Internation Marketing for Frijj - Case Study Example

Introduction: International marketing is a very vast subject and the ability to rightly choose the potential markets is a very risky decision. As the International Marketing Manager for Frijj, my aim is to work on finding a new international market where the company can launch itself and find the best potential market. This paper will deal with firstly providing a brief overview of the product and the current markets that it is available in. Following this a brief discussion of target market will be provided. This will include details like the demographics of the country and a brief overview of the main age groups that are present in the country. This will be followed by the entry strategy that the company can use for the market and then viability of the idea of moving into the market. The next section will provide a brief overview of the product and the current market that it operates in. Product Overview: Frijj is a subsidiary of Dairy Crest. The company is a manufacturer of milkshakes that are mainly sold in the United Kingdom. The milkshakes are mainly in four main flavours which include Strawberry, chocolate, Banana and Chocolate Fudge Brownie. The company believes in introducing a new range and variety even if it is a limited edition with innovative ideas, artwork, Characters from Simpsons as well. The company has been able to include several different flavours like Toffee caramel, custard, caramel, raspberry doughnut, Jaffa Cake, Banoffee Pie and even mint choc chips. The product is available in two bottle sizes which include 500 ml as well as one litre. The company presently only mainly caters to the UK markets and although it does have a high potential in other markets like the South East Asian Markets. The choice of markets and international countries will be discussed below. Choice of International Countries: The main focus for the products to be taken international includes South East Asian countries. The main countries that fall into the South East Asian markets which extend over almost 4,100,000 square kilometers and mainly include countries ten countries and several cities and towns. The countries that are included in the South East Asian countries include: Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, and Vietnam. Chosen Country: The chosen country for this paper is Indonesia. Indonesian markets are a high potential market for the product. The Republic of Indonesia is in Southeast Asia and located between Indian Ocean and Pacific Ocean. The coordinates of this country are 5 00 S, 115 00 E. The total land area is 1,919,440 sq. km and the total coast line is 54, 41 km. Indonesia is an archipelago country which islands are 17,508 islands and around 6,000 islands are inhibited. The most popular Indonesia island in the world is Bali where is located in east Indonesia. The territory boundaries of Indonesia are strategic which are bordered directly with five countries. In the north, Indonesia territory is bordered with Malaysia. While, in the east and in the south, Indonesia shares borders with Papua New Guinea and East Timor. Meanwhile, Indonesia also shares its borders with Singapore in around the west of Indonesia. The large islands have central mountain ranges rising from more or less extensive lowlands and coastal plains. There are over 100 volcanoes which has made frequent earthquakes. Indonesia has at least 150 active volcanoes. As equator line location lies on Indonesia, Indonesia has only two seasons which are summer or dry and rainy or monsoonal wet. Regularly, rainy season is occurred between November and March. Meanwhile, dry season is in between April and October. Throughout the year, averagely Indonesia has a rainfall and humidity with from 1,780–3,175 millimeters (70–125 in) and up to 6,100 millimeters (240 in) and humidity is about 80 %. The average temperature is 25–33 °C. This weather is relatively normal and it will bring a potential profit for our product due to long summer season (7 months). Until now, Indonesia government never restricts Indonesian for having children more than one. This allowance prompts the increased of family members in Indonesia, though in recent years the trend is getting slow. However, the size of Indonesian nuclear family is relatively bigger than other advanced and development countries. The table below is describing the development of family members in Indonesia that indicated by child birth per woman: Year Total fertility rate Rank Percent Change Date of Information 2003 2.5 109 2003 est. 2004 2.44 111 -2.40 % 2004 est. 2005 2.44 112 0.00 % 2005 est. 2006 2.4 113 -1.64 % 2006 est. 2007 2.38 109 -0.83 % 2007 est. 2008 2.34 111 -1.68 % 2008 est. Source: CIA World Fact Book According to the table, the average of children numbers in one family is around 2.4 – 2.5 in past 6 years. Generally Indonesian children are still live in their parents until their ages 20s -30s or until they are married. This condition encourages a