Economic Policy Package (Phase XV)

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Package (Phase XV) DEVELOPMENT OF BUSINESS AND

1 Coordinating Ministry of Economic Affairs of the Republic of Indonesia Public Report Economic Policy Package (Phase XV) DEVELOPMENT OF BUSINESS AND COMPETITIVENESS OF NATIONAL LOGISTICS SERVICE PROVIDERS Jakarta, 15 June 2017

2 INTRODUCTION TO ECONOMIC POLICY PACKAGE XV A. Background: 1. National logistics cost is relatively high in the Asian region (24.6% of GDP, 2014), where the biggest contributor of logistics cost is transportation cost of 72%, and its role to form inflation of 12.11% (January 2017). In addition, logistics cost portion may reach 40% of goods retail price. 2. Goods transportation connectivity has not been integrated throughout Indonesia, which frequently results in scarcity of goods, fluctuating prices, and invasion of imports. 3. Market opportunity potentials for logistics service providers in Indonesia are enormous. One of the research results mentions that logistics activities in Indonesia in 2016 are estimated to reach Rp. 2,400T, including: transportation, storage, and delivery services of Rp T; logistics activities from manufacture, agriculture, construction, mining, and other sectors of Rp. 1,901.3T with an increase by 15.2% until The government needs to provide facilitation so that the opportunity may be grabbed by national logistics service providers. 4. Logistics policy in the previous Policy Package (Package I-XIV) has been posing many positive impacts on economic activities in Indonesia. For example: (i) until now, there are 30 Bonded Logistics Centers aiming to make obtaining Industrial Raw Material Supply and export product display easier; (ii) Importer s Single Identity (API as the sole identification of importers) aims to reduce bureaucracy process in goods imports, primarily raw materials, and simplify permits for exports and imports. 5. Package XV focuses on National Logistics System Improvement to accelerate Development of Business and Competitiveness of National Logistics Service Providers, including the following policies: a. Provision of Opportunities to Increase Business Role and Scale, by adopting a policy that provides business opportunities for national transportation and insurance to transport export and import goods and to improve the business of ship dock/ship maintenance within the country. b. Business Facilitation and Cost Reduction for National Logistics Service Providers, by adopting, among others, the following policies: (i) reduce operational cost of transportation services; (ii) omit the requirements for goods transport permit; (iii) reduce port business investment cost; (iv) standardize documents on domestic goods flow; (v) develop regional distribution centers; (vi) provide easier procurement of certain ships; and (vii) apply mechanism of container guarantee fee return; etc. c. Institutional and Authority Strengthening of Indonesia National Single Window (INSW), by adopting, among others, the following policies: (i) grant independence function to INSW to be able to develop an electronic system for service and supervision of exports and imports, customs, and ports throughout Indonesia; (ii) supervise export and import activities which may potentially become illegal trading; (iii) establish a single risk management for smooth flow of goods and reduce dwelling time; and (iv) act as 1

3 the competent authority in ASEAN Single Window integration and security of FTA implementation. d. Administrative Simplification: The Government has established Export Import Administration Team to reduce highly frequent flow of prohibited and restricted goods. Full explanation is available in the matrix attached. B. Purpose and Benefit of this Policy is to Immediately: 1. Provide Market Opportunities for Shipping, Marine Insurance, and National Ship Maintenance Businesses; 2. Increase Competitiveness of Logistics Service Providers; 3. Strengthen the Institution of Indonesia National Single Window (INSW). C. Policy Target: 1. Open national shipping opportunities to serve export and import transportation of around USD 600 million/year, shipping investment of around units of new ships worth USD 700 million, transportation insurance of 1%-2%, domestic bank loan of USD 560 million, and new employment of 2,000 sailors. 2. Increase the competitiveness of domestic ship docks by providing an incentive of 0% import duty for 115 types of ship s spare parts and components, including maintaining the life of 1,800 shipping companies. 3. Provide bigger opportunity for national shipping companies to serve special transportation of, for example, tankers and bulkers. 4. Reduce goods transportation cost by air. For example, Regulated Agent cost in several short domestic routes, such as Jakarta-Surabaya and Jakarta-Semarang, can reach 30% of the transportation cost. 5. Improve the Regional Government s role in development of Regional Logistics System to control inflation and reduce post-harvest product damage up to 30% by establishing Regional Distribution Centers and Goods Transportation Standard. 6. Strengthen the authority and institution of INSW to support efficient logistics and smooth exports and imports, including certainty of short dwelling time. D. Policy Basics (18 Policies): 1. Revoke and issue different ministerial regulations (12 ministerial regulations, 2 circular letters, 1 letter of the Coordinating Minister) which may boost business expansion and increase competitiveness of national logistics service providers to build and develop National Logistics System. 2. Revise 3 presidential regulations and merge them into 1 presidential regulation on INSW in order to accelerate the development and application of automatic service of permits for exports and imports, customs, and ports through institutional and authority strengthening of Indonesia National Single Window (INSW). 2

