Culture and Education System and Energy Sector of

Introduction of Indonesia  The name Indonesia was derived from Latin Indus, meaning "India", and Greek nesos, meaning "island―  The economy is largely based on agriculture, manufacturing and mining, although growth in these sectors is slowing down.  Other sectors, such as electricity, gas and drinking water, construction, trade, hotel and restaurant and transport are expected to post an increasing contribution.  The country's vast extent, complex shape and wide range of altitudes and climates form the basis of a wonderful natural richness.  There are total 17,508 islands in Indonesia. Out of these five are large islands and rests are small in size. (539,450 sq.km) (473,606 sq.km) Papua (421,952 sq.km) Sulawesi (189,035 sq.km) Java including Madura (132,035 sq.km)  Indonesia Facts & Figures Capital City (+7 GMT) Chief of State President Susilo Bambang YUDHOYONO. Currency Indonesian rupiah Major Languages Bahasa Indonesia, English, Dutch, Javanese, and other local dialects. Primary Religions Muslim, Protestant, Roman Catholic, Hindu, Buddhist. Main Airports , (DPS) (Ngurah Rai), Java, Jakarta (CGK) (Soekarno-Hatta) Indonesia Coastline 54,720 km Population The population of Indonesia was estimated at 237,512,352 in 2008. Famous Tourist Bali, Ubud, Jakarta, North Sulawesi and Kalimantan. Attractions Best Time to Visit Between May to September.

CULTURE SYSTEM OF INDONESIA  Symbolism  The national motto, , is an old Javanese expression usually translated as "unity in diversity" first formulated by President Sukarno in 1945.  Base on Five Principles: Belief in one supreme God; Just and civilized humanitarianism; Indonesian unity; Popular independence governed by wise policies arrived at through consideration and representation; and Social justice for all Indonesian people. Indonesia was clear from the beginning as the successor of the East Indies. sion usually translated as "unity in diversity."

 National Identity  Ethnic groups Group % Javanese 40.6%, Sundanese 15% Madurese 3.3%, Minangkabau 2.7%, Betawi 2.4%, Bugis 2.4%, Banten 2% Banjar 1.7% Other or unspecified 29.9%

 Religion Religion % Muslim 86.1%, Protestant 5.7%, Roman Catholic 3%, Hindu 1.8%, Other or unspecified 3.4%

 Indonesian Unit  In Indonesia nuclear family of husband, wife, and children is the most extensive domestic unit.

 An omission is the traditional, pastoral matrilineal Minangkabau, for whom the domestic unit still comprises co resident females around a grandmother with married and unmarried daughters and sons in a large long-established house.

 Some societies, such as the Karo of Sumatra, exist in big houses with multiple hearths and bedchambers that belong to connected or even distinct nuclear family units.

 Inheritance  Muslim inheritance favors males over females as do the background of many traditional societies.  Tradition generally favors males, but actual practice frequently give females inheritance.

 Relative Groups  Indonesia ethnic groups have strong relationship grouping based upon Patrilineal, matrilineal, or bilateral descent.  Government does not provide social security, joblessness insurance, old age care, or legal support.

 Socialization  Guests are served with a slight bow, and elders are passed by juniors with a bow. Handshakes are suitable between men.  Confrontation should be met with smiles and quiet manner, and direct eye contact should be avoided, especially with social superiors.  Social servants wear neat uniforms to work, as do schoolchildren and teachers.

 Religious Beliefs  In the Indonesia the Javanese are predominantly Muslim, although many are Catholic or Protestant, and many Chinese in Java and somewhere else are Christian, mainly Protestant.  Islam in Indonesia is of the Sunni variety, with small hierarchical direction. Two most important Muslim organizations, (1)Nahdatul Ulama (NU) and (2)Muhammadiyah, equally found in Java, have play an important responsibility in learning, the follower of freedom effort, and policy after freedom.

 Death and the spirit world  Funerals, similar to marriages, call for a rallying of people, neighbors, and associates, and surrounded by many ethnic groups social status may be expressed through the wealth or simplicity of funerals.

 Secular Celebrations  The most important national festival is Independence Day 17 August, which is obvious by parades and displays in Jakarta and regional and district capitals.  Youth are often well-known Kartini Day, 21 April, honors Indonesia's first female emancipationist; schools and women's organizations grasp activities that day.  New Year's is famous 1 January when businesses close and local fairs with firework are held in some places.  On Bali a lunar calendar New Year's Day is celebrated with fasting, prayer, quiet, and inactivity. All people must remain indoors and without lights on so that hazardous spirits will think Bali is empty and will leave.

 The Arts and Humanities  Preservation of art and craft people and objects, such as house structural design, and tie-dye weaving, wood carving, silver and gold working, statuary, puppets, and basketry, are under threat from the global arts and crafts market, local demands for cash, and altering resident values.  Graphic Arts  Traditional hand-puppet or animal carvings of the mountain Batak of Sumatra or the upriver Dayak of Kalimantan are now mostly for tourists, though they once showed rich creativity.  Batik cloth varies very much in creativity, clarification, excellence, and cost.  Performance Arts  Performance arts are different and consist of:  Javanese and Balinese gong-chime orchestras and shadow plays,  Sundanese bamboo orchestras,  Muslim orchestral music at family proceedings or Muslim holiday happiness, trance dances from east Java, the spectacular barong dance or the chimpanzee dances for tourists on Bali, Batak puppet dances.

EDUCATION SYSTEM OF INDONESIA  is under the duty of the Ministry of Education and Culture and the Ministry of Religious Affairs.  In that there is 90.4% literacy level in Indonesia, in that male education literacy level 94% and female literacy level 86.8% of total population as per 2010 census.  In Indonesia age 15 and over can read and write so it increases literacy level of Indonesia.  Literacy  Definition : Age 15 and over can read and write Total population : 90.4% Male : 94% Female : 86.8%

 Education expenditures : 2.8% of GDP

 School hours  Schools are also open six days a week in Indonesia from Monday to Saturday.  As well as their usual study, children can choose to join extra activities after school hours.  Children can learn traditional dances, join orchestras or spend time playing their favorite sports.

 Subjects  All students learn Bahasa Indonesia which is the official language of Indonesia. In regional areas, students may also study the local language and in high school students learn English, which is the official foreign language.  As well as languages, most students study maths, science, geography, history, arts and crafts. Some schools offer sports like soccer and volleyball but these tend to be larger private schools that can afford playing fields.  All children in Indonesia are also required to study , the five guiding principles of the Indonesian government.

 Types of Education The system consists of seven types of education, they are: • General education prioritizes expansion of general knowledge and improvement of skills for the student. Specialization is also needed in the last grade; • occupational/technical education prepares students in mastering a number of definite occupational/technical skills needed for employment; • Special education provides important skills and abilities for students with substantial and/or mental disabilities; • Service-related education aims at increasing abilities required for a government official or a candidate to apply a certain task; • Religious education prepares students to play a role which demand the mastery of specific information about religion and related subject; • Academic-oriented education focuses primarily on improving the mastery of science; and • Professional education prepares students primarily on mastering specialized or job- related knowledge and skills.

Comparison between India and Indonesia  Comparison on the basis of culture system of India and Indonesia  Indian national motto is ―Vasudev Kutumbakam‖ it means ―all world is one family‖ but in Indonesia national motto, Bhinneka Tunggal Ika, is an old Javanese expression usually translated as "unity in diversity.―  Indian peoples believe in Dharma, Customs, Beliefs, traditions, languages, arts, values,. While in Indonesian people follow many cultural practices and being influenced by Hinduism Buddhism, Confucianism, and Christianity.  There are different dance pattern in India as per different religions and areas, and same in Indonesia their dance pattern change as per religions and areas.  India has traditionally joint family culture but now rapid growth in Nuclear family whereas in Indonesia there is nuclear family.  In Indonesia whether serving tea to guests, while india is concern with tea or coffee and sweet water or cold drink to the guests, only the right hand is used to give or receive, following people. In Indonesia Guests are served with a slight bow, and elders are passed by juniors with a bow while in India same system followed by people but the most work done by the women of house.  In Indonesia handshakes are suitable between men, but a soft feel, in India is touch the foot of elders and say ―Namastey‖ and handshakes with same age people and meet with soft feel.

Comparison Education system of India and Indonesia  Average years of schooling of adults in Indonesia is 5 and india is 5.1 is the years of formal schooling received.  Duration of compulsory education is the number of years that child must legally be enrolled in school in India is 14 years and Indonesia is 9 years.  Government Education Expenditure (% of GDP, 2000-2002) in India is 4.1% and Indonesia is 1.2%.  Public Education Expenditure as a 12.7% in India and 9% in Indonesia of overall government expenditure.  Girls enrolment share, primary level is the number of girls enrolled in primary school, expressed as a 43.6% in India and 48.6% in Indonesia of the total number of pupils in primary school.  Girls enrolment share, secondary level is the number of girls enrolled in primary school, expressed as a 39.6% in India and 48.8% in Indonesia of the total number of pupils in secondary school.  40.5% in India and 11.6% in Indonesia literacy rates by Sex, Aged 15+  39% of girls in India and 8% of girls in Indonesia is out of school from primary school.  Public expenditure per student, primary level is the total reported current spending by the government on primary education, divided by the total number of pupils in primary education, expressed as a 7.2% of per capita GDP in India and 3.2% of per capita GDP in Indonesia.  40.2% in India and 20.13% in Indonesia to Primary school pupil-teacher ratio is the number of pupils enrolled in primary school divided by the number of primary school teachers (regardless of their teaching assignment).  Average 42 Weeks in India and 44 weeks in Indonesia per year by teaching primary level teachers. Data for 2010.  Women to men parity index, as 68% of literacy rates in India and 94% of literacy rates in Indonesia, aged 15-24. Introduction of Energy Sector of Indonesia

 Indonesia is the oil exporter and world’s largest exporter of coal by weight and the largest exporter of natural gas in 2011.

 According to the international Monetary Fund (IMF), Indonesia sustained relatively strong economic performance with an average GDP rate of 6 percent per annum for the past five years.  Growth should see Indonesia’s demand for electricity increase at 7% to 9% per annum for foreseeable future. Market Overview of Indonesia  Indonesia struggles to attract sufficient investment to meet growing domestic energy consumption because of inadequate infrastructure and a complex regulatory environment.  Indonesia's total primary energy consumption grew by over 50 percent between 2001 and 2010.  Petroleum continues to account for the most significant, though decreasing, share of Indonesia's energy mix at less than 30 percent in 2011.  Indonesia is also a significant consumer of traditional biomass in its residential sector, particularly in the more remote areas that lack connection to the country's energy transmission networks. Indonesia’s demand for electricity  Indonesia GDP growth rate of 4.5% in 2009 and with growth for 2010 projected to be 5.6%.  This growth should see Indonesia’s demand for electricity increase at 7% to 9% per annum for the foreseeable future.  This should translate into growth in electricity demand from an estimated 135 terawatt hours (―TWh‖) in 2010 to 167TWh by 2014.  There are around 20 million households, or 80 million people, who currently have no access to public electricity.

Indonesia’s generating capacity

 Indonesia’s existing generating capacity is largely coal and oil fired and, at around 30GW, results in a per capita MW capacity which is amongst the lowest in the region.

 Reason :  The low take up in the use of primary energy sources.  This low take up has been primarily due to the lack of development of distribution and transmission infrastructure  The lack of a robust regulatory framework especially to allow access to project. Development chronology  The modern era for the electricity sector in Indonesia commenced with the 1985 Electricity Law.  IPPs (Independent Power Producers) were licensed to sell their electricity solely to the state-owned electricity company PLN (PT Perusahaan Gas Negara) pursuant to Power Purchase Agreements (―PPAs‖).  The 2002 Electricity Law also allowed for electricity tariffs to be determined by the market and for independent regulation through the establishment of the Electricity Market Supervisory Agency.  Fast track program aimed to accelerate the development of 10 GW of generating capacity with program geared towards IPPs and renewable energy. Government support for infrastructure  The Government’s working plan for 2010, as part of the RJPM, outlines 45 key infrastructure programs including:

 The development of facilities needed for energy processing (e.g. oil refineries, power generation), energy transmission and distribution (e.g. pipelines for gas and oil fuels) and energy storage (e.g. depots);

 The utilization of alternative energy including renewables (e.g. geothermal, solar, water, wind and biomass); and Attractive opportunities for IPPs  The targeted GDP growth rates of 6.2% p.a. and an electrification ratio of 91% by 2019 should see electricity demand growing by 7% to 9% p.a. (and even 9.2% p.a. through to 2019) and take installed capacity to 81.6GW by 2019.  For the next five years the investment required is estimated at US$31.4 billion for 22GW of generating capacity, US$7.3 billion for some 17,000 km of transmission networks and US$5.3 billion for distribution, totaling around US$44 billion.

Energy Development Resources in Indonesia  Oil:-  Indonesia ranked 20th among world oil producers in 2012 (21st for crude oil and condensate production), accounting for approximately 1 percent of the world's daily production of liquid fuels.  Natural Gas :-  Indonesia ranks eighth in world gas production. Indonesia produced approximately 7.9 bcf/d of natural gas in 2009.  Coal :-  In 2011, Indonesia became the world's largest exporter of coal by weight. Indonesia plays an important role in world coal markets, particularly as a regional supplier to Asian markets.  Nuclear Power  Indonesia will build a nuclear power plant by 2016 at a total cost of about US$1.5 billion.Earlier, Research and Technology Minister Kusmayanto Kadiman had described plans to build up to four nuclear power stations, each with a capacity between 1,000 MW and 1,500 MW, on a 600 hectare site on the northern coast of Central Java.

 Renewable Energy:-  Solar Photovoltaic:-  In Indonesia all major international solar photovoltaic (PV) system manufacturers, including BP Solar, Kyocera, Shell Solar, Siemens, and Solarex, have subsidiaries or at least local distributors in Indonesia.  Biomass for Power Generation  National studies estimate the electricity generation potential from the roughly 150 Mt of biomass residues produced per year to be about 50 GW or equivalent to roughly 470 GJ/year.  Geothermal:-  Indonesia's 2011 capacity of approximately 1.2 GW  Plans to increase the use of renewable energy to 15 percent of the electricity portfolio by 2025  Small Hydropower  Indonesia has abundant hydropower resources and has been successful in developing micro, mini, small and large hydropower plants over the past decades  Wind Power:-  Most wind turbines generate electricity from naturally occurring wind.

SWOT ANALYSIS OF INDONESIAN ENERGY SECTOR

 Strength  Adequate resources.  Huge workforce comprising of expert and highly skilled man power is available with the coal companies.  Adequate and rising domestic demand for electricity.  Coal reserves are available at relatively shallow depth which can easily extracted by cost effective open cast mining methods.

 Weakness  Decentralized governance system which further increase bureaucracy; foreign investors would have to deal with central, provincial and local government officials due to decentralization of power.  The government faces the challenge of increasing building and improving infrastructure to maintain easy connectivity between the islands that can support its economic growth.  Protection of intellectual property right is not up to the world standards, and corruption continues to be pervasive.  The financial sector is dominated by commercial banks.  Complex regulatory framework.  Opportunity Indonesia population is growing significantly, however electricity demand is also growing. Opportunity for producing renewable . Natural resources are available easily. Mining infrastructure developments (mainly in Kalimantan and Sumatra). Government support for infrastructure. Government has started fast track program to attract investment of private players.  Threats  Securing Financing Needed by the Energy Sector.  Developing Supplies of Natural Gas for Power Generation and Domestic Use.  Access to Modern Energy Services  Protecting the Environment Through Efficient Resource Utilization and Optimal Resource Mix Increasing. Bilateral Trade between India and Indonesia  India and Indonesia have shared two millennia of close cultural and commercial contacts.  Since the adoption of India’s ―Look East Policy‖ in 1991, there has been a rapid development of bilateral relations in political, security, defense, commercial and cultural fields.  This has facilitated trade, investment liberalization, fiscal and monetary policy reforms, and infrastructural up gradation.  The two economies have been reaping the dividends of low labour costs and have positioned themselves among the top five investment destinations in Asia.

India’s Trade Policy Strategy

 Objectives  To double our percentage share of global merchandise trade within the next five years; and  To act as an effective instrument of economic growth by giving a thrust to employment generation.

 Trends  India’s trade with Indonesia has shown dynamism both in terms of exports and imports. As evident from Table India’s exports to Indonesia have made a quantum jump from US $ 50 million in 1980 to US $92 million in 1990. It is important to highlight that India’s exports increased by more than three times between 1990 and 2000 and 3.7 times between 2000 and 2007, reaching US $1,463 million.

Indonesia Trade Policy Strategy As of the end of July 2008; Indonesia has signed five FTAs that are being implemented namely:

 The ASEAN (Association of South east Asian Nations) Free Trade Area (AFTA)  The ASEAN- FTA  The ASEAN-Korea FTA  The Indonesia-Japan EPA (Economic Partnership Agreement) and the ASEAN-Japan FTA. They are at different stages of implementation.

TRENDS India’s imports from Indonesia have displayed a greater dynamism rising from a mere US $25 million (1980) to US $5438 million (2007). Thus it is discernable that Indonesia has remained a more attractive imports source for India as compared to India’s export destination. Consequently India’s trade balance with Indonesia got converted from a surplus of US $26 million in 1980 to a trade deficit of US $3975 in 2007.

Cooperation in the Energy Sector  According to India’s minister of state for coal, Shriprakash Jaiswal, coal imports are likely to rise by 21 per cent over 2011.  This clearly indicates that India is in dire need of reliable and long-term coal imports, without which domestic demand cannot be met.  Indian companies have been looking for mining rights and even joint ventures with their Indonesian counterparts for securing long term supplies of coal.  Anil Dhirubhai Ambani Group’s Reliance Power also acquired three coal mines in Indonesia and plans to invest over Rs. 3,000 crore in that country. In June 2010, it announced that it plans to buy two Indonesian coal companies through its unit, Reliance Coal Resources.

Indonesia Law regarding Energy Sector

 The 2009 Electricity Law divides the electricity business into two broad categories as follows: a)Those activities involved in supplying electrical power such as: i) Electrical power generation (both for self-use and for sale to an off-grid captive consumer); ii) Electrical power transmission; iii) Electrical power distribution; and iv) The sale of electrical power; b) Those activities involved in electrical power support such as: i) Consulting activities; ii) The construction and installation of electrical power equipment; iii) The operations and maintenance of electrical power equipment; iv) The development of electrical supporting equipment technology. v) Transmission, Distribution and Retailing

 Operations and Maintenance (“O & M”) O & M services for conventional electrical power can take the form of the following activities: a) Consulting services for the installation of electricity power supply; b) Construction and placement of electrical power supply installations; c) Inspection and testing of electrical power installations; d) Operation of electrical power installations; and e) Maintenance of electrical power installations.

 Business Law 2009 for Energy Sector  Electricity Supply Licensing  PLN is merely the holder of an Electricity Generation License for Public Use (―IUPTL‖).

 PLN has first right of refusal for un serviced areas which if not accepted can be assumed by the private sector.

 If the private sector does not take up a business opportunity, the Central Government must instruct PLN to supply the area.

 Tariff  The Central Government approves tariffs for Central Government issued license holders(e.g. PLN and IPP’s selling to PLN).

 The regional authorities approve tariffs for IPP’s selling to non-PLN utilities  Tariff variations, according to different business areas, are permitted.  Tariffs must be approved by the Indonesian/Regional House of Representatives.  The Investment Law Obligations for power plant investors under the 2007 Investment Law include: a) Prioritizing the use of Indonesian manpower; b) Ensuring a safe and healthy working environment; c) Implementing a corporate social responsibility program; d) Certain environmental conservation obligation

India and Indonesia in Energy Sector

 Indian Scenario a) Research & Development Areas 1. Non conventional energy sources 2. Innovative green products 3. Development of waste recycling and reuse techniques b) Business opportunities in Manufacturing 1. Production of eco-friendly building materials. 2. Sensor based water and energy saving devices 3. Production of solar concentrators

 Indonesian Scenario  Primary Objectives for Utilities by 2020 By minimizing interruptions in power delivery.  Improve Energy Efficiency By reducing waste in power delivery and energy loses.  Accommodate Renewable Power Prevent congestion on the power lines and interruptions.  Preparing for Growing power load.

Opportunity assessment in Energy sector in Indonesia  In 2008, the average electricity supply is 65% and the government plans to increase it to 93% in 2025, improving access to public electricity.  In 2011, the government plans to take several steps to find a solution to this problem, by developing power generation and distribution network extending to all regions of the country.  Development of transmission lines, power plants and other facilities throughout the development of a potential area for investors.  This country was facing power shortages in some areas due to lack of infrastructure for electricity transmission and distribution.  To meet the increasing demand of power supply, Indonesia needs additional capacity and participation in development of Independent Private Power plants (IPP).  The project of electricity are: 10,000 MW Phase I 10,000 MW Phase II 15,000 MW

 Renewable Energy  With 40% of the world's geothermal reserves, and is trying to increase their use in large scale.  Geothermal and mining sector has a big opportunity for investors. Law issued in the mining sector is predicted can create legal certainty and this will encourage investor confidence.  the government will also build more than five nuclear power plants.  Indonesia is considering the use of nuclear energy, which will increase electricity production and also help Indonesia create environmentally friendly energy sources and reduce carbon emissions.  Thus we can say that Indonesia has open their door for investment to improve their energy sector and design a favorable legal policy for the investors.

Indian companies deal with energy sector in Indonesia  Tata Power  Tata Power has acquired a 30% stake in three of Indonesia’s leading coal companies, PT Kaltim Prima Coal (KPC), PT Arutmin Indonesia, and PT Bumi resources, and entered into an off take agreement with KPC.  Reliance Industries Ltd  Reliance Coal Resources Private Limited has acquired 100% economic interest in two coal companies in Indonesia which own three coal mines in Indonesia.  Essar Energy  Essar energy acquire a 100 percent interest in the Aries coal mine in April 2010 fo US $118 million. The mining area comprises approximately 5,000 heactares located in the West Kutai region of East Kalimantan.  Adani Power  Adani exploring possibility of setting 2x1100 MW Lignite based power plant in Indonesia. Benefits to India doing Energy Business in Indonesia  Geographical Location  Booming Economy  Government Anti-corruption Strategies  Natural Resources  Large & Youthful Domestic Market  Political Stability  Energy access  Energy security  Climate change Other Benefits  Benefiting to Currency earning.  Benefiting to utilize the Indian technology.  Improvement of Exchange Ratio.  Government can increase the foreign currency  You can more importing the products and goods to outside the countries.  Can Improve the country relation.  To increase the GDP of the countries.  Country become a financial Strong.  Skill workers are opportunity to work in foreign country and earning best amount and improve the life style. Drawbacks to India  Helping other economies  Can be difficult or expensive to understand laws and learning local ways of doing business  Dealing with different languages  No immediate transactions (time is a factor due to time zones, etc)

Business Barriers with Indonesia  Lack of Infrastructure  Investment issue and subsidy scheme.  Land acquisition issues  Complex regulatory frame work which leads to long chain of bureaucracy.

FINDINGS  Indonesia is reorienting energy production away from exports to serve its growing domestic consumption.  Indonesia is a significant and well-established player in the international oil and gas industry, though production has failed to keep up with demand in recent years.  State-owned energy company PT Pertamina must balance its needs as a corporation against its mandate as a national oil company to meet domestic demand.  Aging infrastructure and fields suggest the country will struggle to meet production targets in the short term.  Indonesia was the world's eighth largest net exporter of natural gas in 2011.  Indonesia was the third-largest exporter of liquefied natural gas (LNG) in 2011.  In 2011, Indonesia became the world's largest exporter of coal by weight.  Indonesia has 6.1 billion short tons of recoverable coal.  Generation capacity growth in Indonesia has lagged behind the pace of electricity demand growth, leading to power shortages and a low electrification ratio.  Indonesia was the third largest geothermal generator in the world in 2011.

SUGGESTION

 India has to invest in the energy sector in Indonesia as there is ample resource of energy but they do not have good infrastructure and technology.

 As Indonesian government has put some favorable policy and develops a ―fast track‖ program to attract foreign investors so this is a time for India to invest in energy sector to capture more market share.