good and strong relationship between family members. The situation is generally different in comparison with other western countries whose children are more independently. Moreover, ethics and strict religion’s rules about family manners dominantly affect people’s culture. Meanwhile, the role of female and male is changing in recent years. Females are more having right to give their voices in society and they want to be deemed equal in society. These entire elements put family as an essential and crucial factor for Indonesia people. This culture can bring positive affects for our business as common parents would give the best for their children and their average family size is large. Our product is one of the best and with the culture being careful about the health of the children the demand for a healthy milkshake will always have high demand. Overview of Country: The Indonesian market is one which has very low levels of immigrations and a total of fifty percent of the market is urbanized. This section aims at getting a better understanding of the market to enable the company make stronger and more focused marketing plans for the country. Also gaining a strong understanding of the country will enable the companies to analyse the kind of products that will be apt for the country and that will be well received by the majority within the country. The country has a strong difference that is seen between the upper class and the lower classes and the middle class is one which is a blooming market with high chances of adapting to the changing world. Indonesian population is primarily Muslim. Aesthetics therefore, tend to reflect this in mostly architecture, and the relative suppression of other forms of visual art, considered sacrilegious in Islam. The market of Indonesia is extremely large with a population as vast as 240,271, 255 (CIA, 2009). A market which is so vast would allow the company to have a larger target market in this case as much as male 79, 549, 569/ female 78,918,321. This is relatively a very large market and thus it can be well targeted and the milkshakes can be introduced into these markets. However, it is a known fact that milkshakes are a general attraction for all. The target market hence can be divided into the following age groups: 3 – 25 – The company can target the people within this age group as children tend to be very inclined towards the flavoured milk and all kinds of milkshakes and the will be a major part of all the marketing strategies. 25 – 45 – This set of people would mainly be the parents who buy their children the milkshakes and they need to be a part of the target market as the major traffic of children can be focused by targeting the parents. 45 – 65 – This group although mainly include the grandparents and a little older generation also need to be targeted to help increase the traffic. Considering the political systems of the country, it is essential to gain a few important perspectives on the country. After Asia economy crisis occurred in 1998, the political system becomes more democracy instead of authoritarian which Suharto had ruled before 1998. This political change yielded the first direct presidential election in 2004. In 2009, there are many political parties and few of them get majorities votes from Indonesia. They are Partai Demokrat (PD), Partai Demokrasi Indonesia Perjuangan (PDIP), Golkar, Partai Keadilan Sejahtera (PKS). This direct election allowing everyone from minimum age of 17 could directly vote their president. After that, political condition in Indonesia is relatively more stable than the past. Indonesia is thriving Democracy with significant regional autonomy in 33 provinces. Democracy political system influences life of many Indonesian. Indonesian people now have freedom to speech, vote, receive and give any information and opinion. This condition also makes that people and their country easily accept any influences from other countries’ information and culture. In fact, the situation boosted the growth of television and newspaper media in Indonesia which have been increasing significantly since in 2000. The legal system of Indonesia is based on democratic and common-law concepts, familiar to residents of the UK and US. The system culminates in the Supreme Court, or Mahkamah Agung, which “is the final court of appeal but does not have the power of judicial review (justices are appointed by the president from a list of candidates selected by the legislature)” (Indonesia, 2009). In recent years, Indonesia Government is struggling to eradicate bribery in its legal institution. This bribery problem gets in a culture in government body. In order to overcome this matter, Susilo Bambang Yudhoyono, the incumbent president, established KPK (Corruption eradication commission). Since then, there is now a fairer and clean legal system. Indonesia is a common law country and tends to be a democratic country. Indonesia is a member of