tanks And Vessels

Shanthi International

Innovative Manufacturers (India) - Swiss

Type Turning On Sliding Head Automats

Amco Metal, Mumbai

7Solutions In

Agnee Transmissions (I)pvt ltd Gravita India Ltd

Shree Laxmi Engineering Works

Azoth Import Export Enterprises

Lemon Castings Inc

Welltex Industries

Goldy Industries India

San Stampings Pvt. Ltd

Technolink Inc

A. N. Pal Chowdhury Engg Enteprises

Shivam Cast Products

Vishvkarma Machine Tools

Welding Specialities (I) Pvt. Ltd

Castalloys

Mipalloy

Jasch Industries Limited

Lancer Laser Tech Pvt Ltd

Hind Metal Works

Metal Udyog

Aar Pee Industries

Raymond Tubes

Siddhapura Machine Tools

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Vimal Alloys Private Limited

Godson Auto Pvt. Ltd

Supreme Metals

Italimpianti Orafi Spa

Cassa Exim Ltd

Steel Rolling Mill India

Steel Rolling Mill India

Tata Steel

Export policy of Indonesia:

Indonesia Imposes New Taxes on Metal Exports

Indonesia is world’s largest steel producer country. New Indonesian taxes lied on metals and

curbs on the shipment of raw minerals may exports of the materials to China, highlighting

concerns over the effects of the policy to the Indonesian economy. The rules are likely to

affect less to the Indonesia’s metal exports but are a precursor to a total ban on exports of raw

materials.

Growth in Indonesia's Steel Usage Set for Slowdown

Indonesia’s steel consumption growth is approximately to slow to 5 percent this year, to

about 9 million tons, from 32.5 percent in 2011 because of lack of raw materials to produce

steel.

The forecast was much lower than his earlier estimate of 10 million tons.

Steel consumption grew by 15 percent in 2010 and by 32.5 percent last year, to 8.6 million

tons. The growth is on par with the country’s growth of economy.

Indonesia plans unprocessed metal export ban in 2014

Indonesia will ban exports of some unprocessed metals from 2014 and could revoke the

export licenses of firms that violate the ban, the energy ministry said in a regulation that was

posted on its website on Friday but later disappeared. Minerals covered by the ban, which has

been widely discussed, include copper, gold, silver, nickel, tin, bauxite and zinc.

The regulation would improve domestic metal production capacity, boost supplies of refined

products to the domestic market and increase government revenue.

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Indonesia to review unprocessed metal ore export rules

Indonesia will review its rules on the export of unprocessed metal ores after a Supreme Court

ruling upheld a challenge to a government ban on such shipments.

Indonesia may make additional investments in its bauxite-refining industry, but it will

encounter difficulties because the major market for its bauxite exports, China, has

substantially decreased its imports of the refined product alumina.

Import metal policy of Indonesia

The total imports of salable steel, pig iron and scrap during the last five years and value

thereof are as under :-

category 2007-08 2008-09 2009-10 2010-11

Qty value Qty Value Qty value Qty value

Saleable

Steel

1885 2712 1501 2260 1667 2697 1667 2697

Pig Iron 2.00 2.03 2.00 2.36 1.00 1.48 2.6 3.14

Steel Scrap 1512 945 1980 1206 1280 967 1470 1497

0

500

1000

1500

2000

2500

3000

2007-08 2008-09 2009-10 2010-11

Saleable steel

pig iron

steel scrap

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Producers and production capacity of metal in Indonesia

The steel maker company named PT Krakatau Steel of the Indonesia has not

increased its production capacity. There was no any new investment in this sector. Increase

the production of steel however, has been recorded in the country's production capacity for

hot rolled coil (HRC/Plate) and cold rolled coil (CRC/Sheet) in 2007. The country's

production capacity for HRC/Plate rose up to 2,300,000 tons annually from 2,200,000

tons. The increase was contributed by the company of KS and Gunung Raja Paksi. The

CRC/Sheet industry has also increased the capacity. Currently the country's production

capacity for that steel material has reached up to 1,680,000 tons annually, from 1,610,000

tons annually from the Indonesian steel sector.

1. Slab industry

PT Krakatau Steel is The only producer of slab in Indonesia .PT KS has two units of slab

production facility SSP-1 which is using the technology of MAN GHH from Germany and

SSP-2 which is using the technology of Voest Alpine from Austria. Total slab production

capacity of Krakatau steel is 1,850,000 tons annually.