 As Indonesia population growth rate is high which lead to high demand of electricity consumption, so there is chance to generate and distribute electricity in Indonesia.

 This is right time for India to enter into Indonesian market to deal with energy sector and expand their business.

Conclusion  From the above discussion we can say that Indonesia has a growing economy and sustain their economy growth 6% over the past five years.  As we have get the information about oil and Gas industry, Energy sector and find out that Indonesia has ample resources of energy but they do not have good infrastructure to use that effectively so that they are attracting foreign investment by their attractive policies.  So this is the great opportunity for India to enter in this energy sector and expand their business.

FAMILY BUSINESS AND SOCIAL PROBLEM OF INDONESIA And Agriculture Products

FAMILY BUSINESS AND SOCIAL PROBLEM OF INDONESIA

In Indonesia, Only 3% of family businesses which still exist up until now were built in 1932 to 1943, 2% were built in 1944-1955, 10% were built in 1956-1967, 24% were built in 1968 – 1979, 24% were built in 1980 – 1991 and 37% were built in 1992 – 2003, the composition is dominated by relatively new companies. On the positive side the data shows us that within the last decade there has been good progress in Indonesian family businesses development. It also demonstrates there has been improvement in business management. The research analyzes the steps needed in small scale Indonesian family businesses life cycle to enable them enhancing their transformation and growing ability into professional ones.

Moreover, businesses could also learn from the failure and success of others. The research applies five stage models which consist of: existence, survival, success, renewal and decline.

First, the existence stage is known as entrepreneurial or birth stage, founder communicated and realized business idea thus business is still fragile. Simple organization structure is applied thus information is processed informally and documented in the form of hand-writings.

Second, the survival stag , company has accomplish to overcome start-up problems, growth is excellent and founder spots on new opportunities however the founder trap also starts to exist.

Third, the success stage, day to day operational activity started to be handled by professional director except when competent relatives do exist. However, it is still difficult to give up the authority for running the business to outsiders.

Fourth, the renewal stage, company wishes to re-experience early stages; execute collaboration and teamwork to accelerate innovation and creativity by infiltrating matrix structure, thus decision making will be much decentralized. Corporate is still big and bureaucratic but its members are driven to work-hard.

The sample was chosen attributed to its 88 years business period and has been lead by three generations. The methodology uses non-participative observer method. Qualitative design (Naumes, 1979) is applied to observe participant as reference (Weber, 1968). The research uses secondary data which has been well publicized yet by mass media and also by the company itself. Secondary data is utilized to compare the result obtained through interview with the one that is understood and broadcasted by mass media. Obtained information then grouped to analyze its life cycle stages of the business sample.

Business foundation was triggered by her spouse’s death and since the traditional herbal medicine business started, she was able to supply her customers regularly thus customers were able to buy directly and people no longer felt hesitate asking for fevers.

The herb’s effectiveness popularity has becoming well-spread through word of mouth. Orders started coming from outside city, product demands increased drastically which made Mrs. Meneer no longer able to deliver the herbs on her own. The problem is solved by changing product packages by putting her picture as an authenticity guarantee. Mrs. Meneer started to expand her business by opening a shop in Padamaran and she kept developing her recipes. Any reference books related to many kinds of medical plants were read to find new discoveries. Her two daughters (Lucy and Marie) were actively included within the daily activities, with her full passion and persistency Mrs. Meneer started analyze production needs, projected raw material availability and also planned to increase her market share. Moreover, Mrs. Meneer began to search for distribution agents who are willing to sell her products. Her first agents were in Cirebon, Jogjakarta and Solo. Mrs. Meneer’s company had becoming more successful with the increasing number of employees, her leadership style was discipline and direct manner, affectionate but wise. Her philosophy regarding profit was to share it with others which made the harmony within the work place and enhanced her employees’ hard-working characters. Nonnie, her first daughter got married and moved to Jakarta to open a shop in Juanda Pasar Street with the intention of improving their distributions channels. In late 40’ish, Mrs. Meneer’s products had been brought by many Chinese-Indonesian doctors to abroad countries.

Many Dutch people were interested to bring her products to their homeland. She decided on changing her company form became partnership in 1952 and observed carefully every word within the certificate which claimed Lucy and Marie as corporate commissaries, herself as the Chief Director and Hans Ramana as Vice of Chief Director. Product’s distribution had started to be well-organized in 1952, a truck was provided to load and freight the traditional herb medicine to and Jakarta. She also bought a Germany grinding machine with 100 times bigger capacity compared to human’s; it needed only an hour compared to three days when it was done manually. Mrs. Meneer realized that traditional herbs medicines are health products; therefore she had always reminded to keep excellent hygienic level. Mrs. Meneer’s took an active role in the company, decided rules and regulation and displayed superb commitment for its development. Founder managed the company directly, started from mixing to selling, her skills and ability to process these spices was derived from her many years experience.

In 1967 the company was formally trusted over to her son-in-law, Hans Ramana, the Vice Director. Her daughter, Lucy Saerang, Marie Kalalo and Has Pangemanan sat down within the commission board. Management model was still following founder’s model and simple management system was employed. Beauty products lines were developed. Mrs. Meneer’s began to send her products to smaller Indonesian regions using limited equipments and vehicles. In the 70’ish, the industry started to undergo intense competition level, the number of traditional herbs medicine ( jamu ) companies recorded was about 70 companies. Hans Ramana short leadership tenure ended in 1976, he passed away in Honolulu, U.S.A. and the business was changed into corporation in 1977. Table 8 shows the transition era when leadership transferred from first generation to first successor. It also shows the increasing demands for traditional herbs medicine increased the industry competition, position was trusted to Nonnie Saerang, the second was handed over to Hans Pangemanan.

Meanwhile commissary position was held by Marie Kalalo, Lucy Saerang and Charles Saerang. Business was exclusively kept within family members, reserved their traditional authenticity characters and still large profit-oriented. The same traditional management technique was still employed. The main obstacle was to rebuild traditional herbs medicine image which had been slowly overwhelmed by pharmacy’s medicine reputation. Conflicts between majorities group and minority group started after three years Mrs. Meneer passed away. Fortunately Mrs. Meneer had developed distribution system to gather information, ideas and data from customers such as: critics, customers’ needs or any other suggestions to increase pr oduction quality. Products within the market were controlled and maintained. The company maintained partnership between manufacturer and agents/distributors. Advertising and promotion were done to increase sales and incident where it was taken to the green court with assaulting claim.

Some of distribution and agents did not receive the supply they ordered thus some partnership relationships were neglected and it happened right when demands reached the peak. Therefore, competitors used this moment to supply the market with their products. In consequence, their market share and demands increased significantly. In 1987 – 1989 periods, the company tried to fix their distribution channels, packaging, maintaining good relationships with employees and conducting continuous innovations. Plasma Agriculture program was developed to sustain product’s efficiency in order to increase the certainty on receiving raw materials quantity, quality and price stability levels. Mrs. Meneer’s product packaging was modernized to increase customers’ eagerness and branding toward the products. The company has started to use recycled material as their packaging material. As the result, the company’s product image has been continuously becoming better and was able to penetrate abroad countries Malaysia, Brunnei Darusalam and . It had also awarded employees with excellent performance and loyalty. Product diversification was driven by the changing trend, therefore the company tried to fulfill the market’s demand towards instant products. In 1989, Mrs. Meneer’s company owned 150 traditional herbs medicine ( jamu ) product lines. During 1990’ish periods, the company was handed over to the third generation. Competitors had increased dramatically to 300-500 companies in Indonesia. However, Mrs. Meneer’s company had 34% national market share and the rest were spread within abroad countries.

In 1995, product lines increased to 206 variety and in 2001 it reached 254 products. Clinically- tested products were done to increase traditional medicines quality to make their products able to compete world-wide, it was done within five main products, which were: traditional herbs medicine ( jamu ) for back pain, diabetes, diarrhea, hypertension and cholesterol The new innovation boosted product demands which reached 270 tons per month and also to the growing customers’ fanatics. Mrs. Meneer’s owned 40 distribution agents wide spread within 19 Indonesian provinces throughout these number of distribution agents, company were able to strengthen and adding more outlets to become 28.665 outlets with 57.330 employees. The number of abroad outlets was 4.900 within twelve countries, which are: Malaysia, Philippines, Korea, Netherlands, Taiwan, Japan, U.S.A, Brunei, Arabia, Vietnam, Singapore, New Zealand and Denmark.

Several problems identical to family business are:

(1) unfocused strategic planning, decision making and resources allocation processes

(2) informal and unsystematic procedures on solving the problems related to succession

(3) tendency to react reluctantly towards changes although maintaining a sustainable business and continuously conducting innovative and creative improvements to increase the company’s service quality for its customers and business partners are critical. To become successful family businesses, the combination of three main aspects (business management, family management, ownership management) is essential.

Indonesia, a vast polyglot nation, has weathered the global financial crisis relatively smoothly because of its heavy reliance on domestic consumption as the driver of economic growth. Increasing investment by both local and foreign investors is also supporting solid growth. Although the economy slowed to 4.6% growth in 2009 from the 6%-plus growth rate recorded in 2007 and 2008, by 2010 growth returned to a 6% rate and remained there in 2011. During the recession, Indonesia outperformed most of its regional neighbors. The country experienced high inflation in early 2010, mainly due to food shortages, but agencies across the government acted quickly to ensure sufficient food stocks. The government made economic advances under the first administration of President Yudhoyono, introducing significant reforms in the financial sector, including tax and customs reforms, the use of Treasury bills, and capital market development and supervision, and in December 2011, Fitch Ratings Agency upgraded the country's credit rating to investment grade for the first time since 1997. Indonesia's debt-to-GDP ratio in recent years has declined steadily because of increasingly robust GDP growth and sound fiscal stewardship. Indonesia still struggles with poverty and unemployment, inadequate infrastructure, corruption, a complex regulatory environment, and unequal resource distribution among regions. In 2011 the government faces the ongoing challenge of improving Indonesia's insufficient infrastructure to remove impediments to economic growth, while addressing climate change mitigation and adaptation needs, particularly with regard to conserving Indonesia's forests and peatlands.

Character and Structure: Although the brought spectacular development to Indonesia during the 1970s and 1980s, lifting the nation out of the dire economic conditions of the previous two decades, this success did not solve major structural problems and, indeed, may have created new kinds of difficulties. Increasingly in the 1990s, the economic outlook was weakened by charges dubbed ―Corruption, Collusion, and Nepotism‖ (Korupsi, Kolusi, dan Nepotisme—KKN), which after 1996 were leveled particularly at Suharto and his family. Despite liberalization and surveillance policies enacted in the late 1980s, these factors grew in importance and left the economy particularly vulnerable to, and ill-prepared to address, the financial crisis of 1997-98, which saw the gross domestic product (GDP) drop an officially estimated 13 percent and inflation rise to nearly 60 percent in 1998 alone. In mid-1999, nearly 25 percent of the population was thought to be living in absolute poverty, compared with about 10 percent five years earlier. Since then, Indonesia’s economic growth has been slow and somewhat erratic. Major factors are slow progress on legal, banking, and corporate reforms; continued military action in resource-rich Aceh; and terrorism targeting international capital and tourism.

During the New Order, the economy was transformed from one having virtually no industry in 1965 to production of steel, aluminum, and cement by the late 1970s. At present, Indonesia is the world’s number-one exporter of liquefied natural gas (LNG) and the seventeenth largest oil producer in the world, responsible for about 1.8 percent of world production and 5.2 percent of total Organization of Petroleum Exporting Countries (OPEC) production in 2004. The emphasis in the early 2000s was on less government interference in private business and greater technology inputs. Agriculture predominates and benefits from an infusion of modern technology by the government. Indonesia is a major aid recipient.

Indonesia’s major trade partners are Japan, the , the United States, Singapore, and the Republic of Korea (South Korea); trade with Association of Southeast Asian Nations (ASEAN) members is increasing. In spite of government liberalization of previously restrictive investment rules, foreign investors continue to experience numerous difficulties in conducting business. Since the late 1990s, companies have remained wary of investing in Indonesia, and an increasing number of manufacturers have relocated outside the country because of security issues, deteriorating infrastructure, substantial corruption, high interest rates, and increasing

Government Budget: For 2003 Indonesia’s government budget was Rp 334.5 trillion (US$39 billion) in revenues and Rp 368.8 (US$43 billion) in expenditures, including capital expenditures. The budget is formulated by the Ministry of Finance and approved by the legislature. Budgets are developed as part of five-year economic development plans (Repelita— Rencana Pembangunan Lima Tahun).

Inflation: The estimated inflation rate in Indonesia for 2003 was 6.6 percent. This level ranked Indonesia 163d in the world. Among Southeast Asian nations, only East Timor, Laos, and Papua New Guinea had higher inflation rates.

The fall of the Suharto Government in 1998 provided the impetus for the transformation of Indonesia’s political system from an autocratic, centralised state to a democratic, decentralized state. The first elections in the post-Suharto period were held for the national, provincial, and sub-provincial parliaments in 1999. In 2004 the president and vice-president were directly elected for the first time.The current administration led by Mr Yudhoyono emphasises the need to increase economic growth and investment and to create jobs. The administration’s other stated priority is to stamp out corruption, which significantly raises producers’ costs and deters investments.

While recent and rapid political change under ―Reformasi‖ and decentralization may have provided opportunities for long-term development that embraces these goals, they have also generated an environment of political uncertainty, weak law enforcement, insecurity over property rights, and increased local conflict. Increasing investments, particularly in infrastructure is critical to Indonesia’s long term growth prospects.Indonesia has struggled to overcome the Asian financial crisis, and still grapples with persistent poverty and unemployment, inadequate infrastructure, endemic corruption, a fragile banking sector, a poor investment climate, and unequal resource distribution among regions. Before the crisis, the Indonesian economy was considered to be among the best performing East Asian economies. Annual economic growth in the early 1990s was typically around 7 or 8%, and per capita income rose from 810 in 1992 to 1,240 in 1996. In 1998, per capita income had fallen to 500 and growth in real GDP fallen to - 13,1 in 1998. The country continues the reconstruction process from the December 2004 tsunami and from an earthquake in central Java in May 2006 that caused over $3 billion in damage and losses.Declining oil production and lack of new exploration investment turned Indonesia into a net oil importer in 2004. The cost of subsidizing domestic fuel placed increasing strain on the budget in 2005, and combined with indecisive monetary policy, contributed to a run on the currency, prompting the government to enact a 126% average fuel price hike in October 2005. The resulting inflation and interest rate hikes dampened growth through mid-2006, while large increases in rice prices pushed millions more people under the national poverty line.Economic reformers introduced three policy packages in 2006 to improve the investment climate, infrastructure, and the financial sector, but translating them into reality has not been easy3. Economic growth in 2005 was the highest in 8 years, reaching 5,7 per year, and it is not until 2005, that per capita income reached its pre-crisis level of 1,250. Annual real GDP growth is expected to average 6.3% in 2008. Significant progress has been made in rebuilding Aceh after the 2004 tsunami, and theprovince now shows more economic activity than before the disaster.

Unfortunately, Indonesia suffered new disasters in 2006 and early 2007 including a major earthquake near Yogyakarta, an industrial accident in Sidoarjo, East Java that created a ―mud volcano,‖ a tsunami in South Java, and major flooding in Jakarta, all of which caused additional damages in the billions of dollars. Donors are assisting Indonesia with its disaster mitigation and early warning efforts.In physical and biological resources, Indonesia is a wealthy country. It is a world leader in mineral exports, its rainforests account for more than 50 percent of the tropical forests in Southeast Asia and more than 10 percent of the world’s total, it has unique and extensive biodiversity resources, and its fisheries are some of the world’s most productive and threatened. Indonesia, confronts a huge challenge in using and managing the vast natural resources in a manner that is optimal for the economy, equitable for the population, and sustainable for future generations. Indonesia’s economic recovery from the financial crisis makes it a blend country meaning that it is eligible for both IDA grants and IBRD loans. It also means that it is no longer subject to compulsory PRSP requirement. Still, Indonesia prepared an Interim PRSP (2003) and a draft PRSP was submitted May 2004 to the Poverty Reduction Committee5. The Poverty Reduction Strategy Paper (PRSP), 2003 has been taken as the National Poverty Reduction Strategy Document (SNPK). The SNPK has been integrated in the Medium Term Development Plan 2004 – 2009 that has been made as Law No. 25/2004. For the implementation of the SNPK, the government has developed a National Program on People’s Empowerment (known as PNPM) that sets out the details of operational plans for poverty reduction through promoting capacities of the local communities and providing funds for development. PNPM to certain extent overlaps with the World Bank supported project called Kecamatan Development Program (KDP – Sub-District Development Program), or also known as the community-driven development concept of the World Bank.Indonesia also prepared its own poverty analysis under the Poverty Analysis Program,INDOPOV. The Indopov program resulted in the document: Making the New Indonesia Work for the Poor (Nov. 2006) which includes recommendations for policy and practice changes that will accelerate poverty reduction efforts in Indonesia.Current issues include: alleviating poverty, preventing terrorism, consolidating democracy after four decades of authoritarianism, implementing financial sector reforms, stemming corruption, holding the military and police accountable for human rights violations, and controlling avian influenza. Indonesia Economic Future Challenges

 Indonesia’s growth performance remains solid, but with uncertainty over the

international outlook the country needs to continue improving crisis preparedness.  The global growth outlook remains weak and financial markets turbulent.

 However, to date Indonesia’s growth performance has remained solid. GDP growth in the first quarter of 2012 was 6.3 percent year-on-year, down slightly from 6.5 percent in 2011 as a whole. Consumption held up well in the first quarter of 2012, investment growth came down while net exports made a negative contribution to growth.

 Indonesia is not though immune from spillovers from international developments through both the financial and trade channels.  Falling international commodity prices, and weaker volumes, contributed to a sharp slowdown in export growth in recent months and the narrowing in the trade surplus has seen the current account move into deficit.

 Heightened international risk aversion was accompanied by portfolio capital outflows. Domestic asset prices declined and the portfolio outflows, plus weaker trade balance, put pressure on the Rupiah.

 Reflecting the performance, the baseline outlook is for growth of 6 percent in 2012 and 6.4 percent in 2013.

 However, in the event of a major freezing of international financial markets which contributes to a drop in trading partner growth, a fall in global commodity prices and reduced domestic investor confidence, similar to in 2009, it is projected that growth could slow to 4.7 percent in 2013.

 In a scenario in which such a crisis was accompanied, or indeed precipitated, a severe, prolonged global downturn encompassing the major emerging economies, 2013 growth in Indonesia could drop to 3.8 percent.

 With risks in the global economy are high and expected to persist, emerging economies, including Indonesia, therefore face the twin challenges of enhancing crisis preparedness to deal with near-term shocks while at the same time putting in place policies to support medium-term growth in a weaker global environment.

There are around 300 distinct native ethnicities in Indonesia.

According to the 2010 national census, the population of Indonesia is 237.6 million,[133] with high population growth at 1.9%.58% of the population lives on Java,[133] the world's most populous island. Despite a fairly effective family planning program that has been in place since the 1960s, population is expected to grow to around 265 million by 2020 and 306 million by 2050.

There are around 300 distinct native ethnic groups in Indonesia, and 742 different languages and dialects. Most are descended from Austronesian-speaking peoples whose languages can be traced to Proto-Austronesian (PAn), which possibly originated in Taiwan. Another major grouping are Melanesians, who inhabit eastern Indonesia.The largest ethnic group is the Javanese, who comprise 42% of the population, and are politically and culturally dominant. The Sundanese, ethnic Malays, and Madurese are the largest non-Javanese groups. A sense of Indonesian nationhood exists alongside strong regional identities. Society is largely harmonious, although social, religious and ethnic tensions have triggered horrendous violence. Chinese Indonesians are an influential ethnic minority comprising 3–4% of the population.Much of the country's privately owned commerce and wealth is Chinese-Indonesian-controlled, which has contributed to considerable resentment, and even anti-Chinese violence.

The Istiqlal Mosque in Central Jakarta. Indonesia is the world's most populous Muslim-majority nation. The official national language is Indonesian, a form of Malay. It is based on the prestige dialect of Malay, that of the Johor-Riau Sultanate, which for centuries had been the lingua franca of the archipelago, standards of which are the official languages in Singapore, Malaysia and Brunei. Indonesian is universally taught in schools, consequently it is spoken by nearly every Indonesian. It is the language of business, politics, national media, education, and academia. It was promoted by Indonesian nationalists in the 1920s, and declared the official language under the name Bahasa Indonesia on the proclamation of independence in 1945. Most Indonesians speak at least one of the several hundred local languages and dialects, often as their first language. Of these, Javanese is the most widely spoken as the language of the largest ethnic group. On the other hand, Papua has over 270 indigenous Papuan and Austronesian languages, in a region of about 2.7 million people.

While religious freedom is stipulated in the Indonesian constitution,the government officially recognizes only six religions: Islam, Protestantism, Roman Catholicism, Hinduism, Buddhism, and Confucianism. Although it is not an Islamic state, Indonesia is the world's most populous Muslim-majority nation, with 86.1% of Indonesians being Muslim according to the 2000 census. On 21 May 2011 the Indonesian Sunni-Shia Council (MUHSIN) was established. The council aims to hold gatherings, dialogues and social activities. It was an answer to violence committed in the name of religion. The majority of Muslims in Indonesia are Sunni. 9% of the population was Christian, 3% Hindu, and 2% Buddhist or other. Most Indonesian Hindus are Balinese, and most Buddhists in modern-day Indonesia are ethnic Chinese. Though now minority religions, Hinduism and Buddhism remain defining influences in Indonesian culture. Islam was first adopted by Indonesians in northern Sumatra in the 13th century, through the influence of traders, and became the country's dominant religion by the 16th century. Roman Catholicism was brought to Indonesia by early Portuguese colonialists and missionaries, and the Protestant denominations are largely a result of Dutch Calvinist and Lutheran missionary efforts during the country's colonial period. A large proportion of Indonesians—such as the Javanese abangan , Balinese Hindus, and Dayak Christians—practice a less orthodox, syncretic form of their religion, which draws on local customs and beliefs.

FAMILY-OWNED BUSINESSES

A family owned business is defined as business in which two or more family member together and start a business and majority of ownership and control powers. Family owned business may be the oldest from of business organization and today they are familiar as important and different participants in the world economy.

Family owned business may have some benefits over other business because of here focus on the long term their commitment to quality (which is associated with the family name) and their care and concern of employees. Family business also face different type of management challenges like separation of family and different family business issues.

FAMILY-OWNED BUSINESSES IN INDONESIA

 Tourism

 Fishing

 Handicraft

 Agriculture and cottage industry

ISSUES IN FAMILY BUSINESSES

 A family can be defined as relation between two separate but connected systems. The business and the family with uncertain business and different rules & regulation the way in which peoples communicate with in a family.

 For example may be unsuitable in business situation, similarly personal concerns or rivalry may carried out into the work place to the damage the firm. To become successful in family business. Here must be open communication, use of different strategic planning tools and when here is need get the advice and assistance of experts.

 Bowman- ―Upton listed a number of common issues that most family businesses face. Attracting and retaining nonfamily employees can be problematic, for example, because such employees may find it difficult to deal with family conflicts on the job, limited opportunities for advancement, and the special treatment sometimes accorded family members.

 Many family businesses also have trouble determining guidelines and qualifications for family members hoping to participate in the business. Some companies try to limit the participation of people with certain relationships to the family, such as in-laws, in order to minimize the potential for conflicts.

 Family businesses often face pressure to hire relatives or close friends who may lack the talent or skill to make a useful contribution to the business. Once hired, such people can be difficult to fire, even if they cost the company money or reduce the motivation of other employees by exhibiting a poor attitude.

 Another challenge frequently encountered by family businesses involves paying salaries to and dividing the profits among the family members who participate in the firm. In order to grow, a small business must be able to use a relatively large percentage of profits for expansion.

 Another important issue relating to family businesses is succession—determining who will take over leadership and/or ownership of the company when the current generation retires or dies.

 In family business there various troubles regarding determining guidelines and qualification for family member, the want to participate in the family business. Some firms by to limit the participation of people with certain relationships to the family such as in laws, in order to minimize the conflicts problems.