4 3. Issue 1 presidential instruction for the Strengthening of Port Authority Roles in managing smooth flow of goods in ports. 4. Issue 1 Decision of the Coordinating Minister of Economic Affairs on Export and Import Administration Team. E. Progress of Completion of Economic Policy Package XV 5 (five) regulations on the Ministerial level have been issued: 1. Regulation of Minister of Transportation No. 24 of 2017 on Revocation of Requirements for Company Capital Ownership in Sea Transportation Business, Ship Agencies, Loading and Unloading Business, and Port Company This regulation revises the following 4 (four) regulations: a. Regulation of Minister of Transportation No.45 of 2015 on Capital Ownership Requirements; b. Regulation of Minister of Transportation No.152 of 2016 on Implementation and Business of Goods Loading and Unloading from and to Ships; c. Regulation of Minister of Transportation No.11 of 2016 on Implementation and Business of Agencies; d. Regulation of Minister of Transportation No.146 of 2016 on Implementation of Ports. 2. Regulation of Minister of Transportation No. 130 of 2016 on the Fourth Amendment to Regulation of Minister of Transportation No. 74 of 2015 on Implementation and Business of Transportation Management Services: Omit the provisions for Limitation of Operational Areas of Foreign Transportation Management Service Businesses; 3. Regulation of Minister of Communication and Information No. 7 of 2017 on Procedure for Granting Postal Implementation Permit: Simplification of Postal Implementation Permit; 4. Regulation of Minister of Transportation No. 25 of 2017 on Amendment to Regulation of Minister of Transportation No. 116 of 2016 on Goods Transfer Exceeding the Stacking Time (Long Stay) in Belawan Main Port, Tanjung Priok Main Port, Tanjung Perak Main Port, and Makassar Main Port: Increase Port Cost Efficiency by Reducing Double Handling Cost in Terminals; 5. Regulation of Minister of Trade No. 29/M-DAG/PER/5/2017 on Trade Between Islands: Standardization of Electronic-based Domestic Manifests. 1 (one) Circular Letter on Director General level, 2 (two) Ministerial Letters, and 1 (one) Decision of Coordinating Minister have been issued: 1. Circular Letter of Director General of Sea Transportation No. LIM.003/40/11/DJPL-17: Guideline for Reduction of Container Damage Risks; 2. Letter of Minister of Home Affairs to Regional Governments No /3056/OTDA on Accelerated Completion of Regulation on Economic Policy Package XV: Synchronization of Regulation on Requirements for Goods Transport Permits Granted by Regional Governments; 3. Letter of Coordinating Minister of Economic Affairs to Minister of Home Affairs No. S- 87/M.EKON/04/2017 on Establishment of Regional Logistics System Team (SISLOGDA); 4. Decision of Coordinating Minister of Economic Affairs No. 71 of 2017 on Export and Import Administration Team: to reduce the highly frequent flow of prohibited and restricted goods. 3

5 Drafts of 2 (two) policies on presidential levels have been completed but presidential process is still necessary: 1. Presidential Regulation on Institutional and Authority Strengthening of Indonesia National Single Window (INSW) to Increase Logistics Efficiency; 2. Presidential Instruction: Strengthening of Port Authority Roles Drafts of 4 (four) policies on the ministerial level have been completed but they are still being finalized: 1. Draft Regulation of Minister of Trade on Provisions for Use of National Sea Transportation and Marine Insurance for Exports and Imports of Certain Goods obliges that the transportation and insurance of export goods (coal & CPO) and imports of (rice) and other commodities determined by the Government must use national shipping and insurance companies; 2. Draft Regulation of Minister of Finance on Exemption of Import Duty for 115 types ship s spare parts and components: to increase efficiency of national ship production and ship dock maintenance service; 3. Revision to Regulation of Minister of Transportation No.153 of 2015 on Security of Cargoes and Posts and Supply Chain of Cargoes and Posts Transported by Airplanes under Annex 17 of ICAO; 4. Revision to Regulation of Minister of Trade No. 127 of 2015 on Provisions for Imports of Capital Goods in Non-New Condition, primarily ships for certain purposes aged 15 to 30 years 4

MINISTER OF TRADING OF THE REPUBLIC OF INDONESIA

MINISTER OF TRADING OF THE REPUBLIC OF INDONESIA REGULATION OF THE MINISTER OF TRADING OF THE REPUBLIC OF INDONESIA NUMBER 82 OF 2017 ON THE PROVISION OF THE UTILIZATION OF NATIONAL SEA TRANSPORTATION