ADB, APEC, APT, ARF, ASEAN, BIS, CP, EAS, FAO, G-15, G-20, G-77, IAEA, IBRD, ICAO, ICC, ICRM, IDA, IDB, IFAD, IFC, IFRCS, IHO, ILO, IMF, IMO, IMSO, Interpol, IOC, IOM (observer), IPU, ISO, ITSO, ITU, ITUC, and MIGA (Indonesia, 2009). Indonesia operates on a modified free-market economy, with limited censorship. It is also essential to gain a perspective on the social classes of the people in this country. There is a relatively large gap between the upper and lower classes in Indonesia, with the middle class being relatively nascent. There are various clubs and organizations which are arranged around lines of interest, for various enthusiasts in Indonesia, with limited government control. Business Customs in Indonesia: Indonesia business environment is tough and competitive as the government begins to open and liberalize its domestic market for foreign investors. Even though, many foreign companies find hard to start their business in Indonesia because of prolix country’s bureaucracy which is time consuming. Therefore, there is common term of “under-table money” where companies are giving lot of amount of money to bureaucratic people in order to accomplish their project and business. In addition, networking and relationship with popular and government people in Indonesia are very important. Sometimes, they are more important than company’s investment .With these factors, investors usually are able to find and use business opportunities in Indonesia. Moreover, many Indonesian still believe their old cultures and beliefs. These elements can be obstacles for modern businesses. For instance, local companies find hard to build their factories in rural area as not because lands are expensive but because of that lands belong to public ancestors and even government is hard to persuade them. Indonesia is considered a developed or first-world nation. However, this is not to say that living conditions vary greatly internally. Economics Statistics and Activity: Gross Domestic Product (GDP): Total GDP is $915.9 billion in 2008 and 863.1 billion in 2007. It means the development of this country is significant because of the government role and the better economic system within this country. The GDP is the most important indicator of economy. The growth of GDP will encourage people to spend their money not only for utilities but also leisure. Rate of growth: The rate of GDP growth is tremendously from 5.5 % in 2006 to 6.45 in 2007 but in 2008 decreased is about 6.1 % because of economic down or recession for global financial as a result this country has been affected. However, GDP growth leads Indonesia to top three countries in the world that records positive GDP’ growth in global recession. Personal income per capita: According to new that income per capita is about USD 780, 56 per month. Average family income: The average family income in the past few years has rose of all segment of population is about $1,946 in 2007 from less than $1,000 five years and this years the average income increase about $2,300--$2,400. Family income really affects the business. Family is one of target’s company in positioning its product. Distribution of wealth: We divide in to 4 categories first is lower class that received per month USD 800 and for middle class is USD 800-3.200 and Upper middle is 3.200-10.000 USD and upper class is about above 10.000 (Kristianipos, 2006). Proportion of the population in each class: Indonesia has a lot of gap in term of distribution wealth especially in particular location such as Jakarta, Medan etc; we will explain a class consumer spends more than Rp. 3.45 million Every month compared to B class spend less than Rp.3 million every Month. Is the distribution distorted? The number of income in Indonesia is distorted to the family and also for foreign residents in this country and Indonesian people who work overseas. Because of Indonesia have many resources and opportunities so this distribution sometimes can be distorted in many areas in Indonesia especially in central district such as Java Island and Bali Island. This is one of the reasons why the business is located in Bali. Principle industries: The proportion of the GDP contributes to each industry is as discussed in the section: Agriculture is about 13.5 %, industry is about 45.6 % and services are about 40.8 %. The company focuses on Government’ supports in area of industry and services. These areas can affect foreign visitors coming to Indonesia. Ratio of publicly owned industries: According to Investment regulation Indonesia from a presidential decree 2000, there is term of PMA (Penanaman Modal Asing) means foreign investment. It explains A PMA Company can be a join-venture company between foreign and domestic investors. Foreign investors are permitted to have 100% share of company. From this condition, Frijj Indonesia will be co- owned by U.K and Indonesian independent organization. Foreign investment: Opportunities for foreign investors are many. Foreign investment is big issues in Indonesia especially in travel and tourism industry. Recent