CONNECT Indonesia a Smart Guide to Shipping

CONNECT Indonesia A smart guide to shipping

This is your quick guide to help you connect with customers and businesses across Indonesia. It’s here to help you understand the local culture, shipping requirements, regulations and key commercial opportunities to expand your business.

united problem solversTM Contents CONNECT Indonesia Visit UPS.com

Indonesia Overview 03 > Find out the most important facts about the markets to help you assess the potential for your business.

Economic Potential 04 > Learn about what sells where and the most popular exports and imports that may be relevant to your sector.

Business Culture 07 > Pointers on how to build successful relationships with local businesses and consumers.

Tips and Advice 08 > Useful information and directory to help you ship to and from Indonesia.

Connecting with UPS 10 > A quick overview of UPS capabilities and experience and how we can help connect your business with customers across Indonesia.

Contents Indonesia Overview Economic Potential Business Culture Tips and Advice Connecting with UPS Indonesia Overview CONNECT Indonesia Visit UPS.com

Open your new trade Indonesia is a country with tremendous economic potential. It is the largest economy in the 10-nation ASEAN (Association of Southeast Asian Nations) countries. Indonesia is the world's third most populous democracy, the world's largest archipelagic route to Indonesia. state, and the world's largest Muslim-majority nation. Local government aims to reduce the country’s exports of raw commodities and to diversify into both the manufacturing and service sectors.

National facts and figures

Indonesia Capital Jakarta Population 261,115,456 (2016) Land Area 1,904,569 sq. km Major Urban Centers Jakarta 8.5 million; Surabaya 2.3 million; Medan & Population 1.7 million; Bandung 1.7 million; Bekasi 1.5 million; Palembang 1.4 million (2017) Language Bahasa Indonesia, English, Dutch, local dialects (e.g. Javanese)

One of the most powerful economies Focus on trade Growing economy Ease of doing business by 2030 Indonesia has implemented 10 free trade According to the Bank of Indonesia, GDP growth is The country's ease of doing business index Indonesia is the world's 16th largest economy and agreements and is negotiating for another 7 estimated at 5.05% in 2017. improved significantly from 91st place in 2017 to is projected to rise to 7th position by 2030. agreements in 2018. 72nd position at the start of 2018, according to the In 2018, the economy is expected to continue World Bank. In terms of purchasing power parity, it is ranked Indonesia is a member of G20, an international to grow at a similar rate, which is higher than the 10th in the world. forum for the governments and central bank global economic growth forecasted at the range of Factors that were taken into account when governors, as well as the World Trade Organization 3.6-3.7%. compiling this index include: ease at which (WTO), an intergovernmental organization that businesses can be set up, access to electricity, regulates international trade. registering a property, acquiring finance, paying taxes and engaging in cross-border trade.

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Unlocking your Indonesia's economy began 2017 on a strong footing and accelerated growth is expected to continue thanks to rising investments, more fiscal stimulus and growing exports on the back of the strengthening global economy. potential.

As the largest economy in ASEAN, Indonesia Reforms to promote economic growth has charted good economic growth. The The Indonesian government has taken significant steps to country’s GDP per capita has risen steadily, achieve ambitious development plans in the country. from US$ 857 in 2000 to about US$ 3,570 in There has been a series of economic stimulus packages to 2016. An emerging middle-income country, boost investment through deregulation and fiscal incentives Indonesia has made enormous gains in such as streamlining approval and procurement procedures for poverty reduction. Since 1999, Indonesia has infrastructure projects, a temporary reduction in tax on revalued cut its poverty rate by more than half. In 2016, fixed assets and cuts to energy prices. The 14th economic the poverty rate in Indonesia stands at 10.6%. stimulus package provides incentives to the eCommerce and Currency The Indonesian Rupiah creative industries. From a continental perspective, 67.9% of Indonesian exports GDP (US$) 932.3 billion (2016) In 2016, the Indonesian government opened more lines of by value were delivered to other Asian countries/territories GDP Per 3,570 (2016) while 12.7% were delivered to European countries. Indonesia Capita (US$) business to Foreign Direct Investment (FDI) to streamline the investment process, allowing 100% FDI in the sectors of shipped another 12.3% worth of goods to North America and CPI inflation Rate 3.5% (2016) eCommerce, cold storage, pharmaceuticals manufacturing and 2.9% to Africa. Total Imports (US$) 156.9 billion (2017) the movie industry. The government streamlines investment Key trading partners in 2016 procedures, with 70 industrial zones across 13 provinces Top imports include mechanical machinery Import Top Indonesia or aircraft (US$ 21.8 billion combined) and providing a 3-hour investment express service to facilitate China: US$ 32.1 billion Imports electrical machinery or equipment (US$ 17.9 foreign investors. The service helps speed up licensing billion combined). (2017) Singapore: US$ 25.8 billion procedures that include completion of necessary permits, the Japan: US$ 11.3 billion tax number and a certificate of company registration. Total Exports (US$) 168.7 billion (2017) Infrastructure spending rose to about US$ 30 billion in 2017. Export There are plans to develop 13 industrial estates right across China: US$ 16.8 billion the archipelago in the next five to seven years (until 2022) Top exports include non-oil & gas exports such U.S.: US$ 16.2 billion Top Indonesia to facilitate job creation and boost regional development as fats and vegetable oils (US$ 22.9 billion) and Exports Japan: US$ 16.1 billion mineral fuels (US$ 21.1 billion). (2017) economic growth.

