Indonesia Country Report by Alison Wild

E S

E U

C M

U M

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V R

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Based in Santa Cruz, California, Nix Swimwear is a new retailer that offers consumers

fashionable yet functional swimwear pieces for all types of water lovers. Their designs are based heavily upon current market trends and forecasts within both a fashionable and athletic scope, so both the windsurfing enthusiast and the poolside sunbather can find exactly what they’re looking for within our product line. Nix is also rooted in strong social responsibility and philanthropic efforts in order to be completely transparent and hopefully improve both the tangible and social environments, one bikini at a time.

In seeking a new market to manufacture and export its unique swimwear products

to the United States, Nix Swimwear has come across the country of Indonesia as a particularly intriguing venture. In looking at every necessary element that makes up Indonesia’s local and global presence, a decision can be made that determines whether or not Indonesia will be a viable and ultimately successful place to source product. Such elements being looked at in-detail include Indonesia’s social-economic-political landscapes, textile and apparel industry, corporate culture, and importing and exporting processes.

All strengths, weaknesses, risks, and benefits of the nation will be highlighted to fully

prepare our company for whatever may lie ahead if we choose to purse business in Indonesia. To maximize the success our global strategy, potential costs, manufacturers, and freight companies will be profiled to assure the highest quality production and export process of our goods. A final conclusion and analysis of all research and compiled information will ultimately deduce if Indonesia is a country that meets all of Nix’s sourcing standards. In the end, Nix Swimwear aims to source its product from a country that will be secure, cost-effective, and successful for our company while also reciprocally benefiting from a new business opportunity.

T A B L E

O F

C O N T E N T S

E X E C U T I VE S U M M ARY

C O U N T RY OVE RV I E W

PESTLE Analysis

Geography

Labor & Labor Laws

State of the Textile & Apparel Industry

Textile & apparel Associations

T R A D E AG RE E ME N T S & L AW S

Indonesian Trade Agreements

Trade Laws & Regulations

State of the Textile & Apparel Industry

Culture

BUSINE SS E T I QUE T TE

Negotiations

100

Relationships

104

Social & Cultural Elements

108

Dining

120

M A N U F A C T U R I N G & P R O D U C T I O N Sourcing Guidelines

124

126

Potential Manufacturers

134

Cost Sheet

148

I M P O RTAT I O N

152

Classification

154

Logistics

158

Import & Export Requirements

168

Risks & Benefits

176

Conclusion

180

F I NA L RE M ARKS

174

APPENDIX

182

Country Traits

184

Fiscal Policies

208

Maps

214

Graphs & Data

220

Documents

232

Tech Pack

248

BIBLIOGRAPHY

262

Nestled between Asia and Australia and the Indian and Pacific Oceans lies a chain of islands

of varying size that make up the beautiful country known as Indonesia. An archipelago made up of precisely 17,508 islands (6,000 of which are inhabited) that spans over 3,400 miles along the Equator, Indonesia is a vast country home to some of the world’s most diverse ethnic groups.

H I S T O R Y

The islands have played home to a number of advanced civilizations throughout its existence

up until the Dutch first colonized Indonesia and established themselves as rulers of the land in 1602. For the next 300 years, the Dutch utilized the islands’ natural resources to transform the thencalled Netherlands East Indies into a profitable hub for colonial possessions. However, in the early 20th Century, an independence movement began spread like wildfire throughout the country until Japan invaded in 1942, rendering a fight for independence much more complex. Despite military and naval assistance from American, British, Dutch, and Australian forces, the ruthless Japanese warded off all attempts of combat. On August 17th, 1945, three days after Japan’s surrender, Indonesia was finally able to proclaim its independence and leaders established a provisional constitution and government for the time being. Yet, until 1949, there was still intermittent fighting and constant negotiations as the country’s independence groups resisted the Allied forces as well as the Dutch until a stalemate could be reached that transferred sovereignty from the Netherlands.

A new constitution was soon adopted as well as a parliamentary government which outlining

an executive selected by and accountable to parliament. In 1957, the structure had proved to be unstable as contrasting political parties divided the parliament, and the current president, President Soekarno, one of the original independence fighters during the war, instituted a new authoritarian regime known as the “Guided Democracy”. Soekarno was gradually stripped from power after a coup of supposed communist sympathizers in 1965, in which extremist right-wing groups murdered thousands of rural alleged communists, left him amidst a national crisis of fear and violence. General Suharto, the head of the armed forces during that time, was made acting President and went on to run the country under his proclaimed “New Order” from 1967-1988. As expected, this new system went unflavored by the Indonesian people and demonstrators and riots called for the President’s immediate resignation. By 1998, Suharto had stepped down and was replaced by his appointed Vice President, B.J. Habbie, until Indonesia’s first election in 1999, which delegated positions in the national, provincial, and sub-provincial parliaments. Finally, an amended version of the constitution in 2004 allowed for the fair and free election of a president and vice president by popular vote.