year the president of Indonesia implement new programmes such as “Visit Indonesia”. It means entertainment business also has better chance like we will do in Bali. In addition, Indonesia government has launched many investment promotions and proposal to other countries. Moreover, New Investment law aims to reduce time in doing business from 151 days to 30 days. Then, the government will give investment incentives and guarantee for all imported goods. Which industries: The increase of foreign investment in Indonesia rose significantly especially in some industry such as travel and tourism, franchise industry rose by double digit according to latest news in Indonesia, as a result the this particular industry can be good business or profitable business in Indonesia for this period. Diet and nutrition: Indonesian food has a lot of variety. Different regions have different customs. “In West Java - where Sundanese live most - they like to eat fresh vegetables and sambal” (Authentic, 2009). Meat centers on fish, and vegetables are locally grown or imported. A typical meal consists of fish and vegetables, served with traditional drinks. Individual tastes tend to vary greatly. Malnutrition rates are low, at under 2% (Indonesia, 2009). Foods grown or raised in the country include chicken and fowl, fish, and fruits and vegetables. Recreation, sports, and other leisure activities Surfing remains very popular in Indonesia. Betting on horse races is another popular leisure activity. Types of activity are as varied as individuals, and defy categorization. The average Indonesian spends under 5% of their annual income on these activities (Indonesia, 2009). Health care: Healthcare was revamped following the 2006 tsunami. The life expectancy is relative to other developed nations, at around seventy years. “Midwives form an integral part of the health care system in Indonesia. In fact 80 to 90 % of maternal and newborn care was instituted by midwives, both in the private and public arena” (Indonesia, 2006). Trade restriction: Tariff Restrictions: Indonesia ranks 50th out of 120 countries in the Trade Tariff Restrictiveness index with average 4.5 % in 2006.Meanwhile, MFN (Tariff level for GATT/WTO members including U.S) tariff is 9.5 % also in the same year. In fact, Indonesia is seeking to eliminate all tariffs by 2020 to achieve Bogor free-trade. The highest tariff is charged on alcoholic beverages and motor vehicles. However, after that year Indonesia has been trying to reduce number of tariff barriers. Now Indonesia is subject to import restriction at 141 lines. Indonesia certainly restricts sanitary products and foods that if affected. After all, there is no any restriction except for Israel’s products. In addition, Indonesia does not implement tariff quotes. List of tariff lines is presented in appendix 1. Import taxes: Indonesia has applied 10% value-add tax (VAT) on the sale of all domestic and imported goods. Products like alcohol beverages, explosives and certain dangerous weapon are subjected to import licensing restriction. The government does have the power to control entertainment products such as videos, movies, exhibition and arts which are must be reviewed by censor board. Indonesia can give licenses for any products except alcoholic beverages; nitrocellulose; precursors; optical discs; rice; white crystal sugar; consumption salt; and unworked diamonds. Labor force and Unemployment and Inflation rates There are more 100 million labor forces in Indonesia. Jobless rate is decreasing from 2005. Jobless rate is 8.1 % in 2008 comparing around 10 % in 2006 (Badan Pusat Statistik Indonesia). Inflation rates also decreased from 11.2 % in 2006 to 8.4 % in 2008. Moreover, The incumbent president Susilo Bambang Yudhoyono said that the Indonesia’s inflation could reach 4 % in just two years (2009-2010). Development in Science and Technology The technology development in Indonesia is mostly affected by the improvement of technology from advanced countries like Japan, Korea and United States. Therefore, technology and science application in Indonesia are often producing high cost for Indonesian people. Moreover, low quality of education and limited brilliant scientists in Indonesia also prompted low technology development. Technology investment can be indicated by proportion of GDP invested in R&D. However Investment technology in Indonesia was gradually falling from many years. In 1970s, Indonesia invested 0.4 % of GDP to R&D and in 2004, Investment down to 0.1 % of GDP. Since 2000, Indonesia failed to improve its position at bottom rank comparing to other ASEAN countries in term of acquiring science knowledge. Government Participation in the Marketplace The government of the country has been noted to be very involved in the markets and the marketplace. Although there is a high level of corruption and bribery that takes place inside the country, the government has tried its best to help improve the economic systems of the country. The government