 Family business often faces various kinds of pressures to higher close friends and relatives who have insufficient skill and talent to make a useful contribution to the business. Once these people are hired it will be difficult to hire them even if they cost the company money or reduce the motivation of other employees by shaving a poor attitude.

 Another difficulty a family business faces paying salaries and dividing profit among the family member to participate in the firm. In order to grow a small business has to reinvest a relatively large portion of profit for that expansion.

 Another important issue and the family business is the succession, deciding. Who will take over leadership or ownership the company when the current when retires or dies.

Agriculture provides only 4% of GDP however sectors importance to the economy is greater than percentage of GDP. Because it provides employment and income opportunities in outer atolls, attaining food security and self reliance in part through import substitution of certain agriculture products. About 3.4% of Indonesia labor force is engaged in agriculture and related activity. Sector provides employment to majority of female labor force. Most of the crops are grown with heavier concentration of root crops in southland more field and grain crops in north. Coconut is most common plantation crop in all the atolls as well as most popular home garden tree and also coconut is essential part of the Maldivian diet and its supply is sufficient for local use. The production of Palm Oil, Rubber, Cocoa, Cassava, Coffee, Tea, Tobacco, Rice has been increasing and they constitute a significant percentage of grower’s income. The production of root crops like Taro, Cassava, and Sweet potato and grain is decreasing with increased in consumption of imported rice and wheat floor at administered prices. Nowadays root crops are more of delicacy than every day staple food. Recently farming trend is increasing in resort island also. A total of 26 resorts have been recorded for producing significant part of their tropical vegetables and fruits. An important component of agriculture is also timber. Live stock production is limited to goat husbandry and poultry production. The poultry takes places primarily in rural islands. Agriculture crops are mainly grown with rain fed water. However, cash crops like chilies and watermelon are irrigated with extracted water

The main law governing international trade is the law on export and import of 1979( Law No: 31/79) which stipulates the conditions and procedures for the imports and exports of goods and entrusts the Ministry of Economic Development (MED) as the authority to regulate export and import.

 The Law mandates the authority to determine the customs tariffs on the products imported into the country. The tariff remains the main trade policy measure, and is mainly used as a revenue instrument accounting for nearly two third of tax receipts. Some tariffs are levied on environmental, health and religious grounds.

 Government has the discretion to exempt duty, especially if these imports are use for industrial purposes and development of infrastructure and tourist resorts. However, Government stopped duty exemption on imported items that are to be used for resort development since 2006.

 Government aims to reduce the dependence on import revenue as an income source for government expenditure and recently proposed much wider tax reforms. In this background, in June 2009, government proposed amendments to the export-import law to eliminate import duties on foods items and lower it for other commodities.

 The proposed amendments to the import and export law intend to address three broad policy considerations which include economic development objectives, environmental objectives and WTO obligations during its formulation.

 The government foresees that the proposed amendments will be initially costly. Therefore, in order to compensate the loss of revenue government has also submitted a corporate tax bill in parallel to parliament as a part of new broader tax regime which includes income tax and goods and service tax.

 There are no changes to the Law (Law No: 4/75) on Prohibited Imports since last trade policy review. Under this, goods are prohibited on the basis of national security and religious grounds.

 With effect from 1st of January 2006, a separate set of duties is being applied to goods importing from South Asian Association of Regional Cooperation (SAARC) member countries under the South Asian Free Trade Area (SAFTA)’s Tariff Liberalization Program (TLP) for least developed countries (LDCs) which includes Bangladesh, Bhutan, Nepal & Indonesia and for Non-LDCs which include India, Pakistan & Sri Lanka-

 Tariff reductions under the TLP (Trade liberalization program) are divided into two phases. Under phase one, Non-LDCs must reduce existing tariff rates (except for items included in national sensitive lists) by at least 20% within the first-two years from the date of coming into force of the Agreement, while for LDCs, tariff rates (for items not in the sensitive lists) have to be brought down to 30% over the same period.

 Under the second phase of the TLP all Non-LDCs have to bring down all tariffs to a range of 0 - 5% at the beginning of 2013. For LDCs, the same reduction has to be achieved at the beginning of 2016.

 The Agreement puts special emphasis on special and differential treatment for LDC member states, specifically:

 Giving special regard to the situation of the LDCs when considering the application of anti-dumping and/or countervailing measures.

 Greater flexibility in continuation of quantitative or other restrictions provisionally and without discrimination in critical circumstances by the LDC member states on imports from other Contracting States.  Considering, where practical, taking direct trade measures with a view to enhancing sustainable exports from LDC States,

 Establishing an appropriate mechanism to compensate the loss of customs revenue of LDCs arising from the implementation of TLP, until an alternative domestic arrangements are formulated to address this situation.

 A separate article on special and differential treatment for Indonesia is also included in the Agreement stating that after graduation, Indonesia will receive no less favorable treatment than that accorded to LDC member states.

INDONESIA IMPORTS OF AGRICULTURAL PRODUCTS FROM INDIA

AGRICULTURAL SECTOR- INDONESIA:

Agriculture sector has little role to play in due to shortage of cultivate land and labor. Because of adverse soil condition some limited crops such as coconut, banana, breadfruit, Papaya, Mangoes, taro, betel, chilies, sweet potato, and onion are cultivated in Indonesia. Almost all food including staples has to be imported. In December 2004 Tsunami destroyed cultivable land with salt water in many islands spoiling the ground water till date there islands do not have clean ground water for agriculture. Agriculture provides about 4% GDP. The ratio of food imports to domestic food production is 10:1. Still some islands have sufficient soil and water for horticultures products. However, fishing still remains traditional lively hood. The scope for financing to the farmers is limited. There are constraints of transport and logistics affecting competitively priced inputs to agriculture islands as well as capital of Male and the major tourism islands.As 25% of production is spoiled before reaching Male and other islands.

AGRICULTURE SECTOR’S IMPORTANCE TO THE INDONESIA ECONOMY

Agriculture provides only 4% of GDP however sectors importance to the economy is greater than percentage of GDP. Because it provides employment and income opportunities in outer atolls, attaining food security and self reliance in part through import substitution of certain agriculture products. About 3.4% of Indonesia labor force is engaged in agriculture and related activity. Sector provides employment to majority of female labor force. Most of the crops are grown with heavier concentration of root crops in southland more field and grain crops in north. Coconut is most common plantation crop in all the atolls as well as most popular home garden tree and also coconut is essential part of the Maldivian diet and its supply is sufficient for local use. The production of Palm Oil, Rubber, Cocoa, Cassava, Coffee, Tea, Tobacco, Rice has been increasing and they constitute a significant percentage of grower’s income. The production of root crops like Taro, Cassava, and Sweet potato and grain is decreasing with increased in consumption of imported rice and wheat floor at administered prices.

Nowadays root crops are more of delicacy than every day staple food. Recently farming trend is increasing in resort island also. A total of 26 resorts have been recorded for producing significant part of their tropical vegetables and fruits. An important component of agriculture is also timber. Live stock production is limited to goat husbandry and poultry production. The poultry takes places primarily in rural islands. Agriculture crops are mainly grown with rain fed water. However, cash crops like chilies and watermelon are irrigated with extracted water.

HEAVY IMPORT DEPENDENCY

Almost all food requirements except fresh fish & coconut are imported. Rice is the staple food of the Indonesia and it is mostly imported from south east Asia. According to statistics from Indonesia custom services, 66% of Rice & 90% of Wheat flour is imported from India. Indonesia also import at 10% of fresh fruits, vegetables from India, Australia and Sri lanka.

 MAIN IMPORTS BY INDIA TO INDONESIA INCLUDE

 River sand & Aggregates.

 Groceries like Onions, Potatoes, Egg Wheat Flour, Rice & Sugar.

 Cement.

 Household &food stuffs including fruits and vegetables.

 Garments  Medical & Surgical Equipments.

 Electronics.

 MAIN EXPORTS TO INDIA BY INDONESIA INCLUDE

 Live Ornamental Fish.

 Frozen / Fresh or Chilled Yellow fin Tunas, Fillets, and Loins.

 Fresh or Chilled Big eye Tunas and Loins.

 Fresh or Chilled Grouper, fillets and Loins.

 Frozen / Fresh or Chilled Marlin and Loins.

 Shells & Battery Waste, Shark-Liver oil.

 Aluminums, Copper, Tin, Alloy Steel Waste & Scrap.

Norms and policies of indonesia for import including taxation trade policy objectives and framework:

 The primary objective of indonesia trade policy is to establish favorable environments for speedy commerce and economic activity focusing on diversifying the economy with export- oriented trade in services and industrial development focusing to achieve the main objectives – poverty alleviation and improvement in the standard of living – of Indonesia.

 Since many years Indonesia has maintain relatively open trade policy with no major direct trade measures, how tariffs keeping non tariffs measures to an absolute minimum. The free trade policy will be maintained and improved as per government development policies and priorities. Further bilateral regional and multilateral approach to free trade will be pursued.

Bilateral trade arrangement:

 The oldest bilateral arrangement, as identified in the first Trade Policy Review report, is the agreement in force since 31 March 1981 which is known as "Trade Agreement between the Government of the Republic of Indonesia and the Government of the Republic of India

REFERENCES

 National Communication of Indonesia to the UNFCCC

 Manik, A.A. (2001), ―Flood risk assessment: appropriateness of a GIS based approach for small island states such as the Indonesia‖. Unpublished Masters Dissertation. University of Portsmouth, United Kingdom.

 Maniku, H.A. (1990), ―Changes in the Topography of the Indonesia‖. Malé: Forum of Writers on Environment.

 MCPW (2001),Direct communication with Ministry of Construction and Public Works.

 MCS (2001), Direct communication with Indonesia Customs Service.

 Manishmanwah .name/ agriculture _approach

 en.wikipedia.org/ wiki /agriculture_ in India

 www.Indiamba.com / faculty column /FC703/fc703

 TRADE POLICY REVIEW, Report by INDONESIA

 Anderson, K., M. Kurzweil, W. Martin, D. Sandri and E. Valenzuela (2008), ―Methodology for Measuring Distortions to Agricultural Incentives,‖ Agricultural Distortions Working Paper 02, World Bank, Washington, DC, revised January.

 APEDA(2008), www.apeda.com/apedawebsite/trade_promotion/Agri_Export_Zone.htm; http://dgft.delhi.nic.in/ [viewed 1 October 2008]. GAIN-IN8015 (2008), India, Grain and Feed Annual, USDA FAS, 20 February.

Financial Market

A Financial Market is a market in which people and entities can trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices that reflect supply and demand. Securities include stocks and bonds, and commodities include precious metals or agricultural goods.

There are both general markets (where many commodities are traded) and specialized markets (where only one commodity is traded). Markets work by placing many interested buyers and sellers, including households, firms, and government agencies, in one "place", thus making it easier for them to find each other. An economy which relies primarily on interactions between buyers and sellers to allocate resources is known as a market economy in contrast either to a command economy or to a non-market economy such as a gift economy.

In finance, financial markets facilitates the raising of capital (in the capital markets), The transfer of risk (in the derivatives markets), Price discovery, Global transactions with integration of financial markets, The transfer of liquidity (in the money markets), International trade (in the currency markets)

Typically a borrower issues a receipt to the lender promising to pay back the capital. These receipts are securities which may be freely bought or sold. In return for lending money to the borrower, the lender will expect some compensation in the form of interest or dividends. This return on investment is a necessary part of markets to ensure that funds are supplied to them.

Within the financial sector, the term "financial markets" is often used to refer just to the markets that are used to raise finance: for long term finance, the Capital markets; for short term finance, the Money markets.

The capital markets divided into- Primary markets and Secondary markets.

Primary markets:

Newly formed (issued) securities are bought or sold in primary markets, such as during initial public offerings. The transactions in primary markets exist between issuers and investors.

Secondary markets:

Secondary markets allow investors to buy and sell existing securities. While in secondary market transactions exist among investors.

Stock markets which provides financing through the issuance of shares or common stock, and enable the subsequent trading thereof.

Bond markets which provides financing through the issuance of bonds, and enable the subsequent trading thereof.

These are the two major markets but apart from this there is also one market namely Commodity Market.

Commodity markets facilitate the trading of commodities.

Money markets provide short term debt financing and investment.

Derivatives markets provide instruments for the management of financial risk.

Futures markets which provide standardized forward contracts for trading products at some future date; see also forward market.

Insurance markets which facilitate the redistribution of various risks.

Foreign exchange markets facilitate the trading of foreign exchange.

Role (Financial system and the economy) One of the important requisite for the accelerated development of an economy is the existence of a dynamic financial market. Saving mobilization: Obtaining funds from the savers or surplus units such as household individuals, business firms, public sector units, central government, state governments etc. is an important role played by financial markets. Investment: Financial markets play a crucial role in arranging to invest funds thus collected in those units which are in need of the same. National Growth: An important role played by financial market is that, they contributed to a nation‘s growth by ensuring unfettered flow of surplus funds to deficit units. Flow of funds for productive purposes is also made possible. Entrepreneurship growth: Financial market contributes to the development of the entrepreneurial claw by making available the necessary financial resources. Industrial development: The different components of financial markets help an accelerated growth of industrial and economic development of a country, thus contributing to raising the standard of living and the society of well-being.

Functions of Financial Markets

Transfer of Resources: Financial market facilitate the transfer of real economic resources from lenders to ultimate borrowers. Enhancing income: Financial markets allow lenders to earn interest or dividend on their surplus invisible funds, thus contributing to the enhancement of the individual and the national income. Productive usage: Financial market allow for the productive use of the funds borrowed. It helps to enhancing the income and the gross national production. Capital Formation: Financial market provides a channel through which new savings flow to aid capital formation of a country. Price determination: Financial markets allow for the determination of price of the traded financial assets through the interaction of buyers and sellers. They provide a sign for the allocation of funds in the economy based on the demand and supply through the mechanism called price discovery process. Sale Mechanism: Financial markers provide a mechanism for selling of a financial asset by an investor so as to offer the benefit of marketability and liquidity of such assets. Information: The activities of the participants in the financial market result in the generation and the consequent dissemination of information to the various segments of the market. It aids to reduce the cost of transaction of financial assets.

Financial Functions

It provides the borrower with funds so as to enable them to carry out their investment plans. It provides the lenders with earning assets so as to enable them to earn wealth by deploying the assets in production debentures. It provides liquidity in the market so as to facilitate trading of funds.

About Indonesia

The Dutch began to colonize Indonesia in the early 17th century; Japan occupied the islands from 1942 to 1945. Indonesia declared its independence after Japan's surrender, but it required four years of intermittent negotiations, recurring hostilities, and UN mediation before the Netherlands agreed to transfer sovereignty in 1949.

Indonesia is now the world's third most populous democracy, the world's largest archipelagic state, and home to the world's largest Muslim population.

Current issues include: alleviating poverty, improving education, preventing terrorism, consolidating democracy after four decades of authoritarianism, implementing economic and financial reforms, stemming corruption, holding the military and police accountable for human rights violations, addressing climate change, and controlling infectious diseases, particularly those of global and regional importance.

Economic overview

Indonesia, a vast polyglot nation, has weathered the global financial crisis relatively smoothly because of its heavy reliance on domestic consumption as the driver of economic growth. Increasing investment by both local and foreign investors is also supporting solid growth. Although the economy slowed to 4.6% growth in 2009 from the 6%-plus growth rate recorded in 2007 and 2008, by 2010 growth returned to a 6% rate and remained there in 2011. During the recession, Indonesia outperformed most of its regional neighbors.

The country experienced high inflation in early 2010, mainly due to food shortages, but agencies across the government acted quickly to ensure sufficient food stocks. The government made economic advances under the first administration of President Yudhoyono, introducing significant reforms in the financial sector, including tax and customs reforms, the use of Treasury bills, and capital market development and supervision, and in December 2011, Fitch Ratings Agency upgraded the country's credit rating to investment grade for the first time since 1997.

Indonesia's debt-to-GDP ratio in recent years has declined steadily because of increasingly robust GDP growth and sound fiscal stewardship. Indonesia still struggles with poverty and unemployment, inadequate infrastructure, corruption, a complex regulatory environment, and unequal resource distribution among regions. In 2011 the government faces the ongoing challenge of improving Indonesia's insufficient infrastructure to remove impediments to economic growth, while addressing climate change mitigation and adaptation needs, particularly with regard to conserving Indonesia's forests and peatlands.

Indonesia Economic Future Challenges

Indonesia‘s growth performance remains solid, but with uncertainty over the international outlook the country needs to continue improving crisis preparedness. The global growth outlook remains weak and financial markets turbulent.

However, to date Indonesia‘s growth performance has remained solid. GDP growth in the first quarter of 2012 was 6.3 percent year-on-year, down slightly from 6.5 percent in 2011 as a whole. Consumption held up well in the first quarter of 2012, investment growth came down while net exports made a negative contribution to growth.

Indonesia is not though immune from spillovers from international developments through both the financial and trade channels. Falling international commodity prices, and weaker volumes, contributed to a sharp slowdown in export growth in recent months and the narrowing in the trade surplus has seen the current account move into deficit.

Heightened international risk aversion was accompanied by portfolio capital outflows. Domestic asset prices declined and the portfolio outflows, plus weaker trade balance, put pressure on the Rupiah. Reflecting the performance, the baseline outlook is for growth of 6 percent in 2012 and 6.4 percent in 2013.

However, in the event of a major freezing of international financial markets which contributes to a drop in trading partner growth, a fall in global commodity prices and reduced domestic investor confidence, similar to in 2009, it is projected that growth could slow to 4.7 percent in 2013. In a scenario in which such a crisis was accompanied, or indeed precipitated, a severe, prolonged global downturn encompassing the major emerging economies, 2013 growth in Indonesia could drop to 3.8 percent.

With risks in the global economy are high and expected to persist, emerging economies, including Indonesia, therefore face the twin challenges of enhancing crisis preparedness to deal with near-term shocks while at the same time putting in place policies to support medium-term growth in a weaker global environment.

Structure of Indonesia’s Financial Market

Source: Bapepam-LK.

BI-RTGS = Bank Indonesia-Real-Time Gross Settlement;

BI-SSSS = Bank Indonesia-Scripless Securities Settlement System;

C-BEST = Central Depository and Book-Entry Settlement;

KPEI = Indonesian Clearing and Guarantee Corporation;

KSEI = Indonesian Central Securities Depository; OTC = Over-the-Counter;

PLTE = Securities Transaction Report Reciever System The financial market is dominated by government debt instrument. The development of Indonesian financial market actually took place from the post 1997/98 period. There is a reasonably high degree of transparency in Indonesia‘s monetary policy.

The various stock exchanges of Indonesian are Jakarta Stock Exchange, Surabaya Stock Exchange (SSX), Jakarta Composite Index (JCI), and Jakarta Futures Exchange (JFX).

Indonesia’s bond market has grown steadily in recent years to offer a more diversified array of debt instruments and cater to a broader investor base. The market accommodates the needs of both local and foreign investors. In addition to its position as one of the most attractive market for foreign investors, the potential of growing local investors is also an area that can be cultivated further by local and foreign issuers alike.

As the largest issuer of bonds, the regularly taps the local market to finance the state budget. The Indonesian money market is basically inter- bank money market, as it mostly involves only banking. So far, the transaction in the inter-bank money market is dominated by unsecured lending/borrowing (PUAB), and mostly in a very short term maturity.

BOND listed in IDX consists of Corporate Bonds Government Bonds State Bond (Including Bond Retail/ORI), Treasury Bills (T-Bills), Corporate Sukuk. All these instruments can be traded and has been and or reported the trading through .

Source: Asiaonline, Ministry of Finance (2011) Major Players in the Indonesia Market Participants in the Indonesian bond market include issuers from the government and the corporate sector; supranational and offshore borrowers; investors comprising financial institutions and asset-pooling industries; intermediaries comprising securities companies, investment houses, and dealers; rating agencies; and market associations. As the largest issuer of bonds, the Government of Indonesia regularly taps the local market to finance the state budget.

Money market fund is a mutual fund that invests 100% in money market instruments such as Sertifikat Bank Indonesia (SBI), Time Deposit, and bond with the remaining maturity less than one year. There is no subscription and redemption fee charged for this fund. Money-Markets Instruments in Indonesia are Treasury Bills (Surat Perbendaharaan Negara), Islamic Treasury Bills (Surat Perbendaharaan Negara- Syariah), Certificate of the Central Bank (Sertifikat Bank Indonesia), Commercial Paper, Repurchase Agreement.

Intermediaries in Indonesia consist of Banks, Securities, Companies, and Custodians.

The functions of banks in Indonesia are basically as financial intermediary that take deposits from surplus units and channel financing to deficit units. According to Indonesian banking law, Indonesian banking institutions are typically classified into commercial and rural banks. Commercial banks differ with rural banks in the sense that the latter do not involve directly in payment system and have restricted operational area. In term of operational definition, bank in Indonesia are classified into non-syariah and syariah-based principles commercial banks.

There are 121 commercial banks in Indonesia (4 state owned banks and 117 private banks). Two of the state owned banks have Islamic banking units. Of the 26 government regional banks, 15 have Islamic banking units, while of 86 private national banks, 7 have Islamic banking unit, and there are five Islamic commercial banks.

Indonesia Financial System (2011)

Top Largest Banks in Indonesia comprise of Bank CIMB Niaga, Bank Mandiri, Bank Rakyat Indonesia (BRI), and Bank Central Asia (BCA). Best Banks in Indonesia includes PT Bank DBS Indonesia, HSBC, and Bank Mandiri.

Structure of Indonesian Banking System Envisaged in API

Source: Financial Stability Report, Bank Indonesia

Bank Indonesia (BI) is the central bank of Indonesia. It acts as the central depository for the settlement and safekeeping of government bonds and the Certificate of Bank Indonesia. BI objectives are public trust in respect of funding and disbursement of funds; for implementation of monetary policy; contributing to economic growth and equity.

The Capital Market and Financial Institution Supervisory Agency is Bapepam-LK) which locally known as Badan Pengawas Pasar Modal dan Lembaga Keuangan. This regulatory body is responsible for regulating all capital market players such as securities companies, investment managers, custodians, and regulating non-bank financial services industry, including insurance, multi-finance, and pension funds. As a regulator, it grants licenses to various securities market intermediaries (e.g., brokers, mutual funds, custodian banks, underwriters, etc.) and professionals (accountants, public notaries, lawyers, and appraisers).

The entities are Self-Regulatory Organizations (SROs) are The Indonesia Stock Exchange (IDX), The Indonesian Clearing and Guarantee Institution (KPEI), The Indonesian Central Securities Depository (KSEI). These three SROs regulate the listing, trading, clearing and settlement of listed bonds when transacted on the exchange. Each regulates its own areas of operations, subject to Bapepam-LK approval.

Indonesia’s insurance industry is fairly small, but it has been growing steadily since 2000. Currently, there are 141 insurance companies in Indonesia. Insurance companies are important institutional investors in the Indonesian capital market. As of September 2011, the insurance industry holds about 13% of all tradable government bonds, or IDR92.95 trillion out of IDR696.56 trillion.

Individual Debtor Information (IDI) is a Credit Bureau of Indonesia to collect and record credit/loan facilities data, and finally distribute it as credit information. The Mutual-Fund industry in Indonesia has grown considerably since 2000. Fixed- income assets comprise a considerable portion of investment fund assets. As of September 2011, the net asset value of mutual funds was valued at IDR154.53 trillion.

The Indonesia Commodities and Derivatives Exchange (ICDX) is an exchange that launched on March 31, 2010. It began operations with a single palm oil futures contract, but planned to add other heavily-traded Asian commodities in the near future. The ICDX not only competes directly with Indonesia's existing commodities exchange, the Jakarta Futures Exchange, but also attempts to win business from the South East Asian region's other main venues that list palm oil contracts, most notably Bursa Malaysia.

The Global Economic Crisis adversely affected Indonesia`s exports during the first two months of this year, which recorded a slower growth than in the same period in 2011. Since the crisis began, Bank Indonesia‘s monetary strategy has been to support the rupiah exchange rate, and limit any increase in inflation, by maintaining a firm monetary stance.

