Doing business

(Last updated: 19 Aug 2008)
 

Business opportunities

Austrade’s business development specialists have prepared a range of market profiles that offer potential to assist in your exporting investigations. Austrade’s in-market teams have identified opportunities for Australian exporters in various industries (see 'Profiled industries in this market' on the left side of this page).

In conjunction with the market profiles, the Opportunities Online portal may be a useful addition to your information sources. The database established by Austrade aims to deliver international sales leads ('export opportunities'), including tenders, identified by our overseas network to Australian businesses.

Registering is simple and once this is done you will have the option of accessing a weekly newsletter featuring the most recent opportunities uploaded onto the system in industry sectors of interest to you. Another feature is the ability to view, and also print, the complete page of opportunity details.

For general inquiries concerning Austrade’s services, please contact Austrade Direct on 13 28 78.

Business etiquette

Business tips

Indonesians, especially the Javanese, consider outward displays of respect very important.

Decision making frequently occurs through consensus. To attempt to force a decision will often have an adverse effect on negotiations.

A common Indonesian term is ‘jam karet’ (rubber time), and is an indication that meetings may not necessarily start on time. Guests may also arrive late due to traffic. RSVPs are frequently not answered, but this does not imply the guest will not come. In fact, for some invitations, you may find guests turn up with one or more friends unannounced.

Indonesians will frequently not ask for clarification if unsure of a matter. Often they will respond with what they believe you want to hear. Moreover, ‘Yes’ can simply mean, ‘Yes, I hear you’ and not ‘Yes, I agree’. Ensure that the message has been fully understood.

Always have plenty of business cards, and treat other peoples’ cards with respect when they are handed to you. Never give or offer your business card (or any items) with your left hand.

Invitations to business functions often state lounge suit/batik. Long-sleeved batik shirts are

regarded as formal wear, (ie. equivalent to a dark business suit) and are frequently worn by both Indonesians and resident businessmen in Jakarta. Trousers, shirts and ties are common business attire. Women's business clothing is becoming more dressy. Avoid wearing revealing clothing such as sleeveless shirts or shorts.

Alcohol is not widely consumed and pork is prohibited for religious reasons. However, Indonesians generally tolerate alcohol consumption.

When presented with tea or coffee, always wait for your host or hostess to drink first. It is also considered polite to at least sample the food or drink offered. In a meeting, refreshments are frequently not touched till the end.

Avoid pointing, as this is considered to be rude.

Avoid showing the soles of your feet when seated, as this is considered offensive, particularly if the soles of your feet face anyone in the room. Instead place your feet flat on the ground.

In business, the exchange of gifts is not widely practised.

Forms of address

When formally addressing letters to Indonesians all names should be written in full. With titles included in conversation the same name is often used in both formal and informal contexts, eg. ‘Mr Sudjana Santosa’ or ‘Mr Sudjana’ (use only the given name), but as friendship develops, ‘Sudjana’ would be acceptable.

The titles ‘Drs (male) and ‘Dra’ (female) indicate a university graduate in social sciences or arts. The title ‘Ir’ indicates a graduate in engineering/technical sciences. ‘DR’ is a PhD and ‘Dr’ is a medical graduate.

Please also note:

Bribery of foreign public officials is a crime. Australian individuals and companies can be prosecuted in Australia for bribing foreign officials when overseas. For more information, go to the Attorney General's Department on foreign bribery.

Tariffs and non-tariff barriers

Tariff

Indonesian customs use a tariff schedule based on the Harmonized Commodity Description and Coding System for classifying goods. Starting 1 January 2004, the ASEAN member nations, including Indonesia, have collectively undertaken to implement the ASEAN Harmonized Tariff Nomenclature (AHTN). As a result of Indonesia's membership of Association of South East Asian Nations (ASEAN) some tariffs and duties have been reduced for intra-ASEAN trade.

Income tax is 2.5 per cent for registered importers and 7.5 per cent for unregistered importers.

