EU-INDONESIA BUSINESS DIALOGUE st and 22 nd of October 2013, Jakarta

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1 EU-INDONESIA BUSINESS DIALOGUE st and 22 nd of October 2013, Jakarta Recommendations for Increased Trade and Investment between Indonesia and the European Union Organized by:

2 made possible with the support of: Active 23 October 2013 This paper do not reflect any official governments position.

3 TABLE OF CONTENTS Introduction... 3 EIBD Roundtable of Indonesian and European Businesses... 5 Sectors 1. Automotive Food and Beverages Infrastructure Pharmaceuticals Textile and Footwear Cross Sector Topics 1. Intellectual Property Rights Sustainability... 81

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5 3 INTRODUCTION Indonesia and the European Union have a strong relationship. Companies from the European Union have invested over US$ 130 billion in Indonesia and employ more than 1 million Indonesians. Indonesia is one of the European Union s most important suppliers of a large number of essential commodities. In the last ten years, Indonesia s exports to the European Union have doubled to US$ 22 billion. The economies of Indonesia and the European Union are a perfect fit: the range of goods traded is largely complementary. This makes the relationship between the two economies of strategic importance to both. At the same time though, the potential of trade and investment between Indonesia and the European Union is far from being fully utilised. European technologies in areas such as energy, transportation and agriculture are available to increase the competitiveness of the Indonesian economy, and European buyers appreciate the quality of a wide range of Indonesian products including food, garments, interior decoration and electronics. Regulatory and social developments in the European Union and Indonesia however, may create impediments to trade and investment. The Indonesian Chamber of Commerce and Industry (KADIN Indonesia) and the joint European Chambers of Commerce in Indonesia (BritCham, Ekonid, EuroCham, IFCCI and INA) are conducting the EU-Indonesia Business Dialogue (EIBD), in order to identify these impediments and to jointly recommend solutions. These recommendations are summarised in this booklet, and they provide a guide to the actions to be taken in five important sectors and in a number of cross-sector issues. Governments, but also the business communities in the European Union and in Indonesia, have a shared responsibility to remove impediments to trade and investment, for the benefit of the people in Indonesia and in Europe. The EIBD identifies win-win situations for private businesses, leading to overall sustainable economic growth and creation of employment. Let us all work together to achieve this.

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7 5 EIBD 2013 Roundtable of Indonesian and European Businesses October 21, 2013 Recommendations The EIBD Roundtable is a dialogue between Indonesian and European business leaders to formulate possible solutions and joint recommendations on issues that affect trade and investment between the European Union (EU) and Indonesia. Reiterating the report and the recommendations of the Indonesia-EU Vision Group (2011) the EIBD Roundtable recognizes the strategic importance of the EU-Indonesian economic and political relationship for both sides and the fact that both sides stand to win significantly from a strengthened relationship. The particular challenges of building supply chains in a very large emerging economy like Indonesia should be reflected in the EU s capacity building programs and also those of the EU Member States. The EIBD Roundtable 2013 has formulated the following recommendations: 1. Barriers to Trade a. International product and labeling standards ensure that products and services are safe, reliable and of good quality. However, national Indonesian standards are not always consistent with internationally accepted standards; this problem exists in the Indonesian automotive sector, but also in the food sector in both the Indonesian and the European market. Indonesian companies are also struggling with the REACH regulations and excessive audits for exporting to EU. b. Indonesian SMEs only have limited access to European market information, requirements and export techniques. c. As a middle income country Indonesia does not qualify for the lowest European tariff categories. This not only affects the textile industry but also exporters of palm oil and agro-products. Other Asian countries enjoy a more favorable market access, esp. once their bilateral agreements with the EU are concluded. RECOMMENDATIONS Indonesia should aim at adapting and implementing standards that comply with international standards. The EU and the Members States should continue to support this, with adequate support from the Indonesian government. These capacity development programs shall be focused and