IDBI Bank Limited is an Indian financial service company to provide credit and other facilities for the development of the fledgling Indian industry. State Bank of India (SBI) is the largest banking and financial services company in India. India‘s major Stock Exchanges are Bombay Stock Exchange, National Stock Exchange. India‘s insurance regulated by Insurance Regulatory and Development Authority (IRDA). Credit Information Bureau India Limited (CIBIL) is India's first credit information bureau. It's a repository of information, which contains the credit history of commercial and consumer borrowers. Regulatory body Of Mutual Fund in India Association of Mutual funds in India (AMFI). India has four national commodity exchanges namely, Multi Commodity Exchange (MCX), National Commodity and Derivatives Exchange (NCDEX), National Multi-Commodity Exchange (NMCE) and Indian Commodity Exchange (ICEX).

Financial Sector Information (2011)

Source: Asiaonline, Ministry of Finance (2011)

After analyzing the indicators of India and Indonesia we have come up with the following conclusion:

The GDP growth worth in Indonesia was worth 846.83 billion US dollars in 2011, according to a report published by the World Bank. While, according to a report published by the World Bank, in India was worth 1847.98 billion US dollars in 2011.

The inflation rate in Indonesia was recorded at 4.61 percent in October of 2012, while in India was recorded at 7.45 percent in October of 2012.

GDP Deflator in Indonesia increased to 316.14 Index Points in the third quarter of 2012 from 315.11 Index Points in the second quarter of 2012.

The GDP in Indonesia expanded 6.17 percent in the third quarter of 2012 over the same quarter of the previous year. While, in India expanded 5.30 percent in the third quarter of 2012 over the same quarter of the previous year. The GDP per capita in Indonesia was last reported at 1206.99 US dollars in 2011, according to a report published by the World Bank. While, in India was last recorded at 837.75 US dollars in 2011.

Gross National Product in Indonesia increased to 623414.10 IDR Billion in May of 2012 from 610440.80 IDR Billion in February of 2012, according to a report released by the Statistics Indonesia. While, in India increased to 48404.28 INR Billion in June of 2009 from 44375.83 INR Billion in June of 2008.

Interbank Rate in Indonesia increased to 4.20 percent in October of 2012 from 4.09 percent in September of 2012. While, in India increased to 8.19 percent in November of 2012 from 8.14 percent in October of 2012.

Introducing Steel industry, it is the crucial to the development of any modern economy and is considered to be the backbone of human civilization. The level of per capita consumption of steel is treated as one of the important indicators of socio- economic development and living standard of the people in any country.

Japanese companies are considered the largest producers of the steel and Russia also has very huge plants for the production of this material. The large companies are going to merge and increase their status in the steel production all around the globe. Steel prices also fluctuate with the fluctuations in the patrol prices, the oil producing countries are determined to keep the oil prices at a constant level for the next few years.

Global scenario of steel output trends remained on a firm upward path. The rising demand has primarily been dueled by the increased demand from China. The favorable trends in the international markets promise to continue for some more time as the US and some of the leading European economies are showing early signs of recovery.

Global Steel has become one of the most coveted annual steel events around the globe. With the recent sluggishness of the global markets, in addition to the economic and political challenges facing the major economies of the world, we seem to be entering a more complex and difficult to forecast phase of the economic cycle. The slowing down of the Chinese economy and the not so impressive Indian growth story which seems to be losing its steam is bound to have a strong impact on the steel and steel making raw materials industry.

Global Steel 2013, the complexities of the current situation, will also focus on the possible solutions of overcoming the crisis, and further assess how the global steel industry could adjust and innovate itself in the current scenario to become a rallying point for economic recovery in India and the world.

About the Domestic demand of steel, the present steel consumption per capita per annum is about 30 kg in India, compared to 150 kg in the world, and 350 kg in the developed world. The estimated urban consumption per capita per annum is around 77 kg in the country, expected to reach approximately 165 kg in 2019-20, implying a CAGR of 5 percent.

The role played by the steel industry in India, is the pre-deregulation phase has seen the Ministry of Steel in the key role of a regulator which was essential, given the operating economic conditions, the limited presence of industry and the scarcity of key raw material for steel-making at home. Through skillful and judicious decisions on allocation and pricing and formulating related policy measures, the Ministry of Steel had played an important role in taking the steel industry forward in this phase.

In the post-deregulation period, the role of the Ministry of Steel has primarily been that of a facilitator for the Indian steel industry, being responsible for the planning and development of the iron and steel industry, development of essential inputs such as iron ore, limestone, dolomite, manganese ore, chromites, sponge iron, and other related functions.

The role of Steel market in Indonesia is US$ 7.38 billion Rs 66.4 trillion in 2012. Growing demand is expected from the construction and manufacturing sector with economic growth predicted at 6.5% this year. The construction sector is forecast to expand 7.3% & the manufacturing industry is predicted to grow 6.5%.

Talking about the Functions of steel production, Blast furnace basically converts iron ore into liquid form of iron. Iron produced by BF contains high amount of carbon and other impurities, this iron is called pig iron. Pig iron due to its high carbon content has limited end use application such as covers of manholes. To make steel products out of pig iron it is further processed.

Basic purpose of the EAF (Electric Arc Furnace) is re melting sponge iron, melting scrap, its main inputs, to produce finished steel. It uses electricity as much as 400-500 kWh/ton.

COREX is an advance process of making steel. Though few use this process, it is possible to use non-coking coal directly in smelting work and it also makes it possible to use lump ore and pellets as inputs.

Induction Arc Furnace (IAF) is one of the most advance processes of making steel. Like EAF it uses electricity as its main fuel. IAF is most environment friendly and efficient way of producing steel.

Structure of Steel Industry

The four distinct components of the structural steel industry are, Producers of structural steel products, Service Centers, Structural Steel Fabricators and Erectors.

The major economic sectors of Indonesia are agriculture includes three types of farming, the manufacturing sector, and the country‘s hospitality industry.

Position of India in Steel Sector is that India has emerged as the fourth largest steel producing nation in the world, as per the recent figures release by World Steel Association in April 2011. In 2010, India was the 5th largest producer, after China, Japan, USA and Russia had recorded a growth of 11.3% in steel production as compared to 2009. Overall domestic crude steel production grew at a compounded annual growth rate of 8.4% during 2005-06 to 2009-10. The Indian steel industry accounted for around 5% of the world‘s total production in 2010.

Position of Indonesia in Steel Sector is Indonesia‘s steel consumption grew robustly by 22.4% y/y to 10.95 million metric tons in 2011 in line with the growth in domestic steel demand. As the country with the largest economy and highest population in ASEAN, its share of steel consumption reached 20.9% making it the top second steel consuming country in the region.

State-owned PT Krakatau Steel (KRAS) is the largest integrated steel producer in Indonesia. The steelmaker is capable of producing 2.5mn tones of crude steel and is the largest producer of hot- and cold-rolled coils with a domestic market share of 41% and 24%, respectively.

Trade & Economic Relations in India – Indonesia bilateral trade increased from US $ 4.38billion in 2005-06 to US $ 21.30 billion in 2011-12 making Indonesia India‘s second largest trading partner in the ASEAN.

Main items of India‘s Exports to Indonesia are Petroleum products, telecommunication equipment and parts, hydrocarbons and derivatives, oil seed, motor vehicle for goods transportation, animal feed, cotton, flat rolled product, alloy steel while the main items of India‘s imports from Indonesia are Fixed vegetable fats& oils, Coal, Copper ores, natural rubber, pulp & wastepaper, alcohols & phenols, hydrocarbon, machine tools, fertilizers, paper & paperboard, carboxylic acids, dyeing/tanning extracts, medicinal & pharmaceutical products, chemical products, etc.

In order to spur growth and attract investment, the Government of Indonesia organized the Indonesia Infrastructure at Jakarta with the agenda titled ―A World Forum – A National Priority‖. This was a second conference and exhibition of its kind. Four companies namely, BHEL, TCS, Punj Lloyd and ESSAR exhibited in Indonesia Infrastructure and many more such as ICICI, IDFC, and NTPC etc. were present in the conference. The current trends in India-Indonesia steel sector are, India has a huge advantage in raw materials based industries such as steel and aluminum as there is abundant supply of good quality iron ore in the country. Indian companies will need to build a focused China strategy, cultivate close customer relationships and focus on quality to tap the market for flat steel. Domestic steel industry needs to further reduce conversion costs to emerge as the lowest cost players, and devise strategies to tap the Chinese flat steel market.

Indonesian investment in India is rather low and it ranks 36th in FDI inflow to India. Indonesian companies have started bidding for infrastructure and energy related projects in India. Problem for the steel industry was a shortage of raw material in the form of scrap iron, which mostly had to be imported.

Indonesia‘s steel industry still imports 70 percent of the scrap material for its raw material. Only Krakatau Steel, a state-controlled steelmaker, produces steel with 70%- 80% iron ore and the rest from scrap metal. Other industries rely entirely on scrap metal.

PT Essar Indonesia is the largest producer of cold rolled steel in Indonesia's private sector. It has a domestic market share of 35 per cent and a history of process and product innovation. With close proximity to its customer base and raw material suppliers, PT Essar Indonesia caters to diverse market segments that extend beyond Indonesia to other countries as well.

Essar has asked the Indonesian government for mining concession for 30 years to ensure supply for its pellet plant. The planned 2 million tone pellet plant would need about 7 million tons of iron ore. The projects will integrate Essar Steel's operations in Indonesia.

Jindal Stainless has acquired Stainless Steel Cold Rolling plant in Indonesia from Maspion Stainless Steel. Jindal Stainless has established its foothold in the South East Asian & Oceania market with acquisition of a Stainless Steel Cold Rolling plant from Maspion Stainless Steel, Indonesia.

Essar steel limited is the first steel plant in India to be awarded ISO 9002 certification for the complex as a whole. In addition, it is the first steel plant in India to receive ISO 14001 certification for the best environment management. Gujarat NRE and The Economic Times present Global Steel 2013, the 8th international conference on steel and steel making raw materials. Acknowledging the vital role that the emerging nations are bound to play in the years to come and steel being the catalyst of such growth, the theme of Global Steel 2013 has been chosen as ―Growing on Steel‖.

Trends and Developments in Steel Sector, India has become 4th largest producer of crude steel in the world as against the 8th position in 2003 and is expected to become the 2nd largest producer of crude steel in the world by 2015. India continues to maintain its lead position as the world‘s largest producer of direct reduced iron (DRI) or sponge iron.

301 MOUs have been signed with various States for planned capacity of around 488.56 million tones. The break-up of 301 MOUs signed by various State Governments are given in the table below: Source: Ministry of commerce & industry, GOI

About the Future trends, it has to be said that the global recession has affected the Indian steel industry especially stainless steel, but the steel industry is trying to offset the negative effect of the recession by focusing on transportation and construction projects which are usually funded by the government. It is estimated that India's steel consumption will grow at nearly 16% annually till 2013.

Regulatory environment in India is major market for steel and steel items include USA, Canada, Indonesia, Italy, West Asia, Nepal, Taiwan, Thailand, Japan, Sri Lanka and Belgium. The major steel items of export include HR coils, plates, CR and galvanized products, pipes, stainless steel, wire rods and wires. With the fall in prices along with depressed domestic demand, India has been increasing exports to overcome the excess supply situation.

The general policy and procedures for export and import of iron and steel, ferro alloys and Ferro scrap are at present decided by the Ministry of Commerce in consultation with the Ministry of Steel.

Government initiate have been aimed at increasing investment in the steel industry in India, various policy setting being prominent like Allowing private ownership and foreign investment , Importing intellectual property laws , Deregulation of pricing and distribution of iron and steel, Custom policy, Special Economic Zones (SEZs) and Special investment regions.

Import/Export Policy for steel industry in Indonesia has doubled its import tariffs on hot rolled plate and coils and cold rolled steel. The Indonesian Anti-Dumping Committee (KADI) is now reviewing separate anti-dumping duties on hot rolled coil imports from India, China, Russia and Ukraine.

The Industrial Policy has been progressively liberalized dispensing with the requirement of industrial license in almost all sectors except a few retained under compulsory licensing on public health safety and security considerations. Many tax exemptions give rise to unnecessary distortions. Indonesia‘s VAT appears to be generally well designed. It is levied at a single rate of 10% on domestic added value and on imports. The exemptions create revenue losses, although the size of the losses is hard to evaluate.

Import/Export Policy for steel industry in India, Iron and steel products are freely importable as per the extent policy. In the past, India has been importing around 1.5 million tonnes annually. Advance Licensing Scheme allows duty free import of raw material for exports. Similar to import policy for the iron and steel products, the exports of these can also be done freely. Government introduced schemes under the Duty Entitlement Pass Book Scheme (DEPB) to facilitate exports. Under this scheme, exporters on the basis of notified entitlement rates, are granted due credits which entitle them to import duty free goods in return.

Coming to the Tariff Barriers, The tariff is India‘s main trade policy measures. Most imports enter India are subject to tariff which are accounted for 1,484 number of tariff lines. Most imports are highly concentrated on tariff line between 10 -15 percent which is amounted for US$1,651.8 million in 2007 or 39.3 percent of India‘s imports from the world. Value of imports for the tariff above 50 percent is amounted for US$1,097.3 million or has taken 26.1 percent of India‘s imports from the world.

Trade barriers, Indonesian investment in India is rather low and ranks 36th in the FDI inflow to India. Though there has been increasing participation by Indonesian groups especially in West Bengal, the stringent regulatory climate in India is perceived as a primary deterrent for Indonesian companies looking to invest in a big way.

The actions taken by Ministry of Steel have been to address concerns of domestic steel industry. Some are boosting demand in the steel consuming sectors, Reduction Power & Rail Tariffs, Duty on project imports and Reduction in input costs.

Business Opportunities in future before Indian steel sector is that it has rich mineral resources. It has abundance of iron ore, coal and many other raw materials required for iron and steel making. Considering quality of work force, Indian steel industry has low unit labor cost, commensurate with skill. The rapid expansion is expected in the east region, Orissa because the availability of the superior raw material. It is estimated that world steel consumption will double in next 25 years. Quality improvements of Indian steel combined with its low cost advantage will definitely help in substantial gain in export market.

Business opportunity in Gujarat Steel Industry, The Government has allowed Essar Steel to surrender its sector-specific SEZ in Gujarat as the developer is facing an exodus of units from the zone. Income Tax exemptions were the biggest attraction among SEZ developers and unit holders. Essar had set up four units at the SEZ in Hazira to consolidate steel exports, in view of buoyancy in the steel industry.

Business opportunity in Indonesia Steel Industry, After Indonesia had been nominated as investment grade at the end of 2011, Foreign Direct Investment (FDI) flowed swiftly into Indonesia and this momentum shall be utilized effectively to improve its greater role in ASEAN and Global levels. Although the supply of basic materials in the form of iron pellets becomes main obstacles because they are still imported, Indonesia still has opportunity to develop this steel industry in view of low steel iron consumption per capital in Indonesia if compared with steel iron consumption per capital of other ASEAN countries. Therefore, the government is actively inviting domestic and foreign investors to develop this sector.

Export Import Policies and Pharmaceutical Industry Of Indonesia

Indonesia is the largest archipelago country in the world. In Indonesia there are more than 13000 Island. Indonesia have a 141 large seaports, 5 international and 100 traditional Harbours. Import export is very helpful to Indonesian economy to develop itself Because it help them to earn foreign currency. With the help of that they can purchase machinery and raw materials necessary for industrial production and growth.

During the 1980’s, 25% of domestic production was exported. And in that export petroleum is very important export and other is agricultural product. On Other side 70% of import as raw materials & auxiliary goods for industry growth.

GENERAL OBJECTIVES OF THE EXIM POLICY

Government control import of non-essential items through an import policy. At the same time, all-out efforts are made to promote exports. Thus, there are two aspects of trade policy; the import policy which is concerned with regulation and management of imports and the export policy which is concerned with exports not only promotion but also regulation. The main objective of the Government policy is to promote exports to the maximum extent. Exports should be promoted in such a manner that the economy of the country is not affected by unregulated exports of items specially needed within the country. Export control is, therefore, exercised in respect of a limited number of items whose supply position demands that their exports should be regulated in the larger interests of the country. In other words, the policy Aims at1(i) Promoting exports and augmenting foreign exchange earnings ;and 2 (ii) Regulating exports wherever it is necessary for the purposes of either avoiding competition among the Indian exporters or ensuring domestic availability of essential items of mass consumption at reasonable prices. The government of India announced sweeping changes in the trade policy during the year 1991. As a result, the new Export-Import policy came into force from April I, 1992. This was an important step towards the economic reforms of India. In order to bring stability and continuity the policy was made for the duration of 5 years.

GENERAL PROVISIONS ON IMPORT & EXPORT GENERAL PROVISION ON EXPORT

Decision of Minister for Industry and Trade No. 558/MPP/KEP/12/1998;

 Classification of goods for export: i. Regulated goods: can be exported only by Registered Exporter ii. Controlled goods: can be exported with approval from minister for trade iii. Prohibited goods iv. Other than a, b and c is free for export

GENERAL PROVISION ON GOODS FOR EXPORT (NO. 575/MPP/KEP/VIII/2002):

Regulated: Coffee, Textile and its products, veneer and plywood, sandal woods, etc Controlled: Cattles, particular life fish, oil and gas, sea sand etc Prohibited: logs, selected life creatures, etc. Free for export: including electronic goods Exporter might a company or individual, but should registered as an exporter; Procedure: Notify the Custom prior to exporting of goods

GENERAL PROVISIONS ON IMPORT

Decision of Minister for Industry and Trade No. 229/MPP/KEP/7/1997;

i. Only can be conducted by a company poses Importer Identification Number (API); ii. Imported goods must new ones; iii. Exemption for particular goods and procedures apply (determined by ministry of trade)

EXPORT POLICIES OF INDONESIA

o EXPORT SUBSIDIES o RESTRICTIONS ON EXPORTS o AGRICULTURAL EXPORTS

IMPORT POLICIES OF INDONESIA

AGRICULTURAL IMPORTS

Indonesia’s most important non-food agricultural imports are textile fibres (17.5 percent) and animal feeds (7.5 percent).[73] Indonesia’s most important food imports are rice (20.2 percent), other cereals (16.6 percent), oilseeds (6.4 percent) and sugar (10.1 percent). Together, these products accounted for 78.2 percent of all agricultural imports in 1998-2000.

The Indonesia’s Agreement tariff between 2009- 2012.

CHANGES IN 2009 (1) Reimposing the Import Tariff on Diary Products:-

(2) Reducing the Import Tariff on Sugar:-

(3) Offering the Import Tariff Reduction and Exemption to 11 Industries:-

(4) Maintaining Zero Export Tariff on Palm Oil

IMPORT POLICIES OF INDONESIA & FOREIGN MARKET ACCESS

The Trade law of 1934 is the basic law for the regulation of Indonesia trade policies. Indonesia’s Department of Trade is in charge of trade affairs, whose responsibilities are to make foreign trade policies, participate in the formulation of trade-related regulations, classify management categories of imported and exported products, process applications for import licenses, and appoint importers and allocate quotas.

EXPORT ADMINISTRATION REGIME

The basic export administration regime of Indonesia is based on two decrees: Ministerial Decree No. 558/MPP/Kep/12/1998 released by the Department of Industry and Trade in 1988 and Ministerial Decree No.01/M-DAG/PER/1/2007 released by the Department of Trade in 2007.

 The Indonesian Department of Trade Revised the Export Regulations of Raw Rattan  Letter of Credit is Obligatory for Export Products Basing on Natural Resources  The National Single Window System Was Established

EXPORT CREDIT INCENTIVES

INVESTMENT ADMINISTRATION REGIME AND ITS DEVELOPMENTS

According to the Investment Law of 2007, domestic and foreign investors may invest in any business sectors except in the field of transportation, mining, communication and weapons. These 4 fields are in close relation with the national stability and state secrets, so they are exclusive to the investors. Moreover, foreign investors can only hold at most 45% of shares in transportation-related companies and projects, and at most 20% of shares in the communication sector

Trade and Investment Related Administration and Its Developments

Foreign Exchange Administration Foreign Market Access Report 2010 In accordance with the Law on Monitoring Foreign Exchange Flow of Banks and Non-bank Financial Institutions drafted and enacted in 1999 by Bank Indonesia (BI), the central bank of country, Indonesia has no foreign exchange controls. The currencies are freely convertible and foreign companies are free to remit their profits back to their home countries

Tax Management System

 individual taxpayer under 21 years old （WPOP)  foreigners who planned to live in Indonesia for one year but actually stayed less than 183 days;  diplomatic envoys;  representative officials of the international institutions;  Indonesian citizens with foreign residential certificates;  Muslin pilgrims;  land transit passengers; and Indonesian workers with certificate of overseas workers .

The following people do not need SKBFLN certificate:

（1）foreign college students with recommendation letters from higher education institutions;

（2）foreigners doing research work in Indonesia;

（3）foreigners who are working in the islands of Batam, Bintan and Karimun;

（4） the disabled or patients who have been funded by charitable institutions to receive medical treatment abroad and with one companion;

(5） members of the artist, cultural, sport and religious delegations;

(6） exchange students or members of students groups;

(7）Indonesian labor force except for the overseas labors（Tenaga Kerja IND）

PHARMACEUTICAL INDUSTRY

History of the Pharmaceutical Industry

The pharmaceutical industry is one of the leading industries in India, and is soon becoming one of the most advanced countries of the world in terms of the growth of the health sector and advancements in pharmaceutical equipments and production of bulk pharmaceutical drugs. The import and export of pharmaceutical drugs and pharmaceuticals are regulated through EXIM Policy.

The pharma EXIM policy initiatives taken by the Government recently have led to quantitative and qualitative improvements in the Research & Development activities of the industry. The National Pharmaceutical Policy (NPP)'s objective is to ensure availability of lifesaving drugs at reasonable prices.

Pharmaceutical Industry

Many Indian companies are part of an agreement where major AIDS drugs based on Lamivudine, Stavudine, Zidovudine, Nevirapine are supplied to Mozambique, Rwanda, South Africa and Tanzania which have about 33% of all people living with AIDS in Africa. Many US Schemes are sourcing Anti Retrovirals from Indian companies whose products are already US FDA approved.

Many Indian companies have got various international regulatory approvals for their plants, from agencies like USFDA, MHRA-UK, TGA-Australia, MCC-South Africa etc.

More of Indian companies are now seeking regulatory approvals in USA in specialized segments like Anti-infectives, Cardiovasculars, CNS group. Along with Brazil & PR China, India has carved a niche for itself by being a top generic Pharma player.

Global scenario

Global pharmaceutical market is highly dynamic and is characterized by greater levels of R&D expenditure and extensive regulation of its products.

According to PricewaterhouseCoopers (PWC) in 2010, India joined among the league of top 10 global pharmaceuticals markets in terms of sales by 2020 with value reaching US$50 billion. Some of the major pharmaceutical firms include Sun Pharmaceutical, Cadila Healthcare and Piramal Healthcare.

Exports of pharmaceuticals products from India increased from US$6.23 billion in 2006- 07 to US$8.7 billion in 2008-09 a combined annual growth rate of 21.25%. According to PricewaterhouseCoopers (PWC) in 2010, India joined among the league of top 10 global pharmaceuticals markets in terms of sales by 2020 with value reaching US$50 billion. Some of the major pharmaceutical firms include Sun Pharmaceutical, Cadila Healthcare and Piramal Healthcare.

Challenges

All of these changes are ultimately good for the Indian pharmaceutical industry, which suffered in the past from inadequate regulation and large quantities of spurious drugs. They force the industry to reach a level necessary for global competitiveness.

The Asian Pharmaceutical Industry Outlook 2012

Asia is a key driving force of the current global pharmaceutical industry. In recent years, healthcare demands among the region‘s populations have increased and its low operating costs continue to attract pharmaceutical companies. And, it is emerging as a powerhouse of pharmaceutical Research & Development (R&D) facilitated by the availability of a vast patient population, quality data, lower costs and skilled manpower.

Evolution of pharmaceutical industry in India State of the economy Economic growth decelerated in 2008-09 to 6.7 per cent. This represented a decline of 2.1 per cent from the average growth rate of 8.8 per cent in the previous five years (2003-04 to 2007-08). The five years of high growth has raised the expectations of the people.

