Indonesia has low tariffs to encourage trade but fails to provide good bureaucratic procedures and law enforcement, a World Bank report says.
The report, World Trade Indicator 2008, shows that Indonesia has low import tariffs and good trade facilitation, but still scores poorly in providing the necessary supporting conditions for efficient business.
All the factors put Indonesia at 68 of 160 countries in terms of trade outcome.
Indonesia's low average applied tariff is comparable to the tariffs applied by high-income Organization for Economic Cooperation and Development countries and around half the tariffs of China, South Africa and ASEAN countries. It is about one-third of Brazil's and India's.
Indonesia's import tariffs are even lower in various special trade arrangements with partners such as Japan, Korea, China and ASEAN members.
Trade Minister Mari Elka Pangestu said lower tariffs were part of efforts to make Indonesia's internal production processes more efficient without taking away protection from strategic sectors like rice production.
She said Indonesia would push for lower tariffs from other countries through negotiation, including during the coming World Trade Organization meeting she was due to attend next week in Geneva.
"At the WTO, we need to get lower tariffs not only from developed countries, but also from India and Brazil," Mari said after the report presentation in Jakarta on Tuesday.
In terms of trade facilitation, Indonesia provides a slightly higher cost of export than import but takes fewer days to export goods overseas. Export takes five days and import six.
"The short export import days manifest our work in improving customs operations in the past two years and toward the National Single Window (NSW) system that simplified customs procedures.
The NSW is also hoped to address some corruption concerns and ease legal transactions to lower costs.
"Traders and businesses continue to face high costs due to corruption, a weak legal system, poor tax and customs administration, rigid labor regulations, complex licensing and approval procedures, skills inadequacies and the mushrooming of local nuisance taxes," the report says.
Indonesia ranks among the bottom 40 of 178 countries studied in regard to the ease of starting and closing businesses and the enforcement of legal contracts.
But, in a reversal of the usual business complaints, the report shows good logistics performance and competitive transportation costs.
A research director of the Institute for Economics and Social Research, Arianto Patunru, said logistical matters including infrastructure and transportation costs were some of the weaknesses in Indonesia's trade and industry. (mri)
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