eu automotive investment in indonesia

EUROCHAM Automotive Working Group

EU Automotive Investment in Indonesia

EuroCham Automotive Working Group

2012


Background

- Indonesia produced more than 830,000 vehicles in 2011, increased

by 19% compared to 2010. During the last five years, the growth of

the market reached around 10% a year.

- The EU industry is very keen to tap into this potential and to

contribute to the development of the Indonesian automotive industry

and the Indonesian economy in general.

- EU Automotive industry is generally a key industry in providing jobs,

exports income, R&D and innovation and plays a decisive role in the

transition to sustainable growth and mobility.



- EU Automobile manufacturers provide over 10% of EU

manufacturing employment worldwide, with 3.5 million direct jobs

and another 9.1 million jobs indirectly.

- EU Automobile manufacturers are the worlds technology leaders and are the largest private investors in R&D in the EU and play a

large role in the innovation and knowledge-based economy of today

and tomorrow.

- In Indonesia, EU automotive industry invested almost 300 million

USD in 2010/2011. However, the EU market share is still very small

in Indonesia and EU Trade and Investment flows in this sector still

tend to prefer neighbouring countries such as Malaysia and

Thailand where the environment is regarded as more conducive.



1. Domestic Sales

Source: GAIKINDO

EU Domestic Sales and Production in Indonesia

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2005 2006 2007 2008 2009 2010 2011

Mercedes-Benz

BMW

Volkswagen

Audi

Smart

MINI

Volvo


2. Production

Source: GAIKINDO

EU Domestic Sales and Production in Indonesia

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2005 2006 2007 2008 2009 2010 2011

Mercedes-Benz

BMW

Volkswagen


1. Minister of Trade Regulation No. 27/M-DAG-PER/5/2012 on

Import License

Issues:

- Limitation for company with API-U to import based on one

section only.

- Limitation for company with API-P to import finished goods for

complementary and market test purposes only.

- Limited definition of special relationship - No transition period for the industry to adjust with the new

regulation and renegotiate contracts with third party.

- Need further clarification of status of existing technical license.

Ministry of Trade verbally agreed to revise provisions stipulated in

MOT Regulation No. 27/2012, however the revision is not yet

issued.

Regulatory Issues


2. The implementation of certain mandatory SNI (Indonesia

National Standard)

Government of Indonesia is planning to make mandatory various

SNI for car components, e.g. SNI for braking system, rear-view

mirror, etc. the Government is also planning to impose mandatory

SNI certification for CBU cars, which will require SNI certification

for tires, mirror, windscreen and other components. Other SNIs to

be introduced are safety glass, rim, battery, safety belt, plastic seat,

brake, noise and emissions.

The application of domestic automotive standards, different from

international standards, can potentially contribute to setting

Technical Barriers to Trade (TBT) and non-tariff barriers (NTB) to

both EU and Indonesian exports, affecting bilateral trade.

Regulatory Issues


3. Revision of Government Regulation No. 52 Year 2011 on

Income Tax Facilities for Investment in Certain Business Lines

and or in Specific Areas

Previously, under Government Regulation No. 62 Year 2008, car

assembler was eligible to apply for Tax Allowance Facility.

However, under Government Regulation No. 52/2011, car

assembler is not included as a sector eligible for Tax Allowance

Facility, whereas car component companies can still apply for the

Tax Allowance Facility.

Regulatory Issues


4. ASEAN Mutual Recognition Agreement Two options to implement ASEAN MRA are proposed:

- Marketed products

ASEAN countries must accept test report from origin country for

products manufactured by non-ASEAN countries which are

marketed in ASEAN countries.

- Manufactured and marketed products

There are two different interpretations:

Non-ASEAN products marketed in ASEAN should be tested by

ASEAN test facilities

Government of Indonesia interpretation:

Non-ASEAN products marketed in ASEAN should be manufactured

in ASEAN countries and tested by ASEAN test facilities

It is deemed unfeasible for automotive industry to apply interpretation

of Government of Indonesia on manufactured and marketed products.

Regulatory Issues


5. Importation of Used Trucks

By nullification of Ministry of Industry and Trade Regulation No.

756/MPP/Kep/12/2003 on importation of capital goods in used

condition, importation of CBU used truck is prohibited. But up to

now, the importation of CBU used truck is still on going, by using

stipulation in article 10 in Minister of Trade Regulation No. 48/M-

DAG/PER/12/2011, which we believe should not be applied on

importation of CBU used truck.

Regulatory Issues


6. Bonded Zone Regulation

Minister of Finance Regulation No. 147/2011 on Bonded Zone

stipulates that the delivery of bonded zone product to Indonesian

customs area is only permitted in the maximal amount of 25% of

export realization value in the previous year (2011). Minister of

Finance Regulation No. 44/2012 revises Regulation No. 147/2011

and increases the limitation of delivery of Produced Goods to 50%:

- for goods imported before Minister of Finance Regulation No.

147/2011 was issued (before 6 September 2011)

- for goods which still requires to be processed further, or cannot

function properly without being combined with other goods,

and/or cannot be directly used by end consumer (intermediate

goods), up to 31 December 2014

Regulatory Issues


1. Improvement of fuel quality standards and emission

regulations

A high fuel quality with low sulphur content, for both petrol and

diesel fuel is essential for the introduction of modern low emission

injection technologies. The low fuel quality in Indonesia is still the

biggest hurdle for the introduction of such modern low emission

technologies.

Therefore, we are proposing the introduction of higher fuel quality

standards (EURO 4) on par with more stringent emission

regulations. This would lead to lowering emissions and lowering of

the overall fuel consumption in Indonesia.

Environmental Issues


2. Bio-Fuels

Indonesia as the biggest palm-oil producer in the world is today

having a major opportunity to introduce a biodiesel mixture (B5,

B7). in order to avoid technical problems and additional costs, a

high fuel quality has to be ensured. It is therefore essential to

increase the fuel quality before adding higher proportions of bio

fuel.



3. Tax incentives for innovation and new technologies

Excise tax for vehicles should be based on CO2 emission to

encourage the use of low CO2 emission vehicles thus creating a

premium price for clean and efficient vehicles as it today is based

on general engine capacity or power-train of vehicles before CO2

limits are soon to be enforced in many parts of the world.

It is also important to promote the availability of cleaner fuel (Euro

3 or 4) in Indonesia which can be used by more advanced and

environmentally friendly engines used in greener vehicles now

available in the international market.



4. Low Cost and Green Car

Regulations on low cost cars and green cars should be separate,

as regulating low cost cars and green cars within one regulation is

not deemed feasible.



EuroCham Automotive Working Group - 2012

eu automotive investment in indonesia

Documents

eu automotive industry

eu industry

eu trade

indonesian automotive

eu market share

gaikindo eu domestic

eu manufacturing employment

key industry