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Boost for Indonesia’s manufacturing sector has been one of the major pillars of the nation's economy since the 1970s. The Government of Indonesia issued a regulation on December 28th, 2015 to increase investment in developing industrial zones. The purpose of the business. regulation is to attract investors and facilitate the growth of industrial zones across the country.

To promote investment in the less developed areas in Indonesia, businesses are granted Expansion of Foreign Direct Investment bigger incentives. For example: tax subsidies and allowances at the national level, in FDI flows into Indonesia have been experiencing a 12.7% growth in the 2nd quarter addition to relief from regional taxes and levies such as land and building acquisition fees, of 2017 as a result of the investment in special economic zones, as well as the law property taxes and street lighting taxes. enforcement, business certainty, interest rate tax cuts for exporters, energy tariff cuts for Kendal Industrial Park in Semarang (Park by the Bay) in Java labor-intensive industries, tax incentives and lower tax rate on property acquired by local real estate investment trusts. A joint Indonesia-Singapore project started in November 2016 and is expected to complete in 2021. The scale of investment in total will be IDR 4.3 trillion (about US$ 450 million). The biggest foreign investor in Indonesia in the 2nd quarter of 2017 was Singapore (US$ 1.6 billion), followed by Japan (US$ 1.4 billion) and China (US$ 1.3 billion). Located between Jakarta and Surabaya – two of Indonesia’s largest domestic markets – Kendal Industrial Park is about 20km from Tanjung Emas Port in Semarang, which is the only The top sectors in foreign investments were metal, machinery and electronic industry port serving Central Java. (US$ 1.1 billion), mining industry (US$ 1.0 billion), and water, power, gas industry (US$ 0.99 billion). As part of the plan to accelerate growth in Central Java, Kendal Industrial Park is set to form the economic engine and create jobs in the region (100,000 employment opportunities). The project will further enhance bilateral trade between Singapore and Indonesia. Industrial estates: Potential estates: Northern Sulawesi, The park is expected to attract manufacturing companies in industries such as furniture, Java Western Kalimantan food processing, building materials and textiles and will serve as an alternative Southern Sulawesi Bali manufacturing location for companies who wish to invest in Indonesia. Eastern Kalimantan Parts of Northern Sumatra Nusa Tenggara Southern Sumatra Papua West Papua

Kendal Industrial Park in Semarang

Contents Indonesia Overview Economic Potential Business Culture Tips and Advice Connecting with UPS Economic Potential CONNECT Indonesia Visit UPS.com

eCommerce hotspot. Indonesia is poised to become the third largest eCommerce market in the world with total spending reaching US$ 14.5 million by 2021. It has the biggest and fastest growing online retail sector in the Southeast Asia region, contributed by the increase in internet penetration, mobile connectivity and online retailing. Social commerce has become increasingly popular among Indonesians with more than 50% of Internet users transacting via Facebook.