8 6 concentrated on the private sector, taking into consideration the specific weaknesses of Indonesian industries. Interruption of trade and investment should be minimized by applying the principles of selfdeclaration and mutual recognition of testing as much as possible. The Government of Indonesia should develop a mid-term Export Promotion Strategy for Indonesian SMEs. The design of this strategy shall also rely on the input from the private sectors and liaise with the export development programs offered by EU Member states. Based on an ambitious, but also realistic scope of the topics to be covered, European and Indonesian business leaders called for the governments of Indonesia and the EU to swiftly start negotiations for a CEPA. 2. Investment Regulations Indonesia and the EU countries welcome foreign investment, but apply restrictions. The two business communities believe that investment restrictions are counterproductive to stimulating economic growth, job creation and employment and that, where necessary, partnerships between international and Indonesian companies should be stimulated, not regulated. A more favorable investment climate in Indonesia will also help to secure a larger share of Europe s current investments to ASEAN. RECOMMENDATIONS The Negative Investment List (DNI) should regularly be evaluated, taking into consideration general economic and social requirements of Indonesia, not only purely sectoral interests. Changes to business regulations shall not overrule or thwart the DNI. The hierarchy of laws has to be respected; the intra-governmental dialogue shall be improved. 3. Rule of Law & Intellectual Property Rights (IPR) There is no shortage of laws and regulations in Indonesia that meet international standards. The Indonesian Government and Parliament are working on law reform and have made many improvements in recent years. Despite the lack of or delayed introduction of implementing regulations, the Indonesian legal system offers sufficient protection for the legitimate interests of businesses. A major problem constitutes the lack of enforcement of laws and regulations, by executive as well as legislative institutions. This is true for registering and protecting the different claims associated to IPR (Patents, Trademarks, Geographical Indications (GIs), Copyrights, Industry Design and Trade Secrets). This is equally true for other fields of law, such as property rights and general legal claims. RECOMMENDATIONS IPR enforcement in Indonesia should be strengthened, especially protection on trade secrets and piracy. An easier registration process, a better law enforcement of IPR and stronger regulations on trade secrets in Indonesia are important. The existing EU capacity development programs can be instrumental. As GIs are a crucial instrument for protection of Indonesian and EU product origin names both governments are requested to significantly expand the number of Indonesian GIs. The process of law reform shall be continued with high priority, to ensure a competitive legal business environment. The further streamlining of court procedures and the improvement of the enforceability and sanctity of contracts are important elements of this reform process.

9 12. Ministry of Industry and Trade, Ministry of Tourism and Creative Economy, Ministry of Cooperatives and SMEs, Universities, Associations and Profession organisations, to hold intensive socialisation and education activities regarding Industrial Design, Patents, Trademark and Copyright; 13. Government to Government cooperation and support to simplify the registration process for Indonesian GI in Europe and vice versa. CROSS SECTOR SUSTAINABILITY

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11 83 CROSS SECTOR SUSTAINABILITY Indonesia s growing waste problem and its increasing need for clean energy can be addressed simultaneously with the use of European technologies in generating energy from waste. 1. Background Waste products in solid, liquid and gas forms from human production and consumption activities are a source of environmental contamination that may harm the economy in urban areas. The problems in handling the waste occur because of an imbalance between the production of waste and the capacity in the management of waste. Waste volumes continue to increase in line with the growth of the population, changes in living standards and the dynamics of community activities. Waste that is not maintained well can be the cause of health problems, causing diseases, flooding, pollution of soil, water and air and a reduced value of the environment. Waste management is an effort to reduce waste volumes or change its shape into something useful, such as by way of composting, compacting, crushing, recycling or generating energy. New technologies developed in Europe and Indonesia offer many new possibilities that need to be utilised to reduce the waste-related problems and generate value. 2. Business Opportunities Based on Law no 18 of 2008, supported with Government Regulation no 81 of 2012, it is the joint responsibility of the people in the place where waste is generated and the government to limit and manage their waste. Principles of waste management should be to subsequently reduce the amount of waste generated, to re-use waste products as much as possible, to recycle materials from waste, to produce derived products from waste and finally to generate energy from the residual waste by incineration or gasification Waste Gathering & Transporting The market size of waste management continues to increase in line with the growth of the population and human activity. Private parties can set up a co=operation with the government or the manager of residential areas and other areas to become the partner for waste management in those areas. Private parties can help to renew the equipment that is used for waste gathering, put