takes a keen interest in the businesses and it has been noted that in the current times, the government has been taking a lot of steps and measures to introduce new investment plans and proposals for companies to help and assist them to invest into the country. Also the government in the current period is also allowing a high number of international investments in the country and thus they take all steps and measures to be more inviting to the international companies. Also since the country is one with a very strong religion and very strict norms that need to be followed, the government plays a strong role in the entertainment sector as well. Campaign Proposition: Frijj has a major possibility to make it big in the Indonesian Markets. The company needs to however focus on more new media marketing to reach out to as many people as possible and to develop a brand image in the country. The first step however for the company is to develop an interactive website. Frijj can follow all the rules and regulations of the country in terms of the food regulations. The company will focus on a niche market i.e. children and the aim is to market the goods to the children. Based on the study of the markets it is essential that the company focuses on all the aspects of the business and the marketing plan involves not only the traditional marketing mix but also a mix of new media marketing as well. Frijj has a number of different options to choose from. These can be used either by alone or even as a combination and will prove to be very beneficial for the company. 1. Email Marketing: Firstly, Email marketing, is one of the most effective and latest modes of marketing. This form of marketing has proven to be successful in almost every industry (Baggot & Sales, 2007). It has however been noted that people are willing to provide their addresses and telephone numbers, but when it comes to e-mail; they are not as equally open-minded. According to a number of experts, it is said that email marketing will definitely become a part of the marketing mix for a number of industries however it is unlikely that it could replace direct marketing. The best strategy would be to buy a targeted email list from an Email list vendor (Baggot & Sales, 2007). The list can be based on age group. A personalized mail campaign can be sent to the list and the response rate can be observed. The database requires constant cleanup and updating as required (Mullen, Daniels, & Gilmour , 2008). 2. Video Marketing: Secondly, Frijj also has the option to use the option of Video marketing. This is a form of marketing which is known to be most beneficial in the case of the industry, as the videos can be of the process used to make the milkshakes or a very colourful advert that attracts children. Pod Casting is another new strong form of marketing. This is one of latest new media marketing processes and it is a series of digital media files which normally include both audio and videos and these are normally provided for downloads (Ratcliffe & Mack, 2007). However the downloading in the case of pod cast is different from the normal downloads and this mainly done via web syndication. This is a part of the video marketing itself. The use of ‘YouTube’ and other similar sites has become a major mode of achieving newer customers. 3. Pay-Per-Click Campaigns: Also another very fast growing and very beneficial mode of marketing is to run a pay per click campaign. Here the company can place their advertisements in other website, on search engines, and advertising networks. These are commonly referred to as Sponsored ads by the search networks. There are a number of different providers for pay per click, like Google Ad words, Yahoo Search Marketing and many more (Mordkovich, 2006). Frijj can utilise this to drive traffic to their website and gain customers and higher revenues. This will prove to be beneficial to the company as Frijj would only require paying if the customers click through and come to their own website. The benefits of this mode of advertisement are very high as the cost is very low and generates immediate traffic to the site. The biggest advantage of running this campaign is the quality of visits or the targeted traffic that it can generate. This is a great and effective method to generate immediate quality traffic and also to create awareness. 