It is strictly prohibited to import certain products: books, magazines, brochures and newspapers written in Chinese, in Indonesian or in a local language (except for scientific reasons) as well as cassettes, video cassettes and films for personal use. Import licenses are required for medicines, psychotropic substances, explosives, arms, fireworks, films and videos, telecommunications equipment, color photocopiers, unregistered foods and drinks, some pesticides (DDT, EDB, Pentachlorophenols). These licenses are issued after consultation with the competent Ministry (Agriculture, Health, Commerce and Industry).
Permits are required for animals and animal products. These documents are issued by the Directorate General of Livestock and Animal Health Services. At present, the importation of all chicken products is banned. There is a specific quota system for spirits and wines.
Foreign companies are allowed to import or to manufacture products but not both.
Customs Duties and Taxes on Imports
To classify imports and exports, Indonesia uses the Harmonized System of nomenclature and codification of goods. To honor its commitments to the WTO and respond to the imperatives of domestic politics, the government has implemented two types of policy over the last few years which have had a considerable effect on the level and the structure of duties. These policies are linked to a program of duty reduction between 1996 and 2003, and to a program of tariff harmonization between 2004 and 2010.
Documents required for import are: a waybill which must show the transport costs; a commercial invoice containing information, amongst others, about the buyer and the seller, the date of dispatch, the nature and the price of the goods, their origin, transport and insurance costs; an insurance certificate, which must usually be produced when the goods are insured outside Indonesia or if they must be put in a bonded warehouse; and a certificate of origin, in the case of drugs or medicines.
The most favoured countries have a tariff of 7.6%, in average. Recently Indonesia has started to ask a zero tariff for some pharmaceutical raw materials and some equipment for the print industry. In average the bound tariff is 37% but most tariffs are bound at 40%. Some products such as automobiles, steel, some agricultural products and some chemical products pay more than 40%. Spirits have a tariff of 150%.
In addition to import documentation, some certificates are required. This is the case for food, seeds, pharmaceutical and chemical products. A notification to the Customs Office and electronic document submission must be done prior to the arrival of merchandise.
Commercial samples must be sent directly to the importer.
Consumers, especially those with average or low income, are very aware of prices and the economic situation. Loyalty to a brand and recognition of its name are enhancing elements. Customer follow-up and the quality of after-sales service count.
Consumer Profile and Purchasing Power
Consumption is an enhancing act, assimilated to modernity and the riches of the western lifestyle. The purchasing power of the majority of the inhabitants being low, consumption essentially turns around food products and other basic goods.
Consumer goods were originally sold on traditional markets which could be categorized in different sectors like wholesalers and retailers. With modern markets, most manufacturing companies do not distribute their products themselves as this is too expensive; they call on companies specialized in distribution, which, in turn, use traditional channels. For any commercial activity in Indonesia, foreign companies must work with a local agent or distributor.
Doing business in Indonesia means going through a wide spectrum of agents, distributors or economic intermediaries. It may be difficult to find a distributor for storage, as expenses linked to warehousing are rather crippling.
Although traditional markets are still dominant in Indonesia, modern retail shops, such as hypermarkets, are rapidly becoming more popular, especially in urban areas. Hypermarkets enjoyed the fastest growth rate in 2005: their number rose by 55% and their area by 51%. In spite of the rapid growth of modern retail shops, the "other" retailers of grocery products (small traditional stalls, itinerant merchants and other small retailers) represent 95% of all retailers and almost 56% of sales.