Background analysis

The Indian Pharmaceutical Industry has come a long way from being almost non- existent in the 1970‘s to being one of the largest and most advanced Pharmaceutical industries in the world. The domestic Pharmaceutical output has increased at a CAGR of 13.4.

Relevance for growth:

India has the highest number of manufacturing plants approved by US FDA, which is next only to that in the US. More than 85% of the formulations produced in the country are sold in the domestic market. India got a major boost with the signing of Trade Related Intellectual Property Rights (TRIPS) under the General Agreement on Tariffs and Trade (GATT) in January 2005 with which it began recognizing global patents.

Export profile:

Exports constitute a substantial part of the total production of Pharmaceutical in India. The formulations contribute nearly 55% of the total exports and the rest 45% comes from bulk drugs. Pharmaceutical exports clocked $7.2 billion in 2007-08, accounting for six per cent of the country‘s total exports.

Foreign participation

Drugs and Pharmaceuticals ranks 8th in India‘s top 10 FDI-attracting sectors. The government of India has allowed foreign direct investment up to 100% through the automatic route in the drugs and Pharmaceuticals industry of the country, on the condition, that the activity should not fall into the categories that require licensing. Evolution of industry

In India, modern system of medicine is a 20th century phenomena, though the traditional system of medicine has been in practice for many centuries. . Most domestic manufacturers were engaged in repacking the formulations produced by the multinationals and production was concentrated in the hands of the multinationals.

Labor force

India‘s greatest strengths lie in its people. India also boasts of well-educated, English- speaking labor force that is the base of its competitive advantage. Although molecular biologists are in short supply, there are a number of talented chemists who are equally as important in the discovery process.

Industry production

Thirty-five years of protection has enabled the Indian pharmaceutical industry to perfect its scientific and manufacturing capabilities, allowing many of its leading companies to move up the value added chain. India‘s pharmaceutical industry consists of large, medium, and small companies and is one of the world‘s most price competitive.

Industry structure Mergers, acquisitions, and other alliances

The last 3 years have seen a significant rise in the number of consolidations, mergers & acquisitions, and other types of alliances and tie-ins in the Indian pharmaceutical industry.

The Indian Pharmaceutical Industry

India currently represents just U.S. $6 billion of the $550 billion global pharmaceutica industry but its share is increasing at 10 percent a year, compared to 7 percent annua growth for the world market overall. Also, while the Indian sector represents just 8 pe of the global industry total by volume, putting it in fourth place worldwide, it accounts 13 percent by value,and its drug exports have been growing 30 percent annually.

The Key Players in the Indian Pharmaceutical Industry

Dr. Reddy Ranbaxy Cipla Sun Pharma Aventis Pharma Lupin Cadila Health Novartis Glaxo SmithKline Nicholas Piramal Aurobindo Torrent Pharma Alembic Pfizer PharmaAjanta Pharma Sterling Biotech Aarti Drugs Wockhardt Abbott India Ipca Elder Pharma Wyeth Ltd Astrazeneca LaboratoriesUnichem Lab Ind Swift Lab Panacea Biotech PharmaStrides Arcolab Orchid Chemicals

Over-the-Counter Medicines

The Indian market for over-the-counter medicines (OTCs) is worth about $940 million and is growing 20 percent a year, or double the rate for prescription medicines. The government is keen to widen the availability of OTCs to outlets other than pharmacies, and the Organization of Pharmaceutical Producers of India (OPPI) has called for them to be sold in post offices.

India's long-established manufacturing base also offers a large, well-educated, English- speaking workforce, with 700,000 scientists and engineers graduating every year, including 122,000 chemists and chemical engineers, with 1,500 PhDs. The industry provides the highest intellectual capital per dollar worldwide, says OPPI.

Pharma Export promotion council

The Department had played a pivotal role in the formation of Pharmexcil consequent to the recommendation from 9th Five Year Plan Working Group Report on Drugs and Pharmaceuticals. In the light of this, the Department constantly interacts with Pharmexcil in their work areas.

In addition to this Pharmexcil is concerned with giving export thrus to the various products through visits of delegations to various markets abroad, organizing of seminars workshops and exhibitions. As a major area of work Pharmexcil also holds Buyers/Sellers meets and compiles detailed data base on pharma exports and problems in exporting pharma products.

International cooperation/ export promotion of pharmaceuticals

1. Participation in 9th Session of India-Uzbek Inter-Governmental Commission on Trade, Economic, Scientiic & Technological Cooperation held on 4-5 May, 2011 in Tashkent.

2. Participation in the Meeting of Biotechnology and Life Sciences Working Group under India-US High Technology Cooperation Group held in July, 2011 in New Delhi.

3. Participation in India Russia Forum on Trade and Investment held in November, 2011 in Moscow and the Roundtable on Pharmaceuticals.

4. Participation in Seminars organized by the Embassy of India, Jakarta in cooperation with PT. Strategic Asia held in Jakarta, Indonesia

Future Prospects

The Indian pharmaceutical market has been forecast to grow to as much as US$ 25 billion by 2015 as per Organization of Pharmaceutical Producers of India (OPPI) estimates. However, Espicom's market projections forecast more modest but stable annual market growth of around 7.2 per cent, putting the market at US$ 11.6 billion by 2013.

A new development in the area of outsourcing is that the outsourcing activities are progressively moving out of U.S. and Europe to others, notably, China, India, Korea, Russia and Taiwan. Over the years some of the premier companies in the U.S. such as Albany Molecular research Inc, J-Star Research of New Jersey and many others have seen a decline in revenues due to more companies going off-shore primarily due to lower costs. For example, it has been reported that while the cost to a company of a Ph.D. scientist in a CRO is $ 250,000 in U.S. the corresponding figures in these countries will be between $ 45000 to 70,000.

Indian Pharma 2015- Prescribed growth

McKINSEY‘S just released report on the Indian pharmaceutical market says the industry will treble in the next decade, and catapult the country into the top 10 markets in the world by 2015, overtaking Mexico, Turkey and South Korea.

. The project was undertaken to assess the potential of the Indian pharmaceuticals market, identify opportunities and understand the implications for industry and policy makers.

The pharmaceutical market: Indonesia - review

Environmentally, Indonesia is particularly prone to natural disasters, as the recent earthquakes, tsunamis and volcanic eruptions have illustrated. Politically, a dominant feature of President Yudhoyono‘s presidency has been to curb the corruption that has so frequently plagued Indonesia.Economically, Indonesia‘s economy is projected to become the sixth largest in the Asia Pacific region by 2017, but if the rupiah continues to devaluate against the dollar it could affect the Indonesian pharmaceutical market in US dollar terms.

Legally, Indonesia remained on the USTR‘s Special 301 Priority Watch List in 2011, due to the prevalence of counterfeit pharmaceuticals. Demographically, the population will be the third largest in the Asia Pacific region by 2017 The Indonesian Pharmaceutical Manufacturers Association (GP Farmasi) announced that 20 of its members had increased the price of certain drugs by up to 10.0%, at the start of the 2011.

Indonesia The Indonesian pharmaceutical market is projected to grow at a high single -digit CAGR in US dollar terms during the forecast period, and it will be the sixth largest pharmaceutical market in the Asia Pacific region by 2016.

Inexpensive production and labor, and increasing foreign investments are strengthening the Indonesian Pharma market, despite its volatile socio-political system. Environmentally, Indonesia is particularly prone to natural disasters, as the recent earthquakes, tsunamis and volcanic eruptions have illustrated. Indonesia‘s economy is projected to become the sixth largest in the Asia Pacific region by 2016, but if the rupiah continues to devaluate against the dollar it could affect the Indonesian pharmaceutical market in US dollar terms. Legally, Indonesia remains on the United States Trade Representative‘s (USTR‘s) Special 301 Priority Watch List in 2011, due to the prevalence of counterfeit pharmaceuticals. Demographically, the population will be the third largest in the Asia Pacific region by 2016.

Trends in India-Indonesia Economic Relations

With an expanding economy and increasingly favourable investment climate, Indonesia stands as a key economic entity in the ASEAN region. Its abundance of natural resources and a flourishing manufacturing sector have ensured a successful relationship with the booming Indian economy in areas of trade and investment.

In the area of investment, there are more than twenty major Indian manufacturing joint ventures in Indonesia. Majority of these investments were undertaken in the 1970s and 80s mainly in textiles, synthetic fibre and steel industries with India being among the top 5 investors in Indonesia up to 1985. Major Indian companies that established themselves in this phase included, the Lohia Group (Indorama Synthetics), Ispat Group (Indo Ispat), Aditya Birla Group (having four units in textiles and yarns) and Tolaram Group among others.

Recently, the two countries have been at logger heads over differences pertaining to the India-ASEAN FTA. Indonesia has been pushing for greater access of its palm oil exports to India while India wants a reworking of the negative list put forward by Indonesia. Further, at a bilateral level, there are also issues pertaining to the Indian demand for the removal of non-tariff barriers on its exports of meat and processed foods. Though India is one of the largest exporters of halal bovine meat in the world, Indonesia continues to ban India's bovine meat and milk products on the grounds that India is not free from Foot and Mouth Disease (FMD).

EVOLUTION OF PHARMACEUTICAL INDUSTRY IN GUJARAT

There is no stopping the pharmaceutical and biotechnology industry in Gujarat, which from its glorious past is racing ahead by meeting the needs of era of outsourcing that has of late infused new life into the pharma and biotech industry world over.

Export & R&D

However, the strides that the Gujarat pharma industry, which was worth around US $4.4 billion in 2005-06, is making is not limited to contract research and manufacturing services. The state is still batting as a major exporter of pharmaceuticals in the country with recent expert estimates putting the state's export growth rate at 20 to 25 per cent, at a time when the overall national export growth rate stands at 35 to 40 per cent. Available figures indicate that the state's pharma export is worth Rs 5,000 crore, while its total production stands at between Rs 12,000 and Rs 14,000 crore.

Rich opportunities Though the pharmaceutical industry in this jewel of the West is faring well adopting to new and emerging business conditions and opportunities, all is not well with the industry. There are certain issues to be addressed. "The pharmaceutical industry has shown its strength in R&D at all levels, but unfortunately it is facing crisis for the enough funds for R&D activities due to redundant drug price control order (DPCO).

Gujarat - A leader in pharma machines

According to industry estimates, a great chunk --almost 40 per cent --of machinery used in the pharmaceutical manufacturing in India is produced in Gujarat. This creates a very good local and global opportunity for Gujarat in the manufacturing of pharmaceutical machinery, given its strong and well established engineering sector, points out a recent study titled Gujarat Pharma Industry-striding into the Future, KPMG, India The strong growth prospects of the pharmaceutical exports segment and growing demand from the domestic market, will further fuel growth in the pharmaceutical machinery sector. However, Gujarat's engineering sector is highly fragmented, especially the pharma machinery manufacturing segment.

Global Competitiveness of Indian Pharmaceutical Industry:Trends and Strategies

In the process of industrialization, pharmaceuticals have been a favourite sector f or policy makers in the developed as well inmany developing countries, including India. This special policy preference has been due to the criticality of the pharma ceuticalproducts for the health security of the populace as well as for developing strategicadvantages in the knowledge‐basedeconomy.

The phenomenal progress made by the industry over the last three decades has instille d a strong belief in the government and the pharmaceutical companies in India th at the country has a competitive strength and it should be enhanced by suitable policy measures and firmspecific actions with regard to export, innovation, strategic allia nces and investment. The Pharmaceutical Policy 2002 echoes the same sentimen t and has shifted the focus of the policy from selfreliance in drugs manufacturing to the objective of enhancing global competitiveness.

These challenges require a change in emphasis in the current pharmaceutical policy an d the need for new initiatives beyond those enumerated in the Drug Policy 1986, as mo dified in 1994, so that policy inputs are directed more towards promoting acceler ated growth of the pharmaceutical industry and towards making it moreinternation ally competitive. The need for radically improving the policy framework or knowledgebased industry has also been acknowledged by the Government.

The Prime Minister‘s Advisory Council on Trade and Industry has made important recommendations regardingKnowledgebased industry. The pharmaceutical industry has been identified as one of the most important knowledge based industries in wh ich India has a comparative advantage

Comparative Analysis of the Competitive Strength of the Indian Pharmaceutical Industry

With the arrival of global patent regime and widespread liberalization measures a t the individual country, bilateral, regional and multilateral levels, the issue of com petitiveness is critical for understanding the strengths and weaknesses of a country in t he global market place. The discussion in the previous section provides strong s upport for the view that strategic government policies can have a longterm impact on th e growth and structure of an industry.

Hence, a comparison of the level of innovation can also, to a certain extent, me asure the competitive strength of the sector. The export market share and import coverage of the export (i.e. import to export ratio) are also important indicators of competitive strength. An industry doing very well in the i nternational market suggests that it is scaling up its supplier position visàvis othe rcompetitors and in fact possesses a strong comparative advantage in the produ ct. The present section looks into the trends in above mentioned indicators to examine t he global competitive strength of the Indian pharmaceutical industry.

CONTACTS WITH INDIA

India has age old cultural and civilizational ties with Indonesia. Around 1000 B.C., the earliest migrants from the Indian sub-continent came to Indonesia. A continuous influx of Indian settlers went on during the 1st to the 7th centuries A.D. Early trade relations were established between South India and Indonesia. Sumatra was then named ―Swarna Dwipa‖ or the island of gold; the island of Java was called ―Java Dwipa‖ or the rice island while the Hindu Kingdom on Borneo (Kalimantan) island was called Kutai. Until the 15th century A.D.

The national language, Bahasa Indonesia, contains at least 3000 Sanskrit words in its vocabulary. Gujarati and Arab traders and merchants laid the foundations for the gradual spread of Islam in Indonesia. A series of small Islamic kingdoms sprouted up and spread their roots but without destroying the underlying Hindu/Buddhist cultural symbolism and matrix. The Hindu Kingdom of Majapahit in East Java just came under Islamic rule (in the 16th century) followed by other parts of the country. The present day Balinese are the descendents of Majapahit aristocrats, priests and other higher classes who had retreated eastwards to the islands of Bali and which until today are preserved as Hindu Pockets in a largely Muslim Country.

In 2007 bilateral trade reached US$6.55 billion or an increase 36.6% from the previous year. However, there remains vast untapped potential for future growth. The net balance of trade is in favour of Indonesia, as India is Indonesia‘s largest buyer of Crude Palm Oil (CPO) and an importer of its mining (particularly coal and copper ore), petroleum, rubber, pulp & paper and textile productss

Textile Industry

In the past two years, democracy has been further stabilized in to Indonesia. This country remains the third largest democracy in the world after India and the United States. Three consecutive free, fair and transparent elections in 1999, 2004, and 2009, confirmed the incremental democratic changes. The re-election of the incumbent President Susilo Bambang Yudhoyono (SBY) with a large majority in the first of two possible electoral rounds further stabilized the political scene. Democratization has not only been established in the national, but also at the regional level along with the implementation of decentralized system. The human & civil rights situation has also remained stable.

However, a further substantial deepening of democracy has not been reached in recent years. SBY‘s related indecisive leading style, exacerbated by some frictions within his party coalition in the House of Representatives, has become a serious obstacle in policy-making processes. Widespread corruption still poses a main threat to greater transparency and accountability and the efforts of the current administration have often been proved ineffective. Indonesia‘s judiciary is still far away from being professional and untradeable, inspirit of the relatively good performance of the Constitutional Court. Although previously existing racial and religious conflicts have been reduced significantly in recent years, there is growing orthodox Muslim influence in politics, including several violent actions against religious minorities.

In terms of economics, Indonesia made remarkable development. In contrast to other major economies, the country did not witness major economic setbacks as a result of the global financial crisis. The impact was comparatively minimal because macroeconomic preconditions were relatively good. Furthermore, the central bank took decisive and swift actions at the beginning of the crisis. The Indonesian government also passed an adequate economic stimulus package that favored accelerated recovery. Another reason was the importance of the big domestic market, as domestic demand accounts for two thirds of Indonesian GDP. A remarkable GDP increase and a big increase in FDI‘s show the new good look of the Indonesian market. Being a relatively stable democracy and an emerging market, therefore, Indonesia is now seen much more positively by the international community than it was a decade before. In spirit of all of these achievements, the road to a full-fledged democracy under the rule of law and a sustainable market economy with socio-political safeguards is even now long.

Fossils and the remains of tools show that the Indonesian archipelago was inhabited by Homo erectus, popularly known as the "Java Man", between 1.5 million years ago and as recently as 35,000 years ago. Homo sapiens reached the region by around 45,000 years ago. In 2011 evidence was uncovered in neighboring East Timor, showing that 42,000 years ago these early settlers had high-level maritime skills, and by implication the technology needed to make ocean crossings to reach Australia and other islands, as they were catching and consuming large numbers of big bottomless sea fish such as tuna.

Austronesia peoples, who form the majority of the modern population, migrated to South East Asia from Taiwan. They arrived in Indonesia around 2000 BCE, and as they spread through the archipelago, confined the native Melanesian peoples to the far eastern regions. Ideal agricultural conditions, and the mastering of wet-field rice cultivation as early as the 8th century BCE, allowed villages, towns, and small kingdoms to flourish by the 1st century CE. Indonesia‘s strategic sea-lane position fostered inter- island and international trade, including links with Indian kingdoms and China, which were established several centuries BCE. Trade has since fundamentally shaped Indonesian history.

From the 7th century, the powerful Srivijaya naval kingdom flourished as a result of trade and the influences of Hinduism and Buddhism that were imported with it. Between the 8th and 10th centuries, the agricultural Buddhist Sailendra and Hindu Mataram dynasties thrived and declined in inland Java, leaving grand religious monuments such as Sailendra's and Mataram's . The Hindu Majapahit kingdom was founded in eastern Java in the late 13th century, and under Gajah Mada, its influence stretched over much of Indonesia. Although Muslim traders first traveled through South East Asia early in the Islamic era, the earliest evidence of Islamized populations in Indonesia dates to the 13th century in northern Sumatra. Other Indonesian areas gradually adopted Islam, and it was the dominant religion in Java and Sumatra by the end of the 16th century. For the most part, Islam overlay and mixed with existing cultural and religious influences, which shaped the predominant form of Islam in Indonesia, particularly in Java The first regular contact between Europeans and the peoples of Indonesia began in 1512, when Portuguese traders, led by Francisco Serrão, sought to monopolize the sources of nutmeg, cloves, and cubeb pepper in Maluku. Dutch and British traders followed. In 1602 the Dutch established the Dutch East India Company (VOC) and became the dominant European power. Following bankruptcy, the VOC was formally dissolve in 1800, and the government of the Netherlands established the as a nationalized colony.

1) Computers and Related Services:

The Indonesian IT market is estimated to grow at around 11 per cent annually between 2007 and 2012. By 2011, the hardware-dominated IT market will approach a value of US$5 billion as Indonesia is expected to achieve faster growth than many ASEAN neighbors. With Information and Communication Technology (ICT) penetration of only around 20 per cent and development restricted to richer areas such as Java, Indonesia's uneven development (and resultant digital divide) is a barrier to still faster growth within the potentially huge IT market. 2) Telecommunications Services:

Indonesia has implemented a gradual approach to enhance telecommunications services, with the promotion of an anti-monopoly and pro- competition environment. Now telecommunication services in Indonesia are provided by multi operators and are open for foreign equity investment . The Indonesia Telecommunication Regulatory Agency has adopt equal treatment and ensure a level of playing field for all telecommunication operators according to their license(s), not including any discrimination between foreign operators and national operators.

Indonesia's telecommunications markets grow sharply and continue to expand awaiting now. The number of fixed lines had risen to 18, 3 million as per June 2008, equivalent to a ratio of eight lines per 100 people. By the end of 2007, the teledensity has reached 8.69 % in this local fixed telephony. Mobile cellular telephony has surpassed fixed telephony. The number of mobile subscribers has increased from 30, 3 million in 2004 to 113, 2 million in june 2008, equivalent to a teledensity of around 50.21 per cent.

3) Financial Services:

The traumatic economic emergency in Indonesia has resulted in compelling fundamental changes in the Indonesian banking sector which has gone through a period of consolidation, restructuring, and increased effectiveness. The Indonesian Bank Restructuring Agency (IBRA), under the auspices of the Ministry of Finance, was established in January 1998 to free from the economic crisis. Bank restructuring efforts by Bank Indonesia focused on achieving a mandatory minimum capital requirement ratio (CAR) of 8 per cent (up from 4 per cent), and a target of non-performing loans of 5 per cent initially, by the end of 2001. Since then there has been a stable reduction in non-performing assets and simultaneous increase in profit of both state and private banks. Indonesia currently has 127 banks, of which 47 banks have foreign shares. The top ten banks control about 60.75% of assets in the sector. Four state- owned banks (Bank Mandiri, BNI, BRI, BTN) continue to control the sector with approximately 34.24 per cent of assets.

4) Audio visual Services:

Indonesia is developing her film industry to international level. However, unlike India, the audio-visual sector in Indonesia is extremely regulated. Indonesia prohibits foreign film and videotape allocation from establishing branches and subsidiaries. Indonesia would seek greater understanding of regulation and use of technology in the production of films in India so as to developed its film industry. Indonesia may learn from India on how to change Indonesia‘s audio- visual service sector into a active service sector and to support Indonesia‘s development of creative services. In that case, India may share her experiences in developing her worldwide film industry to Indonesia since there are lot of socio-cultural setting similarities between the two countries. Indonesia is interested in learning from India on the policy of film/audio-visual, regulation, investment and other matters directed related to the film industry that India may share.

5) Distribution Services:

Both countries have domestic sensitivities in opening up this sector. However, they may consider for opening up in future keeping in view of the potential and the opportunities which survive in this sector in both countries.

6) Educational services:

As per Law Number 20/2003 on National Education System, the Ministry of National

Education (MoNE) Indonesia has determined the following mission:

1. To expand educational contract to better quality of education 2. To help and make easy the improvement the ability potential of society from the early child education quality and efficiency, and expand community participation. Therefore, the education policies should accommodate the rights and needs of children, and take into account their growth and expansion 3. To improve the professionalism and the accountability of education institutions as centre of knowledge, skills, experiences, attitudes, and values, derived from both national and global standard. 4. To authorize the community participation in providing education based on the principles of decentralization within the unity in the republic of Indonesia

7) Health Related and Social Services:

Indonesia‘s health sector consists of the public and private providers. Most providers are public hospitals and are situated in all provinces and districts as well as townships. The association of private hospital has recently increased. Private investment in this area is positive and contributes to the excellence of the service to the peoples. International healthcare providers with joint partner are an example of foreign investment in health care and health services provision. Investment from neighboring countries is welcome. In terms of skilled health personnel, the number of specialists in the country has increased because of the high and increased demand for better medical services in entire country

8) Professional Services: In order to open up different professional services such as legal, accounting, auditing and book keeping, architectural, engineering and medical services etc. both sides may regard as to work closely towards recognition of qualifications and experiences of professionals.

9) Tourism and Travel Related Services:

Tourism generates one of the highest foreign earnings in Indonesia, earning over $5 billion in 2007. International tourism is attractive increasingly important for Indonesia, particularly for Bali, where one third of the economy depends straight on tourists.

Nation-wide there were around 5.1 million visitors in 2001. In 2007, it increased to5,5 million tourists and last year‘s figures rose to 6.4 million, thanks to Indonesia‘s Visit Indonesia Year 2008.From 2005 to 2007 the number of tourist from India to Indonesia increased by 53.2 %, (from 36,169 to 68,908), especially since Indonesia issued VOA (visa on arrival) facilities for visitors from India. The five main destinations for India tourists are Jakarta, Batam, Bali, East Java, and North Sumatera.

10) Transport Services:

Transport growth which consists of land, railway, sea, air and its supporting services has generally reduced the inter-regional disparity, open the trade opportunity, job opportunity and increase the social welfare. The Indonesian narrow policy in transportation is under the control of Ministry of Transportation consisting of the land, air, sea, and railways transportation.