2. HRC/P (Hot Rolled Coil/Plate)

PT Krakatau Steel, PT Gunung Raja Paksi Jayapari Steel and Gunawan Dianjaya

Steel these three companies produce Hrplates in Indonesia.

The country's largest producer of HRC/plate PT Krakatau Steel is the country's largest

producer of HRC/plate PT, with the production capacity of 1,950,000 tons of HRC annually,

up from 1,850,000 tons annually at earlier. Its HR Plate production capacity is 150,000 tons

annually.

3. CRC/S (Cold Rolled Coil/Sheet)

Indonesia has 5 companies producing Cold rolled sheet, formerly the five companies

are PT Krakatau Steel, PT Essar Dhanajaya, PT Intan Nasional Steel, PT Little Giants, PT

Baja Berlian Utama, and all with a total production capacity of 1.61 million tons a year, The

factories are located in a number of areas in Banten, West Java, Central Java .

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4. Forging Ahead: Indonesia's Dynamic Metal and Steel Industry

Indometal is the ideal platform for the metal business in Indonesia with other

country.indometal 2014 will be the right venue to meet key industry players and decision-

makers, share new concepts and ideas, establish new relationships and gain the right business

leads in Indonesia and the region. Indometal Building on the global expertise of Messe

Düsseldorf's internationally renowned trade fairs GIFA, METEC, THERMPROCESS, and

NEWCAST, indometal 2014 is the trade fair for the metal and steel industry for the region

that focuses on the synergistic interrelations between the different country of foundry

technology, casting products, metallurgy and thermo process technology.

Thus these four are the major product of the steel sector of the Indonesia. India can tie

with the 4 major products of the Indonesia’s steel sector for earning more and enhancing the

development of the Indian steel sector as well as enhancing the profitability with liberal rules

and regulation and indometal is very useful constitution for the any other country doing

business with Indonesia.

Trade Action Against Indian Exports By Indonesia

The WTO (world trade organization) has reported a significant decline in anti-dumping

measures in the period of 1st January – 30th June, 2004. There has been no trade action

against Indian export of steel items at that time. However, some of the trade actions that

continue against Indian steel export are as given below:

In September, 1997 Indonesia entered anti-dumping duty against imports of Hot

Rolled Coils and Plates from various countries including India also. In February, 2003

the Ministry of Industry and Trade of the Republic of Indonesia constitution Sunset

Review had recommended termination of the anti-dumping measures on HR Coil and

Plates from India.

Government of India approached the Dispute Settlement Body of WTO (world trade

organization) against the decision of Indonesian DOC to impose heavy ADD and

CVD on import of Cut to Length Plates (CTL) from the SAIL. The Indonesian Panel

set up by the Dispute Settlement Body of WTO concluded that the India had acted

inconsistently with sales price information submitted by SAIL without a legally

sufficient justification and making its determination regarding the dumping margin for

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SAIL entirely on the basis of ‘facts of the steel sector available’. However, the Panel

did not agree with India’s claim targeting the relevant Indonesia statutory provision

governing the use of facts available which had discuss earlier.

On 7th February, 2003 the Indonesia issued a notice of determination under Section

129 of the Uruguay Round Agreement Act purporting to implement the ruling and

regulatory frame work and recommendations of the DSB in that dispute. Under the

revised determination the anti-dumping duty has been reduced to 42.39% from the

earlier.

In February, 2003, the Indonesia Department of Commerce investigated that anti-

dumping and anti-subsidy investigation against Indian Prestressed Concrete Steel

Wire Strands. Indonesia Department of Commerce announced the final duties in

December, 2003, imposed an AD Margin of 102.07% against TATA SSL, 83.65%

against other Indian exporters and Countervailing Duty of 62.92% against all the

Indian steel exporter company.

The Department of Foreign Trade (DFT) of Indonesia initiated anti-dumping

investigations against imports of HR Coils from specially India in July, 2002 and

imposed preliminary anti-dumping duty on Indian exports. In July, 2003, the DFT,

however, issued a notification fixing a ‘reduced quota and waived the anti-dumping

duty for the next 5 years.

Liberalization Of The Indonesian Steel Sector

1. The important policy measures of the Indonesia, which have been taken for the growth and

development of the Indonesia iron and steel sector are as under: In the new industrial policy

announced in July, 2009, the provision of compulsory licensing under the act, 1951. iron and

steel industry among others, was removed from the list of industries reserved for the public

sector and also exempted from the provisions of compulsory licensing under the Industries

(Development and Regulation) Act, 1951.