Value added tax (VAT) is levied on most imports and the rate is 10 per cent.

Customs authority contact details:

Directorate General of Customs and Excise
Jl. Jenderal Ahmad Yani
Jakarta 13230
PO Box 108 Jakarta 10002
Tel: (62 21) 489 0308
Fax: (62 21) 489 6206
Telex: DJBC

Non-tariff barriers

Import restrictions

Permission to import is granted to a registered importer, defined as a holder of an Import Registration Number and a Tax Registration Number approved and issued by the Department of Industry and Trade.

Import licences are required for a wide range of goods and are issued by the Department of Industry and Trade.

Restricted and prohibited goods include:

• narcotics
• explosives, including fireworks
• arms and ammunitions
• defined books and printed materials, audio and visual recording media
• certain species of flora and fauna

Some goods are exempt from import duty, including:

• goods for representatives of foreign countries, and international bodies and their officials who work in Indonesia
• goods for research and scientific purposes
• machinery for the establishment of industry

Importers/custom brokers may release certain imported goods by using complementary customs documents to obtain a rush-handling facility. Some goods for which the rush-handling facility can be used include:

• human body organs
• hazardous materials
• live animals and plants
• time sensitive newspapers and magazines

Product certification, labelling and packaging

Labelling

It is normal commercial practice for the marking of outside containers. However, with the exception of certain bulk items, letters of credit numbers and dates of relevant invoices must be indicated.

The use of labels in Bahasa Indonesia is mandatory on all types of goods. Exemptions may be granted only if there are no Indonesian words that can act as a substitute or if there is difficulty in finding Indonesian words with a similar meaning. Approval to omit Bahasa Indonesia labelling must be obtained from the Indonesian Attorney General.

Labels for food products must:

• indicate that the product has been registered with and has a product number (ML number) supplied by the Food and Drug Control Agency
• have an expiration date
• be in the Indonesian language
• have the complete name and address of the importer
• have a halal certificate from an agency approved by the Indonesian Islamic Council if the product is halal

Note: colouring agents used in foods are subject to specific labelling regulations.

Labels for pharmaceutical drugs must show:

• country of origin
• nature of composition
• quantity and registration number (KL registration number with the Ministry of Health)

Cosmetics and hygiene products have specific production, distribution, labelling, packaging and advertising requirements.

Exporters should consult with their importer and local authorities for changes. Further information is available from the Directorate General of Customs and Excise.

Packaging

Goods should be packed securely in standard export packaging. Items easily affected by heat and humidity should be suitably treated and packed to prevent deterioration. Some goods such as food products, beverages, textiles and consumer items must be in the manufacturer’s original packaging. The outer part of each package should be labelled with the type of goods and quantity or weight of contents.

Special certificates

Exporters of livestock should clarify certification with AQIS, Meat and Livestock Australia and the Australian Government Department of Agriculture, Fisheries and Forestry. A halal certificate is required to accompany meat shipments.

Imported medicines require a certificate of analysis from the manufacturer. Regarding medicines, brochures in Indonesian must accompany free medicines for distribution in Indonesia. Retailers are to sell patent medicines only to recognised companies (retailers are prohibited from repacking or mixing operations).

Living plants, seeds and other planting materials require a phytosanitary certificate issued by the approved authority in the country of origin stating that they are free from pests or diseases. In Australia this is usually done through AQIS, the Australian Government Department of Agriculture, Fisheries and Forestry or the relevant state department of agriculture.

Fruit entering Indonesia requires a health certificate issued by the approved authority in the country of origin stating that it is free from fruit fly.

A supplier's certificate is required only for goods imported within investment and project aid schemes.

Further information is available from the Directorate General of Customs and Excise.

Methods of quoting and payment

Quotes should normally be in US dollars and CIF in any major port in Indonesia. Normal terms of payments employed in foreign trade are permitted (letter of credit (L/C), telegraphic transfer in advance, COD or open account, etc). If letter of credit terms are used the tariff code number must be indicated.