1. Road transportation: The sub sectors for land transportation are taxi-cab, passenger city bus, inter-city or inter- province bus, land rental service with is closed for foreigners as mentioned in the free regulation. In the government regulation, land transport service can be provided by state Owned Company, Regional State Owned Company, and Cooperative in transportation, national private company, and individuals. Foreign investment is illegal in public transport (taxi and bus services). Ferry (inland waterways transport) is open for foreign investment with a most foreign participation of 49 per cent. 2. 2. Air Transport: Since 1999 civil in Indonesia has grown-up rapidly. In 2008, a total of 37,309,358 passengers were transported on domestic flights, while the numbers of passengers transported on international flights were 4,084,875. Recently, they are served by 15 scheduled operating domestic and international routes, 6 of which only serve domestic routes. There are 27 (twenty seven) airports in Indonesia which serve international air transport. Indonesian Law No. 1/2009 on Civil Aviation is a brandnew law to put up the growth of civil aviation in Indonesia. Foreign investments are allowed on some of Air Transport ancillary services and should be joint venture with Indonesian legal entity and foreign equity is limited up to 49 per cent. One of them is the aircraft repair and maintenance industry which is well-developed in Indonesia. Recently, the aircraft repair and maintenance activity is carrying out by PT. Maintenance Facilities, PT. Merpati Maintenance Facilities, PT. IPTN and PT. Aero Indonesia. They have been trusted to do repair and maintenance of various national and foreign aircraft.

3. Maritime Transport: The recent Indonesian rule allow foreign participation in certain port activities, as a joint venture with a local partner, as an Indonesian legal entity. In the maritime cargo handling services foreign investors are allowed only through Joint Venture Corporation and is allowed simply in the main ports. Foreigners can hold up to 49 per cent equity in in a joint venture with Indonesian transport company. Foreign transport companies operating international services to and from Indonesian ports which is open for international trade should assign an Indonesian transport company and ship agency company as a general agent. 4. Rail Transport: Based on Law No.23 / 2007 on Railways, there are chance for local or foreign company to advance in railways sector. The private sector can build and control the new railways or to operate the off line tracks, management railways, to control and maintenance infrastructure of railways but only as a joint venture with local partner, as an Indonesia entity, or joint venture with state own enterprise PT Kereta Api Indonesia.

11) Call Centre Industry:

A call centre or call center is a centralized office used for the purpose of receiving or transmit a large volume of requests by telephone. An inbound call centre is operate by a company to administer incoming product maintain or information inquiries from consumers. Outbound call centers are operated for telemarketing, solicitation of charitable or political donations and debt set. In addition to a call centre, collective handling of letters, faxes, live chat, and e-mails at one position is known as a contact centre.

A call centre is operated through an broad open workplace for call centre agents, with work stations that include a computer for each agent, a telephone set/headset connected to a telecom switch, and one or more supervisor stations. It can be separately operated or networked with additional centers, often linked to a corporate computer network, including mainframes, microcomputers and LANs. Increasingly, the voice and data pathways into the centre are linked through a set of new technologies called computer telephony integration (CTI).

12) Manufacturing Industry:

Manufacturing Industry Despite the huge size of the Indonesian market, low labour costs and the potential of the ASEAN as a whole for pharmaceutical sales; investors are still tired of the country. Recent changes in regulations have been viewed as protectionist and mstly in favour of existing local companies which already dominate the market. The sector is in need of a major increase in order to best serve the population, particularly the poorest stratum that is being priced out of the market because of the myriad of taxes and duties that keep Indonesia‘s pharmaceutical prices among the highest in Asia, while being the least innovative.

One of the major weaknesses in the sector is the lack of locally available raw materials that leaves producers at the mercy of fluctuating global prices. High oil prices will maintain the country‘s high drug costs that already stand at 25-30% higher than average world prices, according to the Health Research and Development Agency. Like many of the industries that make up the manufacturing sector, pharmaceutical producers were hit hard by the industry electricity tariff increase in 2010 that raise prices by 18%. In addition, the import tax of 5% imposed on raw materials under Minister of Finance Regulation 240/2010 greatly impacts drug producers. It is estimated that between 90-98% of all pharmaceutical raw materials have to be imported mainly from China, and to a much lesser extent from America and India. The expensive price of drugs in the country is therefore easily explained considering that on average, raw materials and energy make up 35% of the total selling price for drug companies.

2) Manufacturing Industry:

Manufacturing Industry Despite the huge size of the Indonesian market, low labour costs and the potential of the ASEAN as a whole for pharmaceutical sales; investors are still tired of the country. Recent changes in regulations have been viewed as protectionist and mstly in favour of existing local companies which already dominate the market. The sector is in need of a major increase in order to best serve the population, particularly the poorest stratum that is being priced out of the market because of the myriad of taxes and duties that keep Indonesia‘s pharmaceutical prices among the highest in Asia, while being the least innovative.

One of the major weaknesses in the sector is the lack of locally available raw materials that leaves producers at the mercy of fluctuating global prices. High oil prices will maintain the country‘s high drug costs that already stand at 25-30% higher than average world prices, according to the Health Research and Development Agency. Like many of the industries that make up the manufacturing sector, pharmaceutical producers were hit hard by the industry electricity tariff increase in 2010 that raise prices by 18%. In addition, the import tax of 5% imposed on raw materials under Minister of Finance Regulation 240/2010 greatly impacts drug producers. It is estimated that between 90-98% of all pharmaceutical raw materials have to be imported mainly from China, and to a much lesser extent from America and India. The expensive price of drugs in the country is therefore easily explained considering that on average, raw materials and energy make up 35% of the total selling price for drug companies.

Fishing Industry:

According to a report Indonesian waters possess good quantity of fish stocks because the country‘s marine fishing industry has not developed. Therefore, over these new times, Vietnamese companies aim to operate fishing in Indonesian special economic zones. These companies are facing strict challenges to operate in Indonesi waters.

Rear Admiral Syahrin Abdurrahman from Ministry of Marine Affairs and Fisheries, was speaking at the Investment Promotion Conference of Vietnam seafood enterprises held by Vietnam Directorate of Fisheries. He said that currently,Indonesia wants to cooperate with countries having big experiences in catching and processing operations like Vietnam to explore fish stocks at allowable level.

He also added that Vietnamese companies need to use fleets with capacity of 100 MT lead by Indonesian captain, investing in local processing plants with contributed capital of in any case 80 percent. According to Nguyen Tran Bien, representative of Indonesia-based PT Papua Fishery Development, administrative procedures remain the biggest obstacle of Vietnam companies when injecting funds in processing plants in Indonesia.

Vietnamese companies are investing 80 percent of their capital in these efforts and have to complete a various range of procedures to get need certificate. Moreover, regarding to a new regulation of Indonesia Ministry of Finances taking effect in December 2011, Vietnam operators are required to contribute 5 percent of ship import duty for each fishing contract. However, Vietnam companies are only signing one-year fishing contract with Indonesia and then receive fleet at the expiration of contract.

13) Pharmaceutical Industry:

The potential of Indonesia's pharmaceutical market will be boosted by the authorities' aim to provide universal health coverage from the start of 2014. However, the Indonesian government must ensure that it calculates its financial ability to run the national healthcare program, or risk the program failing according to Hotbonar Sinaga of the University of Indonesia and Bambang Purwoko of the Pancasila University, cited by the Jakarta Post. In the meantime, modern drug makers will continue to face legislative and market access barriers in the country, although improvements are expected in the coming years, partly due to outside insistence on the country's compliance with international intellectual property (IP) and similar standards.

An at-a-glance perspective on latest regulatory developments, key forecast indicators and major corporate developments, covering the prescription, OTC and generics markets. The SWOT outlines strategic factors which affect Espicom's forecast analysis, and taken together with Espicom's political, economic and business environment SWOTS, it gives a complete overview of market climate.

Market Summary photograph of key market characteristics, including total size of pharmaceuticals and healthcare segments, development drivers, leading therapeutic areas and the competitive landscape.

Regulatory Regime Details of the industry regulatory framework and key legislation covering the licensing of new products/services, pricing and reimbursements, intellectual property, taxation and advertising, as well as an analysis of the overall regulatory load.

Industry Developments Focus on government healthcare reform, epidemiological trends, company M&As, product launches, market entries, FDI activity, R&D, biotechnology, clinical trials and supply chain issues.

Espicom Industry Forecasts Forecasts to end-2016 for all key industry indicators (see list below) supported by open assumptions, plus analysis of key downside risks to the major estimate, including:

Healthcare: Total healthcare expenditure (US$bn), healthcare expenditure (% of GDP), healthcare expenditure per capita (US$), hospital beds (per `000 population), doctors (per `000 population), birth and mortality rate (per `000 population)

Pharmaceutical market: Drug expenditure (US$bn), drug expenditure (% of GDP), drug expenditure per capita (US$)

Patented drug market: Prescription drug sales (US$bn), prescription sales (% of total sales), sales broken down by 14 therapeutic areas (cardiovascular, anti- infective etc.) Generic drug market: Generic product sales (US$bn), generic sales (% of total sales)

OTC drug market: OTC sales (US$bn), OTC sales (% of total sales), sales broken down by product types (analgesics, skin treatments, vitamins and minerals etc.) Medical Devices: Medical device sales (US$bn), medical device sales (% of total healthcare market)

Macroeconomic Forecasts: Nominal and real GDP, % real GDP growth, % private consumption growth, % industrial output growth, % consumer price index, % GDP price deflator, exports, imports, trade balance, current account balance, foreign direct investment, exchange rate against US$, government expenditure, external debt.

Competitive Landscape

The competitive landscape section provides relative company analyses and ranking by US$ sales and % share of total sales - for the total pharmaceutical sector, as well as the OTC, generics, and distribution sub-sectors.

The Textile Sector in India ranks next to Agriculture. Textile is one of India‘s oldest industries and has a formidable presence in the national economy in as much as it contributes to about 14 per cent of manufacturing value-addition, accounts for around one-third of our gross export earnings and provides gainful employment to millions of people. The textile industry occupies a unique place in our country. One of the earliest to come into existence in India, it accounts for 14% of the total Industrial production, contributes to nearly 30% of the total exports and is the second largest employment generator after agriculture.

Textile Industry is providing one of the most basic needs of people and the holds importance; maintaining sustained growth for improving quality of life. It has a unique position as a self-reliant industry, from the production of raw materials to the delivery of finished products, with substantial value-addition at each stage of processing; it is a major contribution to the country's economy. This paper deals with structure, growth and size of the Indian textile industry, role of textile industry in economy, key advantages of the industry, textile industry export and global scenario and strength, weakness, opportunities and treats of the Indian textile industry. importance to cotton weaving. Textile is one of India‘s oldest industries and has a formidable presence in the national economy inasmuch as it contributes to about 14 per cent of manufacturing value-addition, accounts for around one-third of our gross export earnings and provides gainful employment to millions of people. They include cotton and jute growers, artisans and weavers who are engaged in the organised as well as decentralised and household sectors spread across the entire country.

Brief Introduction Indian Textile Industry has earned a unique place in our country. It is among one of the industries which were earliest to come into existence in India. It accounted for 14% of the total Industrial production, contributes to nearly 30% of the total exports and is the second largest employment generator after agriculture. This industry provides one of the most basic needs of people and holds importance; maintaining sustained growth for improving quality of life. It has an image of self- reliant industry, from the production of raw materials to the delivery of finished products, with substantial value-addition at each stage of processing which forms a major contribution to the country's economy. India textile industry is one of the leading in the world. Currently the Indian Textile Industry is estimated to be around US$ 52 billion and is also projected to be around US$ 115 billion by the year 2012. The current Indian domestic market of textile is expected to be increased to US$ 60 billion by 2012 from the current US$ 34.6 billion

Indian industry of Textiles can be divided into several segments, some of which can be listed as below:

Cotton Textiles Silk Textiles Woollen Textiles Readymade Garments Hand-crafted Textiles Jute and Coir

Today most of the international brands like Marks & Spencer, JC penny, Gap have started procuring most of their fabrics from India. In fact, Wal-Mart, who had procured textile worth $ 200 million last few year, intends to procure $ 3 billion worth of textile in the years to follow.

Size of the industry

The Indian Textile Industry today has approximately 1200 medium to large scale textile mills in India. 20%of these mills are located in Coimbatore (Tamilnadu). The industry has 34 million cotton textile spindles for manufacturing cotton yarn which account for 70 percent of India's textile exports. (China has 40 million cotton spindles.) Of the Indian textile yarn exports, almost 80 percent come from coarser yarns (counts below 40's). Consequently, there is a need to upgrade the technology. The domestic knitting industry is characterized by small scale units with facilities for dyeing, processing and finishing. The industry is concentrated in Tirupur (Tamilnadu) and Ludhiana (Punjab). Tirupur produces 60 percent of the country's total knitwear exports. Knitted garments account for almost 32 percent of all exported garments. The major players include Nahar Spinning, Arun Processors and Jersey India.

Total contribution to the economy/ sales

Indian textile industry is one of largest Industries in Indian Economy. In 2000-01, the textile and garment industries accounted for about 4% of GDP, 14%of industrial output, 18% of industrial employment and 27% of export earnings. Indian textile industry is significant in global context also, ranking second to China in the production of both cotton yarn and fabric and fifth in the production of synthetic fibers and yarns. The Indian textile industry constitutes 14% to industrial production, 4% to the country's gross domestic product (GDP) and 17% to the country's export earnings, according to the Annual Report 2009-10 of the Ministry of Textiles.

Domestic and Export Share According to the Indian Ministry of Textiles, the cumulative production of cloth during April'09-March'10 has increased by 8.3 % when compared to the same period of the previous year. The total Indian textile exports have increased to US$ 18.6 billion during April'09-January'10, from US$ 17.7 billion during the same period of the previous year, registering an increase of 4.95 % in rupee terms. Gradually the share of textile exports in total exports has increased to 12.36% during April'09-January'10, as per the Ministry of Textiles. During April-March 2009-10 textiles has registered a growth of 5.5% according to the Index of Industrial Production the data released by the Central Statistical Organization (CSO). Cotton, white wool, silk and man-made fibre textiles have registered a growth of 8.2 % while textile products including apparel have earned a growth of 8.5%.

Top leading Companies

Some of the reputed names in the Textile companies in India are: Raymonds, Arvind Mills, Reliance Textiles, Vardhaman Spinning, Welspun India, Morarjee Mills, Century Textiles, Ginni Filaments Ltd, Mafatlal Textiles, S. Kumar Synfabs, Bombay Dyeing Ltd, BSL Ltd, Banswara Syntex, Grasim Industries, Oswal Knit India, Fabindia, Laksmi Mills, National Rayon Corp, Mysore Silk Factory and many more. Pollution

Indian Textile Industry comes under the category of 'Orange' which represents marginally polluting units.

Latest developments

Indian Textile Industry covers 61 % of the international textile market and 22 % of the global market Indian Textile Industry is known to be the 3rd largest manufacturer of cotton across the globe. This industry of India claims to be the 2nd largest manufacturer as well as provider of cotton yarn and textiles in the world India holds around 25 % share in the cotton yarn industry across the globe

India Textile Industry contributes to around 12 %of the world's production of cotton yarn and textiles

Size of the 1200 medium to large Industry scale textile mills in India

TamilNadu, Geographical AndhraPradesh, Punjab, distribution Karnataka, Maharashtra

16% per annum growth Output per rate and 1000 Million kg annum per annum

Percentage in 7% share in the global world market market Market 4% to the share of GDP Capitalization

Current Facts on India Textile Industry

India retained its position as world‘s second highest cotton producer.

Acreage under cotton reduced about 1% during 2008-09.

The productivity of cotton which was growing up over the years has decreased in 2008-09.

Substantial increase of Minimum Support Prices (MSPs).

Cotton exports couldn't pick up owing to disparity in domestic and international cotton prices.

Imports of cotton were limited to shortage in supply of Extra Long staple cottons

CURRENT POSSITION OF TEXTILE INDUSTRY IN INDIA

Textile constitutes the single largest industry in India. The segment of the industry during the year 2000-01 has been positive. The production of cotton declined from 156 lakh bales in 1999-2000 to 1.40 lakh bales during 2000-01. Production of man-made fibre increased from 835 million kgs in 1999-2000 to 904 million kgs during the year 2000-01 registering a growth of 8.26%. The production of spun yarn increased to 3160 million kgs during 2000-01 from 3046 million kgs during 1999-2000 registering a growth of 3.7%. The production of man-made filament yarn registered a growth of 2.91% during the year 1999-2000 increasing from 894 million kgs to 920 million kgs. The production of fabric registered a growth of 2.7% during the year 1999-2000 increasing from 39,208 million sq mtrs to 40,256 million sq mtrs. The production of mill sector declined by 2.6% while production of handloom, powerloom and hosiery sector increased by 2%, 2.7% and 5.1% respectively. The exports of textiles and garments increased from Rs. 455048 million to Rs. 552424 million, registering a growth of 21%. Growth in the textile industry in the year 2003-2004 was Rs. 1609 billion. And during 2004-05 production of fabrics touched a peak of 45,378 million squre meters. In the year 2005-06 up to November, production of fabrics registered a further growth of 9 percent over the corresponding period of the previous year.

With the growing awareness in the industry of its strengths and weakness and the need for exploiting the opportunities and averting threats, the government has initiated many policy measures as follows.

The Technology Upgradation Fund Scheme (TUFS) was launched in April 99 to provide easy access to capital for technological upgradation by various segments of the Industry. The Technology Mission on Cotton (TMC) was launched in February 2000 to address issues relating to the core fibre of Cotton like low productivity, contamination, obsolete ginning and pressing factories, lack of storage facilities and marketing infrastructure A New Long Term Textiles and Garments Export Entitlement (Quota) Policies 2000-2004 was announced for a period of five years with effect from 1.1.2000 to 31.12.2004 covering the remaining period of the quota regime.

In the current year Budget 2006-2007 states the measures for Textile Industry as follows

► Allocation to the Technology Upgradation Fund (TUF) enhanced from Rs4.4bn to Rs 5.4bn.

► Provision for the interest subsidy on term loans to the handloom sector to be increased from Rs2.0bn to Rs 2.4bn.

► Rs1.9 bn to be provided for the scheme for integrated Textiles Parks (launched in October 2005 with the intention of creating 25 textile parks)

► Excise duty on all man-made fibre yarn and filament yarn to be reduced from 16% to 8%

► Import duty on all man-made fibers and yarns to be reduced from 15% to 10%.

FUTURE PROSPECTS:

The future outlook for the industry looks promising, rising income levels in both urban and rural markets will ensure a rising market for the cotton fabrics considered a basic need in the realm of new economic reforms (NER) proper attention has been given to the development of the textiles industry in the Tenth plan. Total outlay on the development of textile industry as envisaged in the tenth plan is fixed at Rs.1980 crore. The production targets envisaged in the terminal year of the Tenth plan are 45,500 million sq metres of cloth 4,150 million kg of spun yarn and 1,450 million kg of manmade filament yarn. The per capita availability of cloth would be 28.00 sq meters by 2006-2007 as compared to 23.19 sq meters in 2000-01 showing a growth of 3.19 percent. The export target of textiles and apparel is placed at $32 billion by 2006-2007 and $50 billion by 2010.

NDIAN TEXTILE INDUSTRY STRUCTURE AND GROWTH

India‘s textile industry is one of the economy‘s largest. In 2000/01, the textile and garment industries accounted for about 4 percent of GDP, 14 percent of industrial output, 18 percent of industrial employment, and 27 percent of export earnings (Hashim). India‘s textile industry is also significant in a global context, ranking second to China in the production of both cotton yarn and fabric and fifth in the production of synthetic fibers and yarns.

In contrast to other major textile-producing countries, mostly mostly small-scale, nonintegrated spinning, weaving, cloth finishing, and apparel enterprises, many of which use outdated technology, characterize India‘s textile sector. Some, mostly larger, firms operate in the ―organized‖ sector where firms must comply with numerous government labor and tax regulations. Most firms, however, operate in the small-scale ―unorganized‖ sector where regulations are less stringent and more easily evaded.

The unique structure of the Indian textile industry is due to the legacy of tax, labor, and other regulatory policies that have favored small-scale, labor-intensive enterprises, while discriminating against larger scale, more capital-intensive operations. The structure is also due to the historical orientation towards meeting the needs of India‘s predominately low income domestic consumers, rather than the world market. Policy reforms, which began in the 1980s and continued into the 1990s, have led to significant gains in technical efficiency and international competitiveness, particularly in the spinning sector. However, broad scope remains for additional reforms that could enhance the efficiency and competitiveness of India‘s weaving, fabric finishing, and apparel sectors.

Indonesia’s Textile Market

The global economic crisis hit Indonesia‘s apparel industry hard as demand from traditional export markets significantly declined. The course of 2010 and 2011 has seen a strong recovery from the sector with rising consumer purchasing power resulting in increased opportunities for premium and greater added value products. The crisis also provided Indonesia with a platform to reposition itself as an alternative import source for key apparel markets such as the USA and Europe as wages continue on an upward trend in China. In addition, the strengthening of the Indonesian Rupiah against the US Dollar has served to bolster the recovery and boosted industry performance. 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. Some 61% of manufactured garments are exported to international markets as various leading international apparel brands use Indonesia as a manufacturing base for their global exports. Exports of textiles and garments rose by 19.7% yoy to $12.1 billion USD at the end of 2011 (Ministry of Trade) with a target of $13-13.7 billion USD set for 2012. Despite the crisis, the USA remains Indonesia‘s largest market for garments and textiles accounting for 36% of total exports followed by the EU with 16% and Japan with 5%. The most popular export items from 2007-2011 were woven clothing, underwear and knitted or crocheted clothing which together made up nearly 60% of the total value of textile exports over the aforementioned period (Source: ASEAN Quality Textiles and Garments). An interesting trend to note within Indonesia‘s garment production has been the distinctive step towards increased output in more value added items such as suits, jackets, dresses and trousers for both men and women while more basic items such as shirts and vests have only risen slightly or stagnated (Comtrade Statistics 2001-2008).

The textile and garment sector offers both challenges and opportunities as the Indonesian government looks to the sector to be a major engine of growth to 2030 (See Challenges in Indonesia‘s FTG Industry). One of the sector‘s key strengths is the rare presence of both an upstream and downstream industry; both of which are well developed (See Overview of Fibre, Textiles & Garments). The vertical integration as a result of this, from the raw materials to finishing creates highly streamlined supply chains and a one stop solution for international buyers and sourcers. Many of Indonesia‘s largest listed textile and garment manufacturers have also been active in raising funds through the capital markets during 2011-2012 for investment into new plants as well as for the acquisition of companies to complement their upstream or downstream activities even further. In addition, Indonesian textiles companies have been quick to align themselves with international industry standards by making the necessary investments to achieve certifications such as ISO 9001 as well as gain recognition for sustainable and environmentally friendly business practices. This has enabled the market to attract leading global fashion brands by assurances of quality, best practices and quick response times. Investment in Indonesia‘s textile and garment industry grew from 149.88 trillion RP in 2010 to 151.77 trillion RP (16.54 billion USD) in 2011; investments mainly came from local manufacturers as well as from the entrance of foreign players to the Indonesian market. The number of textile companies also rose from 2,880 to 2,980, a 3.5% increase (Indonesia Textile Association). The expansion of the sector and the growth in investment signifies global confidence in the industry as numerous textile manufacturers have come to select Indonesia as an alternative manufacturing and sourcing base to China. While still posing infrastructure and logistics related challenges, Indonesia has proved itself to be a serious player within the global textile and apparel industry. Efforts such as the government‘s program to upgrade machinery coupled with the unique attributes that its labour force has to offer being largely young, low cost and easily trained have not gone unnoticed by international investors. Collectively in 2011, new training centres such as the Indonesia German Textile Centre and the government‘s restructuring program have created 61,000 new jobs, increased production capacity by 19%, boosted productivity by 9% and increased energy efficiency by 22% (Indonesia Textiles Association).