5. Blogs and content sites: This is a recently new and a growing form of new media marketing. Here companies use blogs to share information about the company. Also this can be used as a strong mode of positive advertising for the company. Here the company has a chance to make the website as informative as well as interactive as they would like. Also user interactivity is one of the strongest and most essential parts of a website which provide a mode to reach out to a larger audience and create an impact on the audience. This can be used to provide games, quizzes and many more options which could attract the attention of the prospective customers following which the customers can be drawn towards the website. This is one of the most effective modes of driving traffic to the company website (Wartime & Fenwick, 2008). Recommendations, Justifications and Conclusions: Frijj has a very high possibility of entering into the markets in Indonesia. The two suggested entry methods for the company into the country include a) Strategic Alliances and b) Overseas Manufacture or International Sales Subsidiary. Strategic Alliances are non equity based agreements. Here a company builds different relationship with other companies to market their product internationally. These might even be competitors like in the case of Toyota Ayago, which is marketed as Citroën and a Peugeot. On the other hand the Overseas Manufacture or International Sales Subsidiary is where the company plans to start their own manufacturing plant in the international country and the company invests into plant, machinery, and also the labour from the international markets. This can also be referred to as a Foreign Direct Investment. Based on the above mentioned possible entry modes for Frijj, I would suggest that the company uses the Overseas Manufacture or International Sales Subsidiary. This will prove to be very beneficial for the company as it will gain a local exposure, and the company can also manufacture several more flavors and variations based on the local market needs and tastes. Although the risk is high at the starting levels, it is essential to understand that staying in the markets will allow the company to get a fair idea of the products desired by the local markets which in turn will allow more and innovative products to be developed and sold. These new changed products can also be introduced into the UK as special edition drinks. Based on the study of the country and the deep analysis of the economic and socio – culture of the country, it is clear that Frijj has a high possibility to grow and develop in the markets. Each of the above mentioned modes and techniques of marketing have different levels of affects that they would create on the revenues and the response earned from the customers. Hence it is important to evaluate each of the methods and then create a mix of the best options which can complement each other and work together to help increase the revenues Frijj (Weber, 2009). 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Southest Asia The Long Road Ahead (2nd edition). Singapore: World Scientific. Appendix Appendix 1: History of Indonesia 425 The Bhudism philosophy entered Indonesia in Sumatra island and Melayu kingdoms began to establish in Indonesia 670 The first Hindu temple was built. Sriwijaya was the greatest kingdom at that time 686 Malayo-Polynesian language was carved in stone tablets 770 King Vishnu started to build Borobudur (an amazing Bhudist temple in Java island) and finished at 825 910 Another great temple, Prambanan, was built. 1017 King of India kingdom attacked Sriwijaya 1292 Marco Polo visited Sumatra and Java 1297 Muslim kingdoms have emerged with their first ruler, Sultan Malek Saleh 1509 Portuguese started to trade in Indonesia 1527 Competition between Portuguese and Spanish traders in Maluku was started. It was ended with Maluku belong to Portuguese and Philippine to Spain in 1529 1529 The Dutch and England visited Indonesia 1602 Vereenigde Oost-Indische Compagnie (VOC), Dutch trade company, started to monopoly trades in Indonesia 1870-1942 Netherlands governed Indonesia 1914-1918 World War I 1925 New constitution was established 1935 Communist took over Perhimpunan Indonesia 1938 Netherlands government rejects the autonomy petition for Indonesia 1939-1945 World War II. In 1940, Japanese troops entered Indonesia and Allied force followed in 1944 1945 The United States dropped atomic bomb in Nagasaki and Hiroshima. This weakened The Japanese authority in Indonesia 17 August 1945 Indonesia has its independence with Sukarno as the first Indonesian president 1956 Constitutional union between Indonesia and Netherland is dissolved 1957-1959 President Sukarno dismantled parliamentary democracy 1963 Pres. Sukarno proclaimed “To Hell with your aid” and all but broke relations with the US and the Soviet Union. 1964 Singapore limited imports from Netherlands due to Indonesian aggression. 1965 Six generals were killed in the tragedy that lead to President Sukarno gave his presidential seat to Suharto in 1967 1970 President Sukarno died in Jakarta 1973 Bulog, The State Logistics Boards, is designated to control the food market due to crisis in rice. In this year, mobs killed and raped Chinese races while also destroyed their businesses 1975 The Portuguese colonial rule collapsed and East Timor proclaimed independence, but 10 days later it was invaded by Indonesia. The UN in 1999 declared that Indonesia killed up to 180,000 East Timorese through massacres, torture and starvation during its 24-year occupation. 