Documentary requirements

Pro-forma invoice

Not mandatory, but preferred by importers for quotes.

Commercial invoice

No prescribed form and a minimum of three copies (if L/C payment, minimum of seven copies) are required. The invoice must be signed by the manufacturer or supplier as true and correct. Fax signatures are not permitted. The invoice must indicate the usual full details, including:

• names of shipper
• consignee, buyer (if other than consignee)
• port of loading
• port of discharge
• carrier/vessel
• country of origin
• date of departure
• number and date of invoice
• purchase order number
• number and date of letter of credit (if applicable)
• L/C issuing bank
• exact details of contents (quantity/unit, unit price, total amount in CIF value)
• freight charges
• tariff code number
• insurance premium
• marks
• number and packing (gross weight, net weight

Insurance

Imported goods may be insured either in Indonesia or in the country of origin. For the purpose of import duty calculation, if an importer is unable to show proof of insurance, the insurance value is determined at 0.5 per cent of Cost and Freight (C&F).

Bill of lading

Usually required in three endorsed originals and four non-negotiable copies.

May be made out To Order (if L/C).

Must show details of contents as indicated in the invoice.

Freight must be prepaid.

Must show number and date of invoice, L/C number (if applicable), container and seal number, number of container or packaging.

Packing list

Three originals and four copies are required.

Certificate of origin

One original and two copies are required.

Certificate of analysis

Three originals (if applicable) are required.

Public health requirements

Exporters of livestock should clarify regulations with the Australian Quarantine and Inspection Services, Meat and Livestock Australia and the Australian Government Department of Agriculture, Fisheries and Forestry. Livestock must be slaughtered according to halal requirements (see 'Special certificates' below).

Living seeds and other planting materials require prior approval from the Indonesian Ministry of Agriculture Fruit and vegetables require phytosanitary certificates issued by the appropriate authorities in Australia. Certification that products originate in fruit fly free areas is acceptable.

Indonesian quarantine authorities allow AQIS inspection and standards on imported fruit and vegetables. Fumigation dipping as well as cold treatments are allowed for specific products. AQIS should be contacted regarding these.

Pesticide regulations for fresh fruits and vegetables exist (Maximum Residues Levels).
Fresh fruit must have been refrigerated for 17 days, at 2.8 degrees centigrade or less, prior to importation.

Animal products (semen, etc) must be covered by an import permit issued by the appropriate Indonesian authority. Consignments must be accompanied by a health certificate issued by the appropriate authority in the country of origin (see 'Special certificates' below). Official health certificates may require legalisation by the Indonesian embassy.

The National Drug Policy of 1993 states that a foreign firm may register prescription pharmaceutical drugs only if they use equipment, which is designated with a high technology component, is well recognised by the medical industry and are products of the registering company's own research.

Taxation

The Indonesian taxation system works on a ‘self assessment’ basis, which means taxpayers must lodge their income tax return and calculate the amount of tax payable. This is combined with a wide range of ‘withholding taxes’ imposed on many day-to-day transactions. The various taxes include:

• Taxation of employees and payments made to individual entities. There are established Indonesian tax scales.
• Withholding taxes deducted by eligible corporate entities resident in Indonesia. This includes ‘fees for service’ but not for rental income. The amount withheld depends on the category of the service and is then based on the deemed profit of the industry or in the case of rent, a set percentage (15 per cent).
• Corporate income tax is paid on the lodgement of the annual tax return, which is usually on a calendar year basis. The current rate for resident corporations with taxable income is progressive. Net profit up to Rp50 million (approx. US$4500) is 10 per cent, net profit between Rp50 million to Rp100 million (US$9000) is 15 per cent. Finally for net profit exceeding Rp100 million, 30 per cent tax is applicable.
• Taxes related to payments made to offshore entities (dividends, royalties, etc). Double tax arrangements (DTA) can provide some relief in this area. However, it is essential that the taxpayer applies to the local tax authorities for such DTA provisions to apply.
• Value Added Tax rate is generally 10 per cent.