Economic Liberalization in Indonesia - Assignment Example

Custom clearance procedures and computerized documentation requirements have facilitated imports and exports although registration of importers has remained a major requirement. The Customs Directorate of the Ministry of Finance has also implemented a post-entry audit system, which relies primarily on verification and auditing rather than inspection to monitor compliance. A paperless electronic data interchange system that links importers, banks, and customs was also introduced and is slowly being adopted (Trade Regulations and Standards).

Import tariff has also been considerably reduced and it now ranges from 5% to 30% with a major exception applied to all imported distilled spirits which have a 170% duty applied to it. A 10%VAT is applied to import goods, and luxury goods are subjected to a luxury tax ranging from 20% to 35%. Several free foreign trade zones have been opened which makes it more convenient for importers and exporters to do trading business. Prohibited imports are explicitly stated in their policies, emphasizing the non-acceptance of labels in Chinese languages even Indonesian dialects.

As for administrative fees applied to import goods, the additional fee is required for licensing, storages and warehouses, while anti-dumping, countervailing and excise duties are collected if applicable. An import license approved by the Minister of Industry and Trade is a must before any product importation is allowed. The main documents required at the import level are Commercial Invoice, Certificate of Origin and the Bill of Lading. They have shipping restrictions wherein all import and export products must be carried out on Indonesian vessels.

The local currency is rupiah but the American Dollar is most recommended for currency exchange control. Indonesia also supports the agreement on subsidies and countervailing measures. According to the Central Bureau of Statistics in Jakarta, Indonesia, promising areas for investment/joint ventures/services include oil and gas, manpower and engineering consultancy services for the petroleum industry, mining, plantation products, IT education and services, ports and railways, telecommunications, pharmaceuticals, and education (both School and University).

The above-mentioned trading policies are encouraging signs that the Indonesian government is truly supporting its trading business as it is beneficial to their own economic growth. However, there are many factors to be put into consideration such as too much leeway given too soon may give justified cause to the growing opposition against liberal trade among the locals which could cause instability and unpredictability, however minimal, to future transactions. Indonesia also needs to work on a lot of its policies to make it a haven for trading business.

Bureaucratic red tape still exists, as is common to many countries, and this could cause hassles in the application of import licensing. It is apparent that they are striving for transparency which is crucial in a business relationship but this, too, needs to be worked at.