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2. With effect from the 24.5.2010, steel and iron industry of the Indonesia was included in the

list of ‘high priority’ industries for automatic approval for foreign equity investment up to

51%. This limit has since been increased up to 100%.

3. from January,2006 Pricing and distribution of steel were deregulated. At the same time, it

was ensured that priority continued to be accorded for meeting the requirements of small

scale industries of the steel sector, exporters of engineering goods and North Eastern Region,

besides strategic sectors such as Defense and Railways also.

4. The duty of Import of the Indonesia on capital goods was reduced from 55% to 25%. Raw

materials Duties for steel production were reduced from earlier. These measures reduced the

capital costs and production costs of steel plants and steel company.

5. in January 2007 Freight equalization scheme was withdrawn. However, with the coming

up of new steel plants in different parts of the different country, iron and steel materials are

freely available in the domestic market of the country.

SEZ (special economic zone) in India and Indonesia

Establishment of Special Economic Zones in Indonesia for metal sector

In year 2007The establishment of Special Economic Zones (SEZs) in Indonesia is the

act of the bill No. 25 Investments as part of the efforts to accelerate economic

development in certain areas and sector of Indonesia that play a strategic role in the

national economy in different country.

The bill is a form of the government commitment to trade liberalizes, as agreed with

the WTO (world trade organization).

Trade without barriers is part of the WTO general principles to achieve world trade

liberalization in the country (both regional and bilateral) by:

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Establishment of Special Economic Zones in India

India is the first country in Asia to establish an Export Processing Zone (EPZ) in

Kandla, Gujarat in 1975. All SEZs in India are governed by the Special Economic

Zones (SEZs) Act, 2005 and the SEZ Rules 2009. Which guide the development and

promotion of SEZs in India. The office of the Development Commissioner of SEZs is

under the Ministry of Commerce of the India. SEZ units are entitled to fiscal benefits

and concessions as laid down in the SEZ Act, 2005.

Trade Link between India & Indonesia

Indonesia's anti-dumping investigation agency has asked their government to continue

with the anti-dumping duty on two Indian steel companies — which are Essar and JSW. The

agency says withdrawal of the duty can trigger further troubles for the domestic steel

companies already struggling to retain in their market share.

The recommendation by committee Anti Dumping Indonesia (KADI) comes after

extensive investigation on a complaint by Indonesia's top steel company PT Krakatau. The

Indonesian commerce ministry is expected to take a call soon. The KADI report which was

forwarded by India's ambassador to Indonesia to the steel ministry highlights how the agency

is wary of possible withdrawal of the duty on hot-rolled coils.

Indonesia Surabaya, duties on steel product imports from India Indonesia, April 21 (Jiji

Press)—with Indian trade minister

Motegi also told the Indonesian trade minister that India is concerned about import

tariffs on automobiles and hoping for an improvement in the situation of the sector. Gita was

"thinking very positively about concerns and proposals" at the meeting, Motegi said.

Separately, Motegi met with South Korean trade minister Yoon Sang Jick and

reaffirmed their countries' cooperation in concluding a high-level trilateral free steel trade

agreement also involving China and realizing a wider-area FTA in Asia.

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Six of the most important types of licenses and permits are described below which are

required for trading in Indonesia

1. The construction permit (IMB)

It is one of the most complicated licenses since it combines building function,

land use, road access, and for safety.

2. Business registration (TDP)

It provides information on the business to the government. Businesses can

register only after all other physical and sectoral licenses are obtained.

3. The industrial registration (TDI)

It is the major technical license for industrial activities of small- and medium-

sized enterprises.

4. The trading license (SIUP)

It is the main technical license for trading activities, but is also required by any

manufacturer who buys or sells on the domestic market.

5. The nuisance permit (HO)

It requires approval by neighbours of the business after assessing the

disturbance caused by business activities, such as traffic or noise.

6. The operating license (IUT)

It represents the primary operating license needed for a manufacturing firm.

For service providers, the operating license is usually issued by the line ministry

responsible for the service sector.

Thus these are six licenses which are required for doing business with the Indonesia.

It’s also requiring for the trading with the Indonesia’s constitution these six license are

compulsory for export and import of the product.