Labour strikes in the first quarter of 2012 which took place at industrial areas in the Greater Jakarta area such as Tangerang and Bekasi as well as in Riau and Papua raised alarm among investors. Industrial workers took to the streets and blockaded toll road entrances causing lengthy traffic jams to bring the issue of the minimum wage to the forefront of public attention. The matter was initially sparked by a challenge from the Indonesia Employers Association (APINDO) to the decision to raise the minimum wage in the West Java area by 20-30%. This issue highlighted the need for restructuring of Indonesia‘s manpower laws that were last reformed in 2004 and which are often regarded as being too in favour of workers and unfriendly to businesses. Yet, at the same time, such regulations are also seen as being poorly enforced and thus offering little worker protection leading to ongoing disputes and friction between employers and workers. The textile and garment industry as a labour intensive industry was of course impacted by the labour unrest, however less so than other industries as salaries in the sector rose by 13% in 2010 and again by 1.7% in 2011 (IFT). In addition, the strikes were mainly concentrated in the Greater Jakarta area where living costs have risen considerably and manufacturing wages in general have not kept pace with inflation. Many of the country‘s largest textile and garment manufactures have already taken steps to hedge against the high operational costs of Jakarta and established additional production centres in areas such as Yogyakarta and the region of Central Java where workers unions are also less active.

Having sustained the volatility in market demand as a result of the Asian Crisis in 1998 and the global financial crisis in 2008; Indonesia‘s garment and textile industry has emerged as a more robust industry. The drop off in demand from traditional export markets such as Europe saw the demise of weaker players in the sector that had failed to reposition themselves in a changed economic landscape. Surviving industry players boast international certifications, up to date technology at their disposal and a highly competitive labour force in terms of cost and productivity. Key issues continue to plague the sector such as weak infrastructure and unresolved labour disputes which impact the manufacturing sector as a whole; yet the industry‘s advantages of having both a developed upstream and downstream sector compensate for this and illustrate the potential that the sector holds once the government can fully tackle the infrastructure bottle necks and manpower legislation.

INDONESIA PROFILE:

The archipelago of the republic of Indonesia — comprising 17,508 islands between the Indian ocean and the pacific ocean, of which 6,000 are inhabited — has experienced a number of transformative events within the last decade. the Asian financial crisis of 1997-99, recent political shifts and the December 2004 tsunami — which killed more than 100,000 people and caused more than us$4 billion in damage — are among events that have left their mark on the republic and its textile industry. with a strategy of restructuring, modernization and expansion to maximize its competitiveness, Indonesia‘s textile industry is taking steps to ensure it can weather the challenges of an ever-expanding global economy.

Industry Infrastructure

Indonesia‘s textile industry is vertically integrated and involved in almost every sector of the textile supply chain — from the production of man-made fibers, particularly polyester, nylon and rayon; man-made and cotton yarn spinning; and weaving and knitting; to dyeing, printing and finishing; and apparel manufacturing. According to the Indonesian Textile Association (API), based in the republic‘s capital city of Jakarta, the textile and apparel sector consisted of 2,661 enterprises in 2004. In that year, there were 28 companies in the man-made fiber subsector; 204 in spinning; 1,044 in weaving, knitting and finishing; and 861 in apparel manufacturing. In 2005, a majority of those companies — 57 percent — were located in the region of West Java, followed by Jakarta, 17 percent; Central Java, 14 percent; and East Java, 6 percent. Other regions with textile-related companies were Bali, Sumatra and Yogyakarta.

As the largest employer in Indonesia‘s industrial and manufacturing sector, the textile industry in 2005 employed 1.8 million workers in directly related large- and small-scale operations and 3.7 million in indirectly related operations. Apparel manufacturing — the fastest-growing segment, according to API — employed the most workers, more than 353,000 in 2004; followed closely by the weaving, knitting and finishing sector, with a total of nearly 344,000 workers. Textile industry workers altogether comprised 1.9 percent of total employment in the republic.

According to the 2005 International Textile Machinery Shipment Statistics report of the Switzerland-based International Textile Manufacturers Federation (ITMF), the textile industry‘s installed spinning capacities in 2004 were 7.8 million short-staple spindles, 103,000 long-staple spindles and 90,000 open-end rotors. When comparing the republic to other industries in Asia and Oceania, Indonesia‘s short- staple capacity in 2004 ranked fourth — behind mainland China, India and the Philippines, in that order. The industry‘s long-staple and open-end capacities were seventh and fifth, respectively.

In 2003 and 2004, the weaving segment‘s capacities numbered 29,000 shuttleless looms, 197,000 shuttle looms and 34,000 filament weaving looms. In comparison to other industries in Asia and Oceania, the republic‘s shuttleless capacity in 2004 ranked fourth — behind mainland China, Thailand and Taiwan, which ITMF reported separately from mainland China — and the country‘s shuttle capacity ranked third — behind China and Pakistan.

In the man-made fiber subsector, the Jakarta-based Indonesian Synthetic Fiber Makers Association (APSyFI) reports total manufacturing capacities of 500,000 tons for polyester staple fiber, 825,000 tons for polyester filament yarn and 30,000 tons for nylon filament yarn. APSyFI represents 14 man-made fiber manufacturers in the republic.

A majority of the goods produced along Indonesia‘s textile supply chain last year were consumed domestically. API notes fiber production totaled 752,000 tons, with 559,621 tons and 192,379 tons going to domestic use and exports, respectively. Of the 1.6 million tons of yarn produced in the spinning industry that year, 51 percent was used domestically and 49 percent was exported. In the weaving and knitting sector, 63 percent — or 591,451 tons — of goods produced was used domestically; 344,748 tons were exported. Finally, the apparel and other textile product segment exported 63 percent of the 690,860 tons of goods it produced and found domestic buyers for 273,238 tons of end-products. By far, most of the yarn and fabric consumed in Indonesia was produced in the country.

Regarding industry imports, Indonesian spinners imported 98 percent of the cotton they spun into yarn in 1995. The US International Trade Commission in its 2003 report, ―Textiles and Apparel: Assessment of the Competitiveness of Certain Foreign Suppliers to the U.S. Market‖ notes that domestically produced cotton accounted for less than 4 percent of the country‘s domestic consumption.

To be sure, Indonesia‘s textile industry continues to be economically relevant domestically and globally. According to API, textile and apparel exports made up $8.6 billion, or approximately 3 percent, of the republic‘s 2005 gross domestic product, which totaled nearly $280 billion using the official exchange rate. That was a 12.5-percent increase over 2004 and a 22.3-percent increase over 2003. Last year, the industry had a trade surplus of $7 billion after importing goods worth $1.6 billion. Second only to the mining industry, the textile and apparel sector is one of the largest net exporters in Indonesia.

Globally, Indonesia ranked 11th among leading textile exporters and captured 1.6 percent of total market share in 2004, according to API, which cited the World Trade Organization (WTO). It also ranked ninth among top apparel exporters, with 1.7 percent of total market share. The republic also continues to be a leading textile and apparel producer in the Association of Southeast Asian Nations (ASEAN) region.

The top four destinations for the industry‘s products in 2005 were the United States, importing 36 percent of Indonesia‘s textile and apparel exports; the European Union (EU), 16 percent; Japan, 5 percent; and the United Arab Emirates, 4 percent. According to API, Indonesia‘s textile exports to the United States have increased from $2.4 billion in 2003 to $3.1 billion in 2005. Furthermore, the republic is the United States‘ fifth-largest textile and apparel supplier in value terms, the office of the US Trade Representative reports. In the US Department of Commerce Office of Textiles and Apparel‘s Sept. 8, 2006, Major Shippers Report, Indonesia accounted for 3.93 percent in million dollars and 2.96 percent in million square-meter equivalents of total textile and apparel imports into the United States.

The textile industry is expected to remain as a major contributor to Indonesia‘s economy. One of the leading reasons is that Indonesia still has a comparative advantage for labor-intensive industries and the sizable domestic market, given the nation‘s 220 million population. The Indonesian Government is taking measures as fellows:

*Limiting the importation to protect local textile producers. The Ministry of Industry and Trade has issued a decree to limit textile imports in an effort to help the local industry, which has been severely hurt by massive quantities of cheap imports. Decree No. 732/2002, which was signed by minister Rini MS Soewandi in 2002, stipulates that the importation of textile products can only be done by local textile producers.

* The government has asked the textile industry to lessen the importation of textile raw materials, particularly cotton. Indonesia government warned that if Indonesia over depend on cotton, that cannot be produced in Indonesia, for the textile raw materials, this will further lessen our competitive ability in the international marketplace. As compensation, the government is trying to urge the industry to make use of local raw materials, such as flax and pineapple fiber. In order to the government has been conducting a project to process flax into flax fibers that are ready to be twined into textile, which is in an effort to improve the use of flax fiber. This project, firstly developed in Wonosobo, Central Java, in 2003, has started to show progress. Indonesia is encouraging the marketing of this product into the international market.

*Collect fund to help firms to update their machinery. Indonesia government is expecting the domestic textile industry to buy new machines and equipments so that it would be modernized and more efficient. Many companies could not replace their aging machinery as they had been saddled with huge debts and poor cash flows. Now the government is trying to collect fund to support the replacement program. small and medium enterprises, draw the interest of many countries, not only in the ASEAN region but also in the Middle East, Indonesian thus need the government to push designers to create Moslem clothes that could penetrate foreign markets, even though there is a huge demand in the domestic market. High fashion ladies garments: Indonesia has a differential advantage in high fashion ladies garments. The availability of a wide variety of fabrics, garments accessories, fashion schools,regular fashion shows, fashion models competitions and a substantial domestic market (young and middle age Indonesian men and women wear western dresses) are important factors in growth of high fashion garments industry in Indonesia. Other developing countries may not be able to compete with Indonesia in high fashion garments under free market mechanism.

The Indonesian Ministry of Environment has been encouraging the textile industry to become environment-friendly since 2000, Mr. Arif Wibowo, deputy head of environment-friendly technology standardization in the Ministry of Environment, said on the sidelines of a workshop on Textile Industry and Eco-labeling in Surakarta.

He said the lack of commitment from top executives is hindering the transition of Indonesian textile industry into clean and green industry.

He said being environment-friendly would mean saving lot of water and energy by the textile industry, and recycling the waste generated and reducing the greenhouse effect.

Speaking at the event, Mr. Liliek Setiawan, the head of Indonesian Textile Association (API)-Central Java said the high cost of investment is a major hurdle in implementing environment-friendly technologies in the textile industry, in the midst of dwindling profit margins.

He said the Chinese textile industry registered the highest growth in the world, but the race to decrease production cost to the minimum has resulted in damage to environment and pollution of water and air, which have reached alarming levels.

The Indonesian textile industry is also growing at high rate and it should consider using green technologies to avoid a China-like scenario, Mr. Setiawan said.

However, the transition to environment-friendly production processes is not easy, he said, and urged the Government to provide incentives to companies that implement them

Political and Legal system Automobile Sector in Indonesia

Indonesia's political system is a constitutional democracy. The current system is the result of various constitutional amendments after the fall of the authoritarian President Soeharto in 1998. The president is now elected in a general election every five years. The legislature is made up of two bodies: the House of Representatives and the Regional Representatives' Assembly, mandated to deal with regional affairs.

The supreme constitutional body is the People's Consultative Assembly, consisting of both the DPR and DPD sitting together. It sat frequently until 2004, but is now expected to sit only once during a presidential term unless the nation is confronted by a major political crisis. President Soeharto's rule from 1967-98 was marked by economic development, political stability and close relations with the West. It was, however, marred by human rights abuses, centralized authoritarian rule.

Current President Yudhoyono faces similar challenges to those that confronted his predecessors in the post-Soeharto era. If the representatives of the political parties in Cabinet gave the impression that they supported the President‘s policy initiatives. Yudhoyono has limited options to deal with this situation as he still needs support from these political parties to find the compromises necessary to ensure he leaves behind a credible legacy when his presidency ends in 2014.

Political trends evident in 2011 will recur in 2012. The Joint Secretariat will remain an unreliable coalition. Golkar, PKS, and to some extent the United Development Party (PPP), will continue to play hardball on several unresolved issues, particularly the corruption scandals surrounding former PD treasurer M. Nazaruddin and the Bank Century case. These political risks will be exploited by the opposition Indonesian Democratic Party of Struggle and by members of Yudhoyono‘s coalition when they find it expedient to engineer political instability, thereby further compromising PD‘s image among the electorate.

Debates on election law reform, particularly the minimum parliamentary threshold (PT), will be a major point of contention. While the big political parties PD, Golkar, PDIP want to raise the minimum threshold to four to five percent, PKS, the National Mandate Party ,the National Awakening Party, PPP and other smaller parties want to retain the minimum threshold at three percent to make it easier for them to contest. PD‘s actions will determine whether loyalists like PAN would be forced to disengage from the current coalition.

In 2012, more aspirants may announce their candidacy for the 2014 presidential election. Thus far, only Golkar Chair Aburizal Bakrie and PAN Chair Hatta Rajasa (the Coordinating Minister for the Economy and President Yudhoyono‘s in-law) have accepted their party‘s nomination . Beyond the national political stage, there are a few key political developments in 2012 that merit attention. The first is election in Jakarta and Aceh. The former is important because it involves the election of leaders of the nation‘s capital, receives wide media coverage, and is a national barometer of other local elections.

Controversy surrounding the Aceh election was already evident in 2011. There was political tension between the Aceh Party (Partai Aceh) and incumbent Governor Irwandi Yusuf over a Constitutional Court decision.The second issue is the performance of newly-elected commissioners of the Corruption Eradication Commission, under its new head, Abraham Samad, who was not a popular choice. It is rumoured that the DPR or Parliament chose him to weaken the Commission.

The third issue is the selection of the new commissioners for the General Election Commission who are to take charge of the 2014 presidential and legislative elections. These commissioners must improve on the 2014 election given the controversies surrounding the election.

President Yudhoyono not won decisively in 2009, a national crisis would have arisen over the widespread allegations of election fraud. Political interests of the elite will play a crucial role in the selection process, which is likely to be complicated and challenging.

A. The Constitution.

The legal basis of the Indonesian state is the 1945 Constitution was promulgated the day after the 17 August 1945 proclamation of independence. The Constitution was essentially a draft instrument hurriedly crafted by the Independence Preparatory Committee in the last weeks before the Japanese surrender. It is important to note that the Constitution was the product of a unitary republic. The Constitution was amended four times in the period from 1999 to 2002

B. The Legislative.

The body that can be categorized as the legislature in Indonesia is the House of Representatives. The most significant distinction between the DPR of the 2004-2009 period and the DPRs of former periods is the recruitment of its members. At this moment all DPR members are people who have been directly chosen by the voters. In previous periods, some DPR members were appointed by the President and some of them were appointed by parties.

C. The Executive.

The executive body in Indonesia is the Office of the President. The President and Vice President hold their respective term. In the event that the President dies, resigns, is impeached, or is unable to perform presidential duties as required by the Constitution, then the President will be replaced by the Vice- president.

D. The Judiciary

The judiciary in Indonesia consists of the Supreme Courtland all courts under its jurisdiction and the Constitutional Court. The courts under the Supreme Court include the General Courts, the Military Court, the Religious Court, and the State Administrative Court.

E. Division of Power

The ‗separation of power‘ doctrine is not applied in Indonesia in preference to the division of ‗power doctrine

2 . LEGAL SYSTEM

A. Legislation and Subsidiary Legislation

Hans Kaleen‘s hierarchy of norm theory and Hans Nawiasky‘s hierarchy of legal norm theory can be used to explain the system of legal norms in Indonesia. Both theories suggest that the legal norm is always structured in tiers and is hierarchical in nature,

B. Civil Legal System

The basis for all private law applicable in the European group, and former colonies of the European Group, has been the Dutch Civil Code of 1848. Subsequent amendments to the Dutch Code were also incorporated into the Codes for Indonesia as well based on the principle of concordance

C. Criminal Legal System

The criminal law is one of three systems of law in operation in the nation since the nineteenth century, the other two being a system of European-derived commercial codes and a civil law based on customary law (adat), which included Islamic law (“syaria”).

D. Constitutional Law

One definition of Constitutional Law widely used in Indonesia is that constitutional law is a set of rules that regulate and govern the organization, relationship, and interaction of the institutions of the State both vertically and horizontally.

However, alternative definition often noted in Indonesia is that of Oppenheim and Van Volenhoven that is constitutional law as the law of States in hiatus mode. As an organization Indonesia is a Republic based on the sovereignty of its people.

E. Islamic Law

Islamic law is often stated to be universal in nature. This is because in part the law constitutes a basic tenet of the religion.Theoretically, Islamic law by its very nature should be applied to Muslims wherever they may reside and irrespective of an nationality they may hold.

3. JUDICIAL SYSTEM

A. Supreme Court.

The existence of the Indonesian Supreme Court cannot be separated from the Court‘s history because its function, its authority, and its position have changed from time to time throughout that history. The Daendels Governorship saw many changes to the Indonesia system of justice as established by the Dutch throughout their colonization occur. In 1798, Raad van Justitie became the Hooge Read.

B. Constitutional Court

The mandate for the Constitutional Court came as anamendment to the Constitution. The Constitution was amended 4times in successive years after the fall of former President Soeharto, the Constitutional Court amendments were part of the third series of amendment that were enacted on 9 November 2001. The basis of the Court is contained in Article 24(2) and 24C of the Constitution.

C. Court System

1. Commercial Court

2. Tax Court

3. Labour Court 4. Children Court

5. Human Right Court

6. Military Court

7. Religious Court

8. State Administrative Court .

D. Civil Procedure

The Indonesian judicial system comprises several types of courts under the supervision of the Supreme Court .

4. LEGAL PROFESSIONS AND EDUCATION.

A. Judge.

During the colonial era, Judge (Hakim) in the Hoogrechtsthof and Raad van Justitie were officials (pegawai) completely separate of the government. Meanwhile, the colonial government established special courts for the indigenous/native population known as Landraad.

B. Prosecutor .

The task of prosecuting a criminal case through the General Court (pengadilan umum) system is the responsibility of public attorneys, public prosecutors, and prosecutors (Jaksa). All prosecutors and prosecuting activities are to be administered by the Kejaksaan Republik Indonesia (Public Prosecution Services of the Republic of Indonesia or PPS).

C. Lawyer and Advocate .

The Indonesian legal profession can trace its roots back to the Dutch colonial era and the two types of lawyer that practiced in the jurisdiction; namely, pokrol bambu (zaakwarnemer or native/indigenous lawyer) and advocaat en procureurs or advocate.

D. Notary .

Notaries in civil law countries have at least three principal functions, namely; drafting important legal instruments, authenticating and certifying documents that will serve a particular evidentiary function, and they act as an office of public record.

E. Legal Education.

Law and legal education has occurred as a matter of necessity throughout the history of humanity and not always in a structured or regular format. In this regard Indonesia is no different from any other country with respect to the development of legal education and as such has and continues to encounter many of the issues encountered by others.

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5. ALTERNATIVE DISPUTE RESOLUTION.

A. Arbitration.

Arbitration has existed in Indonesia since the time of the Dutch colonial government. The Dutch brought arbitration to Indonesia along with other elements of their national legal system in an attempt to govern its new colony.

B. Mediation Conciliation.

In arbitration, the arbiter is appointed by the parties to decide and make decisions about the dispute, and the result is potentially a win-lose solution. Nevertheless, some parties still prefer arbitration to adjudication as the parties still maintain some control of the process. Clearly, any control the parties have during mediation, conciliation, or arbitration is lost in the court based litigation process .

Foreign Direct Investment

Country is demonstrated by the experiences of many developing nations. The economic histories of South Korea, Malaysia, Thailand, China, and many other countries show that the presence of foreign companies will boost economic growth and generate jobs. Now, foreign direct investment in Indonesia is rising significantly and quickly becoming a favorite destination for business, manufacturing, and natural resource extraction.

FDI realization in Indonesia jumped to a new record high of $ 587.41 million in the third quarter of this year, surging 22 percent compared to a year earlier. This data was release by the Investment Coordinating Board of Indonesia. Furthermore, the data showed that Indonesia, which is Southeast Asia‘s largest economy, managed to accumulate Rs.164.2 trillion in FDI in the first nine months of 2012, keeping it on track to achieve its annual target of Rs. 206.8 trillion.

Foreign direct investment in Indonesia jumped 22% in the third quarter from a year earlier to another record, bolstering growth in Southeast Asia's largest economy even as a high-profile dispute dents the country's image with overseas investors. Investment in the country's mines and factories, as well as purchases of Indonesian companies, hit 56.6 trillion rupiah ($5.9 billion) in the July-September period, breaking the previous quarter's record of 56.1 trillion rupiah, the government's Investment Coordinating Board said Monday. The board forecasts FDI will rise 26% this year to 206.8 trillion rupiah.

INFRASTRUCTURE Indonesia recorded total FDI of 175.3 trillion rupiah in 2011, rising 18 percent from a year earlier. FDI was 107.6 trillion rupiah in the first half of this year. Some analysts however warned that foreign investment could taper off if the government did not improve basic infrastructure.

"Investments in Indonesia are still rather low and FDI has room to grow if the government invests more in basic infrastructure," said Royal Bank of Scotland economist Enrico Tanuwidjaja in Singapore."The road density hasn't been growing that much. It's the same for rail, ports and other infrastructure."Indonesia receives persistently bad scores in Transparency International's corruption index. Labour unrest is also a problem.

Legislative branch

People's Consultative Assembly is the upper house; It consists of members of the DPR and DPD and has role in inaugurating and impeaching the president and in amending the constitution but does not formulate national policy;

The dates back to the pre-historical ages. The archeological excavation and researches have given evidence of the per- historic people called the Java Man.

This south East Asian country played a major role in the trade and business which was carried out in Asia during this time. The trade accounts and trade contracts of the different countries of Asia mentions the name of Indonesia. This commercial mingling had also influenced the culture and tradition of Indonesia significantly.

The medieval history of Indonesia is also very significant. It is during this period Islam began to influence the Indonesian people.

Within two centuries almost the whole island was converted to Islamism. After the Muslim invasion all the relics of Hinduism was destroyed from the face of this country and Indonesia was transformed to one of largest Islamic nations of the world. Indonesia became famous in the western world especially Europe when the Portuguese traders got to know about exotic spices in the sixteenth century. The Dutch East Indian Company began to cultivate sugarcane and coffee in this country which is still now major crops of Indonesia.

During the Second World War the country went under the possession of Japan. After the end of the war Indonesia became independent and was declared the Republic of Indonesia

Indonesia, a vast polyglot nation, grew an estimated 6.1% and 6.4% in 2010 and 2011, respectively. The government made economic advances under the first administration of President YUDHOYONO (2004-09), introducing significant reforms in the financial sector, including tax and customs reforms, the use of Treasury bills, and capital market development and supervision. During the global financial crisis, Indonesia outperformed its regional neighbors and joined China and India as the only G20 members posting growth in 2009.

The government has promoted fiscally conservative policies, resulting in a debt-to-GDP ratio of less than 25%, a fiscal deficit below 3%, and historically low rates of inflation. Fitch and Moody's upgraded Indonesia's credit rating to investment grade in December 2011. Indonesia still struggles with poverty and unemployment, inadequate infrastructure, corruption, a complex regulatory environment, and unequal resource distribution among regions. The government in 2013 faces the ongoing challenge of improving Indonesia's insufficient infrastructure to remove impediments to economic growth, labor unrest over wages, and reducing its fuel subsidy program in the face of high oil prices. Indonesia’s Automotive Investment News Domestic demand and global investment drive automotive industry in Indonesia as one of the fastest-growing markets in the world.Since Indonesia regains investment grade status from Fitch Rating, the investments of many sectors are growing fast. A number of automakers including Toyota, Honda, Daihatsu, Mitsubishi, General Motors, Ford and Tata have raised their investment in Indonesia. Those companies have announced plans for the construction of new assembly plants that would roll out new models aimed at tapping the fast-growing Indonesian middle class. Auto sales in Indonesia are expected to reach 1 million in 2012, making it one of the world's largest markets. The Indonesia government also approved to hit an eco-car project (Low Cost and Green Car). Indonesia would become a full-scale production base for hybrid-powered vehicle by 2020. Indonesia serves as an important production base for ASEAN and attracts as much investment as Thailand. The Indonesian auto industry, like its Thai counterpart, is a production base for Japanese auto-makers, which makes up 86 per cent of the market.

Indonesia is also becoming a more interesting destination for investors thanks to various factors, including government support. In 2010, Indonesia emerged as the largest ASEAN market for the first time with sales of 850,000 vehicles, while auto sales in Thailand, which was affected by the massive flood crisis, reached just 795,000. Indonesian government designated itself as a major automobile manufacturing base for the ASEAN region. It plans to produce 1 million vehicles per year by 2013 and 2 million vehicles per year by 2020. Indonesia is presently the second-largest auto producer in the region, with its 700,000-vehicle production in 2011 being less than half of Thailand's 1.6 million.