eCommerce growth potential The 5 top trends in Indonesian eCommerce

Indonesians generally access the internet via a mobile device. Online purchases are usually 1. Mobile Optimization made on a smartphone. The number of smartphone users is estimated to have reached 70% of total online traffic comes from mobile devices. 62.69 million in 2017. By 2018, 99% of Facebook users in the country will be using mobile applications to make Google data shows that mobile application platforms are the key for business expansion. 71% purchases. of smartphone users use these applications to browse and make online purchases. About 92% of survey respondents indicated that they would purchase products if the mobile application 2. One-Day Delivery Option helps them find products easily. One-day delivery option is likely to become a potent tool for attracting customers. The high smartphone usage, coupled with the growing middle-class community, has made 3. Payment via Digital Wallet Indonesia an eCommerce hotspot. Although there is an increase in online purchases, Indonesian shoppers are wary of online fraud and display a high degree of distrust towards online payment options via credit and Popular online purchases debit cards. Increasingly, they use a digital wallet, which is a more secured payment option. Most online shoppers in Indonesia are women and mothers which is evident from the list 4. Customer Loyalty Programs of popular online purchases below: The Indonesian market is highly competitive and fairly price sensitive. - Fashion (clothes/accessories) - Mobile phones/tablets Personalized services, such as coupons or offers on special occasions, are key drivers to - Cosmetics repeated engagement. - Personal care 5. Popularity of Chat Bots - Food and beverage The growing competition and the urge to offer more personalized customer support are - Baby products the two main reasons for the increased popularity of chat bots.

eCommerce revenue in 2017 Fashion is the largest segment with a User penetration at the beginning of amounts to US$ 6,963 million and market volume of 21.2% 2017 was 15.1 % and is expected to is expected to grow to US$ 2,471 million in 2017. hit 21.2 % in 2021. US$ 14,474 million in 2021.

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Understanding the local Indonesian business culture differs from western culture. The country is characterized by a unique mixture of distinct ethnic, linguistic and religious groups that have contributed to Indonesia’s rich and diverse culture. Patience and self-control are preferable. business culture is the Looking for a consensus is omnipresent, as Indonesians dislike unequal relations or confrontation. foundation of your success.

Meetings Business Culture Customer Service Holidays

• Indonesians, who are mostly Muslims, • Greet Indonesians with “Selamat" • Customer services improvements in Indonesian public holidays are set each year pray five times a day. Avoid any meetings expression. Say it slowly and sincerely, Indonesia are gaining momentum with by Joint Ministerial Decree. during the prayer hours. e.g.: fast growing expectations for quality and The concept of ‘cuti bersama’ (joint holiday) • Present your business card to the - Good Morning - Selamat Pagi good access to customer support. has been introduced by the Indonesian receptionist upon arrival. - Good Afternoon / Evening - Selamat • Overall Indonesia scores are above Government with the aim to promote domestic tourism. Joint holidays are • Exchange business cards during the first Petang the Asian average for customer service provided to prolong holiday weekends meeting. Present and receive the card - Good Night - Selamat Malam. quality, coming in behind leaders like (usually given on a Monday or Friday). The slowly and with interest. • Business suits are preferred dress Japan and India. 2018 dates listed below may be subject to code. Suits, batik blouses and dresses, • Indonesians believe that firms who • It is helpful to be accompanied by a local change based on official announcement. third party, who should be carefully for women, are also common and compete on service will be more • New Year’s Day (1st January) chosen. acceptable dress code. Avoid sleeveless successful. tops. • Chinese New Year (16th February) • Initial meetings are more about getting- • Indonesia tops the Asian regional th to- know-you rather than business. • Muslim rules of modesty should be ranking in sectors where service is • Hari Raya Nyepi (18 March) honored. closely tied to tradition for example, th • It will take some time for the business • Good Friday (30 March) health and well-being. relationships to be developed. • Most Indonesians apply light pressure • Isa Mi’raj of Prophet Muhamad SAW during hand shakes. Only shake women’s • Indonesian consumers are comfortable th • It is common for Indonesians to enter (13 April) hands if they initiate. with automation of customer services the meeting room according to rank. • Labor Day (1st May) • Indonesians are indirect communicators (limited human interaction, call • Be patient as business dealings are (they do not always say exactly what recording, voice recognition, etc.) and are • Ascension Day of Jesus Christ th usually slow and long. they mean). Read between the lines or willing to pay more for good quality and (10 May) • Clarification and feedback are a necessity pay attention to body language. support. • Waisak Day (29th May) throughout negotiations. Avoid • Indonesians speak quietly and with a • Pancasila Day (1st June) disagreement and, especially, arguments subdued tone. Loud tone of voice would • Hari Raya Idul Fitri (15th - 16th June) with Indonesians. be seen as aggressive. • Independence Day (17th August) • Indonesians do not make hasty • Indonesians see confrontation as • Idul Adha (22th August) decisions and rarely disagree in public humiliation. • Islamic New Year (12th September) • Avoid pressure tactics during • Indonesian may tell you what they think negotiation. you want to hear out of courtesy. • Maulid of Prophet Muhammad SAW (20th November) • Christmas Day (25th December)