12 84 management expertise in place to increase the quality and productivity of the workers that will lead to better results for the society and also for the worker. For the revenues, commonly the policy that is applied is Polluter Pays, where people pay a monthly fee to the manager of waste management in certain area. This creates the possibility to increase the price in exchange for a better service. To add to the revenue stream, this waste management can also be integrated with other business, such as recycling product, deriving new products from waste, such as fuel and sanitation services. In some communities, Bank Sampah or Waste Banks have been set up. These banks function as waste collection and sorting centres, and citizens can maintain an account in which they can save the amount of money they receive from recycled waste Derived products and Energy from Waste Un-reusable and un-recyclable waste can be used to produce derived products, such as compost, building materials or fuel, and it can be used to generate energy through incineration or gasification in landfills. Municipal waste-based power plants are power plants that use municipal solid waste for producing renewable energy that is converted into electrical energy. This can be done either by gasification or incineration. 3. Several problems that need to be addressed for this business are: 1. Finding a location and the required land area to build waste to energy power plants and the land acquisition process can be a difficult process; 2. It is sometimes unclear who needs to provide the supporting infrastructure, such as access roads; 3. Competition for waste might appear after a first plant is built; 4. Financing of waste-to-energy plants may be challenging, partly because the financial market for emission rights has largely disappeared. The market for voluntary emission rights still offers relatively attractive prices, but this also usually requires top environmental standards. Based on Law no 18 of 2008 that regulates waste management, and also from Presidential Regulation (Perpres) No.13 of 2010, municipal waste-based power plants areprojects under the Government s responsibility that can be given to a private entity using a Public-Private Partnership (PPP) scheme. With this type of cooperation, the government will support and provide the needs for the private party to build the municipal waste-based power plant. For example for the municipal waste-based power plant project in Batam, the government will support and provide payment for waste management services, waste supply, electricity purchase, licenses and permits and an area with road access to build the waste-based power plant. To ensure sufficient supply of waste, the government should guarantee the supply of waste. The government should also encourage the private sector to get involved in the operation of waste management especially in waste gathering and transportation to ensure the waste is managed well and delivered in time. Several public and private financing institutions are interested in co-financing PPP projects in waste-toenergy. However, special effort is needed to bring these institutions together.

13 85 RECOMMENDATIONS Several recommendations can be made to the government and related parties to accommodate and expedite the cooperation in waste management: 1. Waste Collection Government should improve the waste collection system. Relatively simple modernisations of waste bins, waste trucks, logistics and temporary waste collection sites can already contribute to higher waste collection rates and less pollution. Stimulating community involvement, such supporting the establishment of waste banks, can help to improve the collection and recycling rates. Co-operation with private sector will make many of these improvements easier and cheaper. 2. Derived products and Energy from Waste In order to maximise the production of derived products and energy from waste, a number of recommendations can be made: The local government needs to guarantee waste supply and all necessary licenses and permits for a minimum period of years; A bankable feasibility study needs to be provided, addressing not only the technical, but also the legal and economic aspects of the project; A Power Purchasing Agreement needs to be in place, which the local government should be willing to help establish with PLN; Financiers often prefer to see landfill management and WTE-management in one hand in order to avoid mutual interference. They also often prefer a management company with a good combination of local and international expertise; Full financing by the private sector is unrealistic. The local governments will need to invest in supporting infrastructure and may need to contribute to a bankable feasibility study. The local government should also be willing to pay realistic gate-fees, without which many waste-to-energy plants are difficult to finance. As a general principle in PPP-projects, the Government needs to make sure that the regulations support the project. The local Government should consider a single window system to prevent the overlapping of administration matters for PPP-projects. An active exchange of experiences between Indonesian municipalities, and between Indonesian and European municipalities on the entire policy framework of waste-to-energy is necessary.

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17 For further information please contact: Indonesian Chamber of Commerce and Industry (KADIN Indonesia) Menara Kadin Indonesia, 24 th floor Jl. H.R. Rasuna Said X-5 Kav 2-3 Jakarta Tel : Fax : info@eibd-conference.com Website : APINDO (Asosiasi Pengusaha Indonesia) Gd. Permata Kuningan Lt.10 Jl. Kuningan Mulia Kav. 9C Guntur - Setiabudi Jakarta Selatan Tel : Fax : / sekretariat@apindo.or.id Website : British Chamber of Commerce in Indonesia (BritCham) Wisma Metropolitan I, 15 th Floor Jl. Jend. Sudirman Kav Jakarta Tel : Fax : events@britcham.or.id Website : German-Indonesian Chamber of Industry and Commerce (EKONID) Jl. H. Agus Salim No. 115 Jakarta Tel : Fax : info@ekonid.or.id Website : eurocham European Business Chamber of Commerce in Indonesia (EuroCham) Wisma Metropolitan 1, 13 th Floor Jl. Jend Sudirman Kav Jakarta Indonesia Tel : Fax : info@eurocham.or.id Website : Indonesian French Chamber of Commerce and Industry (IFCCI) Jl. Wijaya II No. 36, Kebayoran Baru Jakarta Tel : Fax : events@ifcci.com Website : Indonesian-Benelux Chamber of Commerce (INA) Menara Jamsostek Building Tower A 20 th Floor R Jl Gatot Subroto No. 38 Jakarta Tel : Fax : marketing@ina.or.id Website :

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