1977 In Irian Jaya Indonesian forces put down an uprising. Human rights groups estimated that some tens of thousands of highlanders were killed while the government said fewer than 900 deaths resulted. 1980 Again mobs killed and raped Chinese races while also destroyed their businesses 1985 There was an unstable political situation which lead to bomb in several area such as US, Japanese and Canadian embassies in Jakarta 1989-1999 Aceh was designated as military zone 1998 Crisis economy in Asia stimulated riots in 8 major areas in Indonesia. A curfew was imposed on the town. Riots burned 21 stores owned by the ethnic Chinese, who dominate most of the businesses. As a result, President Suharto war forced to step down due to corruption allegation. He was replaced by BJ. Habibie. 2000 President Wahid replaced BJ. Habibie who acted as temporary replacement for the former president 2001 President Wahid declared a state of emergency after the military refused to carry out his orders and parliament met to remove him. The parliament ousted Wahid with a 591 to 0 vote and swore in Megawati Sukarnoputri as the country’s 5th president 2004 Susilo Bambang Yudhoyono replaced Megawati Sukarnoputri. During his 5 years period from 2004-2008, Indonesia has begun to heal from the economy crisis. It shows a positive GDP growth even in the 2009 global economy crisis 2009 There will be a presidential election. Two of three candidates promote protectionism while the other one promotes neo-liberalism. The result could be determining the economy situation in Indonesia. Appendix 2: Age structure Age sex Number of People Population 0-14 years Male 34,337, 341 28.1 % Female 33,162,207 15-64 years Male 79,549,569 66% Female 78,918,321 65 years and over Male 6,335,208 6 % female 7,968,876 (Source: CIA, 2009) Appendix 3 GDP rate Year GDP-real growth rate (%) 2000 0 2001 4.8 2002 3.3 2003 3.5 2004 4.1 2005 4.9 2006 5.6 2007 5.5 2008 6.1 (Source: Indexmundi.com) Appendix 4 The Indonesian MFN and CEPT preferential tariff, 2003-06 (Per cent) 2003 2004 2005 2006   MFN CEPT MFN CEPT MFN CEPT MFN CEPT Total 7.2 2.8 9.9 3.4 9.9 3.4 9.5 2.7 By WTO definition Agricultural products 8.6 6.8 12.1 10.2 12.2 10.2 11.8 7.6 Live animals and products thereof 4.1 2.3 4.1 1.9 4.3 1.9 4.5 0.2 Dairy products 5.0 0.0 5.0 0.0 5.0 0.0 5.6 0.0 Coffee and tea, cocoa, sugar, etc. 7.7 5.5 11.0 9.3 11.1 9.4 11.3 7.5 Cut flowers and plants 5.1 3.2 5.7 3.1 6.4 3.1 6.4 0.0 Fruit and vegetables 5.0 3.8 5.0 3.8 5.1 3.8 5.2 0.5 Grains 8.2 7.9 17.4 17.3 17.7 17.3 17.7 16.3 Oils seeds, fats, oil and their products 4.1 2.8 4.8 2.7 4.8 2.7 4.7 0.3 Beverages and spirits 52.2 50.3 96.4 94.7 96.4 94.7 87.4 84.1 Tobacco 10.3 2.2 10.5 3.9 10.5 3.9 10.5 3.8 Other agricultural products, n.e.s. 3.7 2.2 4.1 2.6 4.1 2.6 4.3 1.6 Non-agricultural products (excl. petroleum) 7.0 2.2 9.6 2.6 9.6 2.6 9.2 2.1 Fish and fishery products 5.0 4.2 5.1 4.1 5.3 4.4 5.4 0.5 Mineral products, precious stones, etc. 5.3 3.2 5.6 3.3 6.4 3.3 6.7 3.0 Metals 8.1 2.0 9.8 2.5 9.1 2.0 9.1 2.1 Chemicals and photographic supplies 5.6 2.4 6.7 2.7 6.7 2.7 6.6 2.4 Leather, rubber, footwear, travel goods 7.5 3.9 8.7 4.1 8.7 4.1 10.3 3.9 Wood, pulp, paper and furniture 3.7 1.8 4.3 2.3 4.3 2.3 4.2 2.2 Textiles and clothing 10.5 1.5 10.8 2.0 10.8 2.0 10.9 1.6 Transport equipment 18.4 2.7 28.7 4.1 28.7 4.1 25.6 4.1 Non-electric machinery 2.4 0.8 2.7 0.9 2.7 0.9 2.7 0.6 Electric machinery 6.0 2.7 6.4 2.9 6.4 2.9 5.6 1.4 Non-agricultural products, n.e.s. 7.4 2.7 7.2 2.3 7.2 2.3 7.0 1.4 Petroleum 5.0 2.0 5.0 1.8 5.0 1.8 1.6 0.5 By sectora Agriculture and fisheries 4.1 3.1 4.0 3.0 4.2 3.1 4.2 0.5 Mining 3.9 2.3 4.0 2.3 4.0 2.3 4.0 1.8 Manufacturing 7.5 2.8 10.3 3.5 10.2 3.5 9.8 2.8 excluding food processing 7.2 2.1 9.8 2.6 9.8 2.6 9.4 2.1 By stage of processing First stage of processing 4.2 2.9 4.6 3.3 4.7 3.3 4.7 0.7 Semi-processed products 6.2 2.0 7.3 2.4 7.0 2.5 7.0 2.0 Fully processed products 8.6 3.3 11.6 3.8 11.7 3.8 11.1 3.1 Appendix 5 Investment negative list, 2006 No. Business activity I. ABSOLUTELY CLOSED FOR INVESTMENT (DOMESTIC AND FOREIGN) Agriculture 1. Cultivation and processing of marijuana and the like Marine and fishery 2. Collection/utilization of sponge Industrial and trading 3. Chemicals harmful to the environment, e.g. penta chlorophenol, dichloro dipenhul trichloro ethane (DDT), dieldrin, chlordane, carbon tetra chloride, chloro fluoro carbon (CFC), methyl bromide, methyl chloroform, halon, etc. 4. Chemicals stipulated in schedule 1 of the Chemical Weapon Convention – sarin, soman, tabun, mustard, levisite, ricine, saxitoxin 5. Weapons and related components 6. Cyclamate and saccharine 7. Alcoholic drinks e.g. liquor, wine and beer (drinks containing malt) 8. Casino and gambling facilities Communication 9. Air traffic system providers (ATS providers), ship certification and classification inspections 10. Management and operation of radio frequency spectrum and satellite orbit monitoring stations Mining and energy 11. Mining of radioactive minerals II. CLOSED TO ANY FOREIGN INVESTMENT (CLOSED TO INVESTMENT