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Useful things to remember If you are thinking of shipping to or from Indonesia, help is at hand. Wherever you are, visit UPS.com to get detailed help on everything you need to know about sending export and import shipments. You’ll find guidance on determining shipping costs; when shipping to and how to prepare for an export shipment; how to book and track shipments and how to process payments and deal with returns. from Indonesia. Below are some important rules, tools and support resources to get you started.

Ship to Indonesia Ship from Indonesia Online Tools

Documentation Documentation A range of tools is available from UPS that can help you with your shipping needs. Visit www.ups.com for these tools. Registered importers have a General Importer’s Identification Number (APIU), which must Ensure your Indonesian exporter has an export license (ET) to ship out of Indonesia. be quoted to customs on arrival. Exported goods must be reported in advance to the customs office by filling out the Accurate cost and delivery time Documents required for import include: a waybill (with the transport costs); a commercial export declaration (PEB). invoice (with information about the buyer and the seller, the date of dispatch, the nature Calculate Time and Cost: Find delivery dates, time and shipping and the price of the goods, their origin, transport, insurance costs; an insurance certificate, Restrictions costs for UPS services. a certificate of origin). Exported goods are classified into four categories: Days of Operation: Find UPS-observed holidays in Indonesia. Import licenses are mainly classified according to the purpose of importation. • Types of products that are subject to export trade system (goods can only be exported by registered exporters) e.g.: plantation (roasted/not roasted coffee, Better knowledge of customs requirement Restrictions processed coffee), forestry (rattan or wood products), industrial (acetic anhydride, Import/Export Country Regulations: Click here for country-specific The importation of goods can only be conducted through registered importers. phenylacetic, butanol). facts and requirements that may impact your international Some commodities, e.g. textiles, may only be imported by registered importers who • Export-Controlled types of products (only conducted by exporters with export have a “Special Importer’s Identification Code Number”. approval from the government), for maintaining the balance of domestic supply, shipment. e.g.: livestock products, fishery, plantation and industrial (scrap iron, stainless steel, copper, brass, aluminum) Effective and efficient shipping process Tariffs ® Tariff free imports include: goods for representatives of foreign countries, goods for • Export-Prohibited types of goods, because they are danger to nature, fail to UPS Import Control . Take control of your inbound international research and scientific purposes, machinery for the establishment of industry. comply with quality standards, guarantee the demand of raw materials, goods shipments and minimize delays and errors. with historic and cultural value, e.g.: forestry (round wood, flakes raw materials, Indonesia applied tariffs to favored countries are 6.9% on average. rail pads made of wood or sawn timber), maritime (sea sand), mining (tin ore and UPS Paperless Invoice: Electronic commercial invoices speed data to Indonesia has a simple average bound tariff rate of 37%. Most Indonesian tariffs on concentrates, compounds likely contain tin or precious stones). customs. non-agricultural goods are bound at 40%, although tariff rates exceed 40% or remain • Free types of goods (goods categorized as free export goods; however, the unbound on goods including automobiles. exporter shall first meet the requirements as exporters) UPS TradeAbility®: A suite of Web-based tools to help manage and Genuine commercial samples, low value, not for resale are duty free but restrictions apply. track international trade. The de minimis exemption limit for imports into Indonesia is US$ 100. Most shipments Tariffs into Indonesia valued at US$ 100 or less will be exempt from customs declarations and The government imposes duties on exports of untreated skins (25%), on white tanned Flex™ Global View : Supply-chain visibility for enterprises with a global import duties and taxes. leather (15%) and coal (5%). reach. Shipments with the customs value greater than US$ 100 and less than or equal to US$ 1,500 can qualify for either one of the following clearance processes: clearance by Quantum View™ Manage: Get up-to-date information about consignment note (with a single tariff of 7.5%) or clearance by submission of PIBK/PIB shipments you send, or those you’re expecting, from one Web-based import declarations. tool that is easily customizable. Shipments with the customs value greater than US$ 1,500 can be processed by PIBK or PIB import declarations. Unique Customs Information Importers must be registered with the Directorate General for Customs and Duty (all companies engaged in trade must be registered with the Investment Coordinating Board and with the Tax Office at the Ministry of Finance). Temporary importation of commercial samples, professional equipment and goods for exhibitions can be made under an ATA Carnet (goods must be exported from Indonesia within 12 months).