Among the factors supporting Indonesia is its 240 million of population, who make up as much as 40 per cent of the total ASEAN population. This reflects the growth opportunities of the country's auto industry, supported by the fast economic growth that drives up demand. There's more demand than supply for automobiles in Indonesia, especially for vehicles with engines below 2.5-litres as well as for light trucks 10 tonnes and under. Moreover, the Indonesian government has offered tremendous investment promotions, both in terms of auto production and consumption to cater to increasing demand and to also lower the number of imported vehicles. They include corporate tax exemption for 5- 10 years (plus 50-per-cent reduction for another two years) that was introduced in August last year. This privilege is for investments of at least $117 million, with investors being required to hold 10-per-cent of the investment amount in the Indonesian Central Bank.

That was followed by exemption of VAT and import duty for goods in the raw material/intermediate material, which benefits imports of auto parts for local assembly. The import duty for passenger cars and commercial vehicles ranges from 0-50 per cent, whiles the import duty for auto parts are 10 per cent, which is waived for ASEAN members. This would also benefit Indonesian investors who depend on raw materials from other ASEAN countries. Indonesia also lowered income tax for investors who produce eco-friendly (22km/liter fuel economy, 80 per cent local content and Euro 3 emission) and low-priced vehicles.

The Indonesian government recently confirmed plans to become the leader of ASEAN. It announced an eco-car project would hit the road this year and that the country would become a full-scale production base for hybrid-powered vehicles by 2020. Indonesia takes the lead as the largest automotive market in the Association of Southeast Asian Nations region, with 2011 sales growing 16.4% from like-2010 to 890,410 units, an analyst reports. Expansion plans at the national automotive industry has been realized in Q1/2012 to reach U.S. $ 2.42 billion, entirely carried out by Japanese investors. Here are automobile manufacturers in Indonesia that began to realize the investment expansion plan. Currently, the process has begun construction of the plant gradually.

Suzuki Motor With the expansion, the volume of car production capacity of Indonesia surged 66.67% in stages from a position of 900,000 units per year to about 1.5 million units per year by 2014. Suzuki Motor through PT. Indomobil Suzuki Motor will invest U.S. $ 782.63 million (Rp 7.13 trillion) for new production capacity of 100,000 units per year. With that addition, Suzuki's total installed capacity in Indonesia reached 200,000 units per year. Investment is planned to be used to increase engine production capacity and increase the number of new models that include multipurpose passenger vehicle (MPV). Toyota Motor PT. Toyota Motor Manufacturing Indonesia has a mandate to realize the expansion of Toyota Motor with value U.S. $ 534.4 million (Rp 4, 81 trillion) to increase the capacity of 120,000 units per year

Honda Motor PT. Honda Prospect Motor will complete the construction of a new plant in Indonesia valued at Rp 3,1 trillion (about 27 billion yen / U.S $ 329 million) to expand its capacity three-fold to 180 000 units per year. Mitsubishi Motors. PT. Krama Yudha Tiga Berlian (Mitsubishi Motor) realize an investment of U.S. $ 27.8 million (Rp250 billion) to increase the capacity of 12,000 units to 162,000 units per year.

Daihatsu Motor PT. Astra Daihatsu Motor racing to held the capacity of expansion to add 100,000 units to 430,000 units per year. The new plant is targeted to commercial production fastest at the end of this year. "In October this year, the new plant expansion completed and began full production in 2013. Additional new capacity we can use it for anything good for the production of Xenia and Avanza, including for low cost and green car [LCGC) Nissan Motor Nissan Ups Investment in Indonesia. Nissan CEO Carlos Ghosn announced a ramp up of investment in Indonesia, adding $400 million to increase production capacity and sales. This follows $313 million pledged last July, part of plans to triple sales growth in the ASEAN region.

GM and BMW GM is preparing to invest US$150 million to re-open its assembly plant for a 7-seater van after seven years. According to GM, the plant would produce 40,000 vehicles per year for both the domestic and export markets, and BMW recently started local production of one of its luxury sedan models.

Overview Different economic sectors of Indonesia

The biggest economy of South East Asia, Indonesia smoothly escaped the brunt of the 2008 global recession. Its diverse industrial portfolio contributes the major share of the country‘s gross domestic product; at 47.1%.Indonesia‘s industry sectors provide employment to 18.6% of the total workforce of the country. Some of the major industries of Indonesia include petroleum and natural gas, textiles, apparel, footwear, mining, cement, chemical fertilizers, plywood, rubber, food and tourism. However, the lack of development in the health industry and in transportation, along with corruption, is the biggest obstacle to the country‘s economic growth.Indonesia Industry Sectors: Major Sectors

The major industry sectors in Indonesia are as follows:

Agriculture: With 42.1% of the total labor force engaged in agriculture, Indonesia can be rightly considered an agrarian economy. The sector contributed 14.4% to the country‘s GDP in 2009. Indonesia‘s agricultural sector can be categorized into food crops, non-food crops, horticulture, animal products, fish products and forest products. In 2006, the country yielded food crops worth 213,529,700 million rupiahs, which was 35% more than the 2003 level. Rice and coffee remain the major producer of the country, making it the world‘s fourth biggest producer of these products.

Mining: According to the statistics provided by the energy and mines ministry, investment in the country‘s mining sector increased from US$1.2 billion in 2007 to US$1.6 billion in 2008. The fall in commodity prices in 2009, due to the global economic downturn, resulted in several major mining companies putting their investment plans on hold. However, the mining industry is expected to reach US$123 billion by 2014, with yearly growth of 10%-11% from 2010 onwards. Increase in international interest can be seen in the Indonesian coal sector, after the significant number of deals that took place in the last quarter of 2009.

Textile and Apparel: The textile and apparel manufacturing industry of Indonesia ranks 14th in the world. In 2008, the value added by textiles and clothing manufacturing dropped to 1.2%. Industry was hard hit by the global recession of the late 2000s. Around 155 textile production companies went bankrupt in 2009 due to an increase in the cost of production and enormous inflow of cheap stuff from China.

Tourism: Tourism is among the biggest economy boosters in Indonesia. This is apparent in the fact that 6.45 million visitors came to the country in 2009, despite of hotel bombings in Jakarta. Tourism contributes 3% to the GDP of the country. The tourism growth plan for 2010 aims at 7 million foreign tourists. However, this is much lower than that of its tiny neighbor Singapore, which was visited by 9.5 million people in 2009.

Indonesia’s auto industry on overdrive 26 May, 2012.

Apart from Myanmar, the other Asians country that is being closely watched is Indonesia, due to its stronger role in regional politics and economics, as well as noticeable policy implementations. A number of auto-makers including Toyota, General Motors, Ford and Tata have raised their investment in Indonesia. These companies have announced plans for the construction of new assembly plants that would roll out new models aimed at tapping the fast-growing Indonesian middle class.

Toyota, for example, announced that it would raise production to 230,000 units per year in 2014 while GM is preparing to invest US$150 million to re-open its assembly plant for a 7-seater van after seven years. According to GM, the plant would produce 40,000 vehicles per year for both the domestic and export markets.

Auto sales in Indonesia are expected to reach 1 million in 2012, making it one of the world's largest markets. Meanwhile, its low vehicle ownership rate means there is much room for growth. Indonesia, in any case, is one of the fastest-growing markets in the world. The Indonesian government recently confirmed plans to become the leader of Asean. It announced an eco-car project would hit the road this year and that the country would become a full-scale production base for hybrid-powered vehicles by 2020.At the same time, the nation's motorcycle market is the third largest in the world after China and India. Honda and Yamaha are the market leaders in the market, which is expected to reach saturation by 2015. The motorcycle ownership ratio in Indonesia is 2 people for 1 motorcycle, very much on the opposite scale as demand for automobiles grows amid the country's strong economic expansion.

Indonesian auto sales up 10.6%

Indonesian Automobile Industry Association vice chairman Johnny Darmawan said 249,589 vehicles were sold during the first quarter in Indonesia, up 10.6 per cent compared to the same period last year. He said that auto sales are expected to reach 960,000 vehicles this year, up from 870,000 in 2011. Growth is expected to continue although the government plans to raise the minimum down payment.The new policies launched by the Indonesian Central Bank require vehicle buyers, who apply for car loans at commercial banks, to place a 30-per-cent down payment.

The Indonesian Finance Ministry also introduced a new regulation requiring finance companies to ask for a 25-per-cent down payment. Most buyers in Indonesia purchase vehicles through auto loans from finance companies."We will not adjust our forecast although the Indonesian government is likely to raise fuel prices," Darmawan said, adding that his association is confident auto sales will remain at 80,000 vehicles per month on average.

Overviews of Business and Trade at International Level

BMI remains bullish on growth in Indonesia's auto sector. Despite the introduction of new regulations regarding minimum down payments on vehicle purchases in June 2012 and a further tightening of legislation in September 2012 to include Shariah lending as well, Indonesia's total vehicle sales for September 2012 came in at 102,111 units. They were close to the record high of 102,512 units reached in July 2012. Should this strong pace of growth be maintained, it would take total 2012 vehicle sales beyond BMI's forecast for 9.8% growth.

Given that sales picked up in September 2012, the market has somewhat digested this new legislation for vehicle sales and we are maintaining our full year forecasts. Sales for the first nine months of 2012 were strong with total sales up 24% year-on-year (y-o-y) to 816,337 units. September's sales were 28% higher than September 2011. BMI currently expects vehicle sales to grow by an average of 10% per year between 2012 and 2016.

Carmakers share this upbeat view. Japan's Mazda Motor has announced that Indonesia will play a pivotal role in its plan to sell 1.7mn units worldwide by 2016. Mazda President and CEO Takashi Yamanouchi said 'the country is increasingly becoming an important market for our strategic viewpoint'. Mazda is employing four strategies to meet its global goal, one of which is to increase its operations in South East Asia. As the region's biggest passenger car sales market, Indonesia is a prime target for growth and the company plans to triple its sales in the country by 2015. This will involve an increase from the 9,054 units sold in 2011 to 30,000 units. In 2012, Mazda is aiming for 12,000 units, which would be a 30% increase on 2011.

India's Tata Motors announced in September that it would start selling vehicles in Indonesia in 2013 through its local wholly owned subsidiary. Tata plans to start off with only 10-15 dealerships. However, the company aims to expand operations to 60 full- service dealerships, 100 workshops and 300 spare parts retailers in the space of just three years. We also believe that Tata could potentially benefit from new laws currently in place to promote research and development in the development of green and energy efficient cars.

Present Trade Relations and Business Volume of different products with India

HYDERABAD, MAY 31: The bilateral trade between India and Indonesia is poised for a major boost and expected to top $45 billion by 2015 up from $20 billion in 2010, according to Lt. General (R) Andhi M.Ghalib, Indonesian Ambassador to India. He said that opportunities abound for cooperation as was demonstrated by the signing up of 33 memorandums of understanding (MoU) for cooperation including business to business. Of this, 18 MoUs have been linked by business entities. They entail a total investment commitment of over $16 billion in Indonesia.

For Indonesia, China and India are two attractive investment partners. Already companies like GVK group, have taken up the development of two airport projects in Indonesia and Reliance Industries had committed investment of about $5 billion there, he said. The cooperation in the automotive sector has grown significantly with several Indian companies such as TVS Motors, Bajaj, Tata Motors and Minda Group either setting up their bases or planning to set them up.

The Indonesian automotive companies are keen to take part in the Indian automotive growth story. The trade agreement with Asean is also expected to boost automotive business between the two countries. The availability of huge natural resources, including thermal coal has attracted several Indian power companies. Already coal is supplied to more than 1200 mw of generation capacity.India and Indonesia set up a joint feasibility study of a Comprehensive Economic Cooperation Agreement (CECA) between the two countries in 2007. The Joint Study Group has submitted its Report in September, 2009.

Introduction of the automobile Company and its role in the economy of Indonesia.

I. Introduction Automobile industry is a symbol of technical marvel by human kind. Being one of the fastest growing sectors in the world its dynamic growth phases are explained by nature of competition, product life cycle and consumer demand. Today, the global automobile industry is concerned with consumer demands for styling, safety, and comfort; and with labor relations and manufacturing efficiency. The industry is at the crossroads with global mergers and relocation of production centers to emerging developing economies.

Due to its deep forward and backward linkages with several key segments of the economy, the automobile industry is having a strong multiplier effect on the growth of a country and hence is capable of being the driver of economic growth. It plays a major catalytic role in developing transport sector in one hand and help industrial sector on the other to grow faster and thereby generate a significant employment opportunities. Also as many countries are opening the land border for trade and developing international road links, the contribution of automobile sector in increasing exports and imports will be significantly high.

As automobile industry is becoming more and more standardized, the level of competition is increasing and production base of most of auto-giant companies are being shifted from the developed countries to developing countries to take the advantage of low cost of production. Thus, many developing countries are making serious efforts to grab these opportunities which include many Asian countries such as Thailand, China, India and Indonesia.

The rising competition and increasing global trade are the major factors in improving the global distribution system and has forced many auto-giants such as General Motors, Ford, Toyota, Honda, Volkswagen, and Daimler Chrysler, to shift their production bases in different developing countries which help them operate efficiently in a globally competitive marketplace.

During the second half of the 1990's, the globalization of the automotive industry has greatly accelerated due to the construction of important overseas facilities and establishment of mergers between giant multinational automobile manufacturers. Over the years, it is being observed that Asia is emerging as a global automotive hub. Exports of automobiles including components from Asia are also increasing by leaps and bounds. Asia has become the major consumer as well as supplier of automobiles.

The Indonesian automotive industry is essentially an assembly industry, dominated by the major Japanese car manufacturers is also coming up in post-liberalization period and increasing its exports. Japan and Korea Rep already have developed automobile industry. Hence, comparison with these two countries may not be worthwhile. Selected four are developing countries and making an effort to develop the automobile sector through different paths. The paper will compare the alternative strategies for the growth of automobile industry in these selected countries.

Economic Role in Indonesia

Economic forces in Indonesia Economic is the social science that deals with the production, distribution, and consumption of goods and services and with the theory and management of economies or economic systems (Economics, 2010). In Indonesia, the economic force which is Gross National Income. Gross National Income is the value of all final good and services produced within a nation in a given year.

The marketing in Indonesia may be affected by the number of people in the country, growth rate, and the local cost of living. When the population in Indonesia is more, the production needs to produce more quantity to satisfy their needs and wants. If the growth rate in Indonesia is lower than the population that mean the standards of living is rising. The purchasing of the power parity may also affect the marketing, when the gross domestic product is adjusted, the value of production will increase and it will cause the cost of living increase.

Indonesia‘s automakers are investing heavily in increasing and diversifying production to keep pace with rising demand in what is now South-east Asia‘s largest vehicle market.

Last year, Indonesia overtook Thailand to achieve the highest vehicle sales among ASEAN member states. More than 894,000 units were sold, according to Jongkie Sugiarto, the first deputy chairman of the Association of Indonesian Motor Vehicles Industry (Gaikindo). The medium-term outlook for the industry is excellent – sales are forecast to reach 1.2m units in 2016, according to IHS Automotive, an analysis and consulting company focusing on the sector.

This gives a lot of scope for continued increases in sales, particularly given economic growth, which topped 6% in 2011 and looks set to do so again in 2012. Rising average income levels are creating a burgeoning middle class who aspire to car ownership, and increasingly are able to achieve it, while the development of the industrial and mining sectors is stimulating demand for commercial vehicles. Interest rates and inflation, currently historically low and stable, are further strengthening the environment. In September Japanese automaker Toyota, which with its affiliate Daihatsu has a market share of around 65%, announced it would be investing $143m to boost its manufacturing capacity in Indonesia by more than 60% to meet growing demand. The construction of a new plant at Karawang will raise the company‘s output to 180,000 vehicles from the current level of 110,000, and is due to be completed by mid-2013.

Toyota is certainly not the only automaker looking to capitalise on the growth of the Indonesian market and the country‘s competitive advantages as a manufacturing centre. In early January, Japanese rival Suzuki announced it would be investing $769.86m in capacity increases in Indonesia. Of this, some $513.42m will be allocated to build a new engine plant, tripling the firm‘s production of engines in the country to 150,000 per year. The new factory, located east of Jakarta, should open in 2014.

The remaining $256.62m will be invested in existing car assembly lines to increase annual output capacity to 120,000 per year, from around 80,000 at present, with the view to raising production to 150,000 over the longer term if required. Though Japanese-owned firms dominate the Indonesian market, accounting for around 90% of vehicle sales, other international rivals are increasing their presence in the country, both in manufacturing and sales.

BMW, meanwhile, announced last May that it is also set to double its production capacity by investing some Rp100bn ($11.15m), as well as increase the number of vehicle models it produces locally.

One of the most important factors in the development of a country‘s automotive industry is a strong supply chain. Vehicle makers like to locate factories near component suppliers where possible – which can be a chicken-and-egg issue for countries new to automotive production, as component makers also prefer to be close to their customers. Indonesia has reached the stage at which a positive multiplier seems to be developing, with a substantial base of local suppliers making the country an even more attractive place to manufacture, and thus complete-unit manufacturers are now expanding production, stimulating the further growth of the components industry.

While the pace of vehicle sales growth is showing signs of slowing, this is to be expected as penetration increases and the market matures. The uncertain global economy and tighter regulation of vehicle loans means that growth may cool somewhat in 2012. But Indonesia remains a huge market with an excellent long-term sales outlook. Combined with the advantages of local production, Indonesia‘s automotive sector is flourishing, and may be entering an exciting new era.

Development of Automotive Industry in Indonesia

The impact of the global financial crisis that struck in 2008 has affected the performance of the country's automotive industry especially in 2009. Based on a report from the Association of Indonesian Motor Vehicle Industries (Gaikindo) car production and sales in 2009 dropped form the previous year. The production shrank to 464,815 units in 2009 from 600,628 units in 2008 or a decline of 22.6%.

Meanwhile, sales fell 19.9% from 603,774 units in 2008 to 483,548 units in 2009 although exceeding the target set by Gaikindo of 450,000 units. Sales in 2008 were the highest in five years. The decline followed the falling value of the rupiah that resulted in an increase in prices. The price hikes forced consumers to postpone plan to purchase new cars.

In addition, high interest rate set by banks and financing firms as a result of the global financial woes discouraged people from buying new cars. However, sales of some major brands like Toyota, Daihatsu and Mitsubishi grew in 2009.

Meanwhile, exports also dropped contributing to the decline in total sales of cars in 2009. Exports of cars in completely built-up (CBU) form totaled 56,669 units in 2009 or down 43.8% from 100,982 units in the previous year. Among the sole agents and car makers succeeded in exporting cars are PT. Astra Daihatsu Motor (ADM). The assembler for Daihatsu cars exported 31,450 units of cars in 2009. ADM's main export products are Gran Max and Terios which were exported to Japan, South Africa and Middle East.Car sales on the domestic market are dominated still by Multi Purpose Vehicle (MPV). In this segment, Toyota's main products Avanza and Inova led in market share putting competitors behind like Xenia of Daihatsu and APV of Suzuki.

In 2010, the car market began to revive to follow the world's economic trend which is heading toward recovery. The country's auto industry, however, will face new challenge in 2010 with the implementation of the Asean China Free Trade Area (ACFTA), which became effect on 1 January 2010. It is feared that Chinese car makers would be more aggressive in their penetration of the domestic market. A number of Chinese car makers already have their agents importing cars from that country in completely knocked down (CKD) form and built production facilities in the country.

Structure of Motor Vehicle Industry

Characteristics of Motor Vehicle Industry in Indonesia Motor vehicle industry began to grow since the operation of brand holding sole agents (ATPM) early the 1970s‘ under a decision of the industry minister No. 295/1982 and No. 428/1987. ATPMs were licensed to assemble, produce and distribute their products in Indonesia. ATPM operates as sole agents selling cars in the country and as car makers. In the beginning the government of Indonesia hoped that ATPM would become the embryo for auto industry through transfer of technology to produce cars with high local content.

However, after 30 years, there was no significant progress made toward developing the assembling industry to manufacturing industry with high dependence on imports for components. As a result the prices of cars remain high.

In 1999, the government's deregulation measure killed the idea of developing full manufacturing industry in the automotive sector. The policy allowed import of cars in CBU form. The role of ATPM became insignificant as non ATPM also were allowed to import any brand of cars .

Foreign principals, therefore, decided to take over the production operations of their car products allowing the ATPM only to serve as the distributors.

Toyota Motor Corp. took over the manufacturing division of PT. Toyota Astra Motor (TAM) and made TAM as a distributor of Toyota cars in 2003. The manufacturing sector is operated by PT. Toyota Manufacturing Indonesia (TMMIN), which is 95% owned by Toyota Motor Corp. Meanwhile, Suzuki Motor Corporation took over control of the manufacturing operation of PT Indomobil Suzuki International and increased its share to 90% from 40% earlier. The remaining 10% is held by Indomobil Sukses International. Distribution of its cars is handled by PT Indomobil Niaga International Brand holding sole agents (ATPM)

Astra and Indomobil are two largest groups of automotive companies in Indonesia cooperating with a number of foreign principals and serve as ATPM selling cars in Indonesia. Astra is agent for Asian and European cars including Toyota, Daihatsu, Isuzu, Nissan Diesel and Peugeot. Indomobil Group is sole agent for Suzuki, Volvo, Audi, Nissan, Ssangyong, Mazda, Hino, Renault and VW Caravelle. There are also other smaller ATPM to operate as agents for a number of brands like PT Garuda Mataram Motor ATPM for Audi and VW Caravelle, PT Nasional Motor Company for Mazda and Hino ; PT Daimler Chrysler Indonesia for Mercedes, Chrysler and Jeep, and PT Grandauto Dinamika for Bentley, Daimler, Jaguar and Roll Royce.

Sales of VW Caravelle, product of Volkswagen, is handled by PT Garuda Mataram Motor instead of PT Car & Cars Indonesia, which is the ATPM for Volkswagen in Indonesia as it was already registered by PT Garuda Mataram Motor when it was first imported to the country for use in the APEX summit in 1992. Currently PT Car & Cars Indonesia is agent for only Volkswagen passenger cars/sedans.

Automotive products in Indonesia are divided into two categories passenger cars and commercial cars. Passenger cars include sedans, MPV 4x2 and SUV 4x4 that consist of a number of types by engine capacity.

Commercial cars include Bus, Pick Up/Truck and Dou Double Cabin 4x2/4x4 which consist a number of types by gross vehicle weight.

Production Capacity

There are still a number of ATPMs operating both as a producer and distributor, but other operate only as distributors as manufacturing divisions have been taken over by principals such as in the case of PT Toyota Astra Motor (TAM). Now TAM operates only as a distributor. Its manufacturing facility was already taken over in July 2003, by PT Toyota Motor Manufacturing Indonesia (TMMIN), which is 95% owned by Toyota Motor Corporation and 5% by PT Astra Internasional.

Suzuki Motor Corporation has also increased its control of PT Indomobil Suzuki International as the ATPM for Suzuki in Indonesia. PT Indomobil Suzuki International now operates only its manufacturing facility and sales or distribution is handled by PT Indomobil Niaga International as a sole distributor.

A number of other ATPM have no assembling plant or manufacturing facility such as PT Tjahja Sakti Motor as the agent for BMW cars, PT Astra France Motor agent for Peugeot, PT Pantja Motor agent for Isuzu cars, etc. Assembling of their cars is handled by other companies such as PT Gaya Motor, which is not an ATPM or other ATPM such as in the case of Ssangyong, the assembling of which is handled by PT Nissan Motor Indonesia. This belongs to the same group, the Indomobil Group.

Toyota Manufacturing Indonesia (TMMIN) has the largest production capacity among the car makers in the country. It has an annual production capacity of 170,000 units per year. Meanwhile, Mitsubishi car maker the Krama Judha Group , which earlier had the second largest capacity with two assembling plants - PT Krama Yudha Ratu Motors for commercial cars and PT Krama Yudha Kesuma Motors for passenger cars - stopped the operation of PT Krama Yudha Kesuma Motors in 2005 resulting in cut in its production capacity and a decline in its sales of passenger cars in Indonesia.