IN WHICH A SHARE IS OWNED BY FOREIGN CITIZEN AND/OR FOREIGN BUSINESS ENTITIES) Forestry and plantation 12. Germ plasm cultivation 13. Concession for natural forests 14. Contractors in the field of lumbering Communication 15. Taxi/bus transportation services 16. Small-scale sailing Table II.4 (cont'd) Trading 17. Trading and trading support services, except large-scale retailers (malls, supermarkets, department stores, shopping centres), wholesale trading (distributors/wholesalers, exporters, and importers), exhibition/convention service providers, quality certification service providers, market research service providers, warehousing services outside seaports, and after-sale service Information 18. Radio and television broadcasting, services providers, radio and closed-circuit television broadcasting services, and multimedia and printed media 19. Motion picture production (film production, film technical services, export and import film business, film distributors and operation of motion picture theatres III. OPEN TO INVESTMENT UNDER THE CONDITION OF A JOINT VENTURE BETWEEN FOREIGN AND DOMESTIC INVESTORS 20. Building and operation of seaports 21. Electricity production, transmission and distribution 22. Shipping 23. Processing and provision of potable water for public use 24. Medical services, including the building and operation of hospitals, medical check-ups, clinical laboratories, mental rehabilitation, public health maintenance security, rent of medical equipment, assistance services for health aid and evacuation of patients under emergency conditions, hospital management services, and services for testing, maintenance and repair of medical equipment 25. Telecommunications 26. Regular/non-regular commercial airliners IV. OPEN TO INVESTMENT UNDER CERTAIN CONDITIONS Marine and fishery sector 27. Cultivation of freshwater fish (a) open to foreign investment for freshwater turtles, nila gift, sidat, kodok lembu, freshwater giant shrimps and thillapya sp (b) in cooperation with small-scale fishery business 28. Fishing of demersal fish (big fish, grouper and other sea fish, except ZEEI areas of the Malacca Strait and Arafura Sea Industrial 29. Wood pulp (a) raw material obtained from imported chips or quarantine of raw material supplied from industrial timber estates (HTI) (b) other than sulphonating and/or chlorination (C 12) 30. Pulp made from cellulose fibres or other materials, except sulphonating and/or chlorination (C 12) 31. Chloro alkali, except using mercury 32. Finished/semi-finished goods made from mangrove wood – raw material coming from mangrove cultivation 33. Money printing – operational licences from BOTASUPAL-BAKIN and approval from Bank Indonesia required 34. Special printing – postal stamps, duty stamps, Bank Indonesia negotiable papers, passports and stamped postal matter; operational licences needed from BOTASUPAL-BAKIN 35. Milk processing (powder and condensed sweetened condensed milk (processing not repackaging) 36. Plywood and rotary veneer (only for the Irian Jaya Province (Papua) 37. Sawn timber (a) only for the Irian Jaya province (Papua) (b) or outside, only using logs from non-natural forests 38. Ethyl alcohol – technical grade, being only used as raw materials and auxiliary materials of other industries 39. Raw materials for explosives (ammonium nitrate) – only in cooperation with business entities, which have security devices and recommended by the Ministry of Defence 40. Explosives and components for industrial (commercial) use (a) only in cooperation with business entities recommended by the Ministry of Defence, (b) only manufacturing; storage and distribution are provided by companies appointed by the Government 41. Electricity planning and supervision consulting services, open to foreign investment provided capacities above (a) 50MW for hydro power plant (PLTA), (b) 55MW for steam power plants (PLTU), (c) 55MW for geothermal power plants (PLTP), (d) main electrical relay stations and transmission networks with voltage above 500 KV 42. Electricity equipment construction, maintenance, installation services, development of technology supporting the supply of electricity and testing of electricity installations – open to foreign investment providing that main electrical relay stations and transmission networks have capacity above 500 KV 43. Petroleum and natural gas drilling services – open to foreign investment provided (a) only for offshore drilling, (b) especially outside the eastern Indonesian region in cooperation with national partners of business field 44. Power plants in locations outside Java, Bali, and Madura Trading 45. Restaurants – open to foreign investment if located in tourism areas/zones and/or integrated with hotels 46. Game services – open to foreign investment if located in tourism areas/zones and/or integrated with hotels Source: BKPM, based on Presidential Decree No. 96/2000, jo.118/2000. Viewed at: http://www.bkpm.go.id/ en/dni.php?mode=baca&t=Negative%20Investment%20List Read More