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Useful links and reference information.

Useful Links Sources & References

Asia Economic Institute HKTDC Research Asia Regional Integration Center European Commission - Indonesia BNP Paribas Asian Development Bank Federation of international Trade Associations International Monetary Fund Central Intelligence Agency Indonesian Chamber of Commerce and Industry The World Bank Global Business Culture Channel NewsAsia Index Mundi International Trade Centre Library of Congress Business Wire Ministry of Trade Republic of Indonesia The Financial Research and Markets Ministry of Foreign Affairs LinkedIn Priceza Group Investment Coordinating Board (BKPM) Indonesia Investments Slide Share Financial Services Authority of Indonesia/Otoritas Jasa Keuangan Santander Trade Portal CNBC (formerly Bapepam) Globaledge Cekindo Political and Economic Risk Consultancy, Ltd. Home Page Manufacturing Indonesia Indonesia Import Procedure Tax Directorate Directorate General - Finance Ministry Netral English EIBN Transparency International - the global coalition against corruption The Jakarta Post Baker McKenzie Global Business Guide Indonesia E Diplomat Worlds Top Exports InterNations Statista Commisceo Global Worlds Richest Countries Calendarlabs Bridgat

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Partnering for Whatever your needs are across Indonesia and the globe, import or export, business or consumer – UPS has the expertise in global logistics to help you succeed. With access to our comprehensive service portfolio you can capitalize on international market maximum potential. potential. The UPS network will connect you with your customers in Indonesia, Asia region and beyond, giving you the reassurance of our experience and the latest technology on your side to help you succeed.

Speed and convenience across the whole island UPS can deliver to your customers in all areas in Indonesia. We offer self-pickup and drop-off services in over 500 access points, conveniently located in key business and industrial areas. Your customers can enjoy the flexibility to pick up their packages at any of the access points at their own convenience, which improves customer experience and generates repeated business for you. Your suppliers in Indonesia can also take in and fulfil last minute orders from you by dropping off your packages at any of the UPS access point locations. Up-to-Date Information UPS' Indonesia delivery fleet has begun utilizing telematics technology. The proprietary system works in conjunction with the Delivery Information Acquisition Device (or DIAD – a handheld device used by UPS drivers during deliveries) to gather data for analysis to improve safety, service and performance throughout UPS’s service network. Along with improvements to network utilization and schedule planning, the DIAD V maximizes service efficiency to ensure that UPS is well equipped to keep tabs on the pickup and delivery of packages, no matter the volume. This ensures that you are kept up to date with the latest status of your packages to and from Indonesia.

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Delivery commitment from Indonesia

To Canada 2 days

To U.S.A. 2 days

To Russia 3 days

To the UK 2 days

To Germany 2 days To South Korea 2 days

To China 2 days To Japan 2 days To the Rest of Europe 2 days To Hong Kong 1 day To Africa Region 3 days To Taiwan 2 days To Vietnam 1 day To Middle East Region 3 days To India 2 days To Thailand 1 day

To the Rest of Asia Pacific1 day To the Philippines 1 day

Region To Singapore 1 day Asia Pacific

Europe To Latin America Region 3 days

North America To Australia 2 days Middle East

Africa

Latin America

*Based on the earliest delivery times by UPS Worldwide Express service and may vary by origin and destination postal codes. Time-in-transit can be subject to change without prior notice. Please visit ups.com for guarantee details, service availability and commitments before shipping. Certain commodities and high-value shipments may require additional transit time for customs clearance. The above information is updated as of July 2017. 11

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Delivery commitment to Indonesia

From Canada 4 days

From U.S.A. 3 days

From Russia 2 days

From the UK 2 days

From Germany 2 days From South Korea 1 day

From China 1 day From Japan 1 day From the Rest of Europe 3 days From Hong Kong 1 day From Africa Region 3 days From Taiwan 1 day From Vietnam 2 days From Middle East Region 3 days From India 2 days From Thailand 1 day

From the Rest of Asia Pacific2 days From the Philippines 1 day

Region From Singapore 1 day Asia Pacific

Europe From Latin America Region 3 days

North America From Australia 2 days Middle East

Africa

Latin America

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