3RD

MOST POPULOUS D E M O C R A C Y X

LARGEST ARCH I PE L AG I C STATE

& M U S L I M - M AJ O R I T Y NAT I ON

C O U N T R Y O V E R V I E W

Y R T N U O C W E I V R E V O

PESTLE - LABOR LAWS - TEXTILE & APPAREL INDUSTRY

P E S T L E A N A LY S I S

O V E R V I E W

As previously mentioned, the Republic of Indonesia is rooted in democratic ideologies,

with fair elections and equal power shared amongst the three branches. Indonesia has proven to be a both a present and valuable asset within the international political arena, especially with its western-friendly Muslim populace, and it behooves other top countries to maintain amicable and sturdy relationships with the country. However, the national government faces constant corruption as well as a perceived lack of initiative when it comes to attempting to overcome political and societal obstacles. In addition, fears and rising activity of extremist Islamic groups have created a national threat to the stability and pluralism of Indonesia. Overall Data Source: MarketLine

T R A N S I T I O N

T O

D E M O C R A C Y

After successfully ridding the country of authoritarian

rule in 2004, Indonesia amended its constitution, establishing both democracy and direct presidential elections. Since the fall

of the tyrannical President Suharto, the Indonesia government has been overseen by four of these democratically appointed

presidents. Over the years, the democracy has continued to thrive and prosper, as the citizens enjoyed their new found freedom check and balances system creates both equality and harmony across the executive, legislative, and judicial branches. In fact, in 2007, the International Association of Political Consultants awarded Indonesia with the prestigious Democracy Award, honoring its peaceful nine year transition into democracy.

of expression. Armed forces were depoliticized and the existing

S T R O N G

D E F E N S E

C O O P E R A T I O N

Indonesia recently began strengthening its security ties

with the likes of key international players such as the United States, Russia, and China, in the hopes of amplifying its current military prowess. The US assisted in not only installing a US Pacific Command, or USPACOM, in the country in 2009, but they also handed over and delivered 24 used fighter jets, completely free

of cost. In addition, Russia has sent over 12 Sukhoi fighters since 2003 and Indonesia is still expecting to receive four more by 2015.

In regards to China, a technology transfer of the mechanism for C-705 missiles to the Indonesia navy is currently in negotiation.

In 2013, the country also showed attempts at strengthening defense cooperation with India, the United Kingdom, and Poland.

L O W

R A N K

I N

G O V E R N A N C E

C A L

U R R E L E N G

N E

T S

I N D I C A T O R S

Unfortunately, Indonesia has shown low rankings in some categories of the World

Governance Indicators, primarily political stability and absence of violence. These factors comes as no surprise, especially given the country’s shaky start into democracy. Parameters for measuring these rankings include perceptions on the likelihood of government destabilization or even upheaval as a result of violent means, whether domestic or terrorist. Similarly, poor rankings were also recorded for rule of law, defined as the “extent to which a country’s citizens have confidence in the rules of society” (MarketLine). These factors make for a somewhat unstable governance landscape for Indonesia, which may potentially cause issues in the future.

C O R R U P T I O N

Various incidents of political and administrative corruption have proven to

be a major issue facing the country. These incidents, whether including policemen, politicians, judiciary members, as well as bureaucrats, put Indonesia at the low rank of 114 out of 177 countries in the Corruption Perception Index in 2013. From several instances of bribery to money laundering and even a cash-for-contracts scandal, these offences illustrate Indonesia’s severe lack of a strong anti-corruption legislation, which is needed to help improve the overall business environment of the country. Overall Data Source: MarketLine

W O R L D W I D E G O V E R N A N C E I N D I C A T O R S

INDICATOR

YEAR

PERCENTILE RANK (0-100)

VOICE & ACCOUNTABILITY

2004 2008 2012

POLITICAL STABILITY & ABSENCE OF VIOLENCE/TERRORISM

2004 2008 2012

GOVERNMENT EFFECTIVENESS

2004 2008 2012

REGULATORY QUALITY

2004 2008 2012

RULE OF LAW

2004 2008 2012

CONTROL OF CORRUPTION

2004 2008 2012

100

Graph Source: WGI / Worldbank.org

G R O W I N G

T I E S

W I T H

C H I N A

Both Indonesia and China have recognized and acted upon the benefits of the

other country through trade and investment ties. Indonesiaâ&#x20AC;&#x2122;s vast natural resources as well as its leading presence in the ASEAN (Association of Southeast Asian Nations) region has made it a very attractive and strategic pursuit for China. This link with ASEAN not only adds to Chinaâ&#x20AC;&#x2122;s rapidly developing global presence, but will also assist in mediating its current territorial disputes over the South China Sea with four members of the Association. On the other hand, Indonesia could definitely stand to gain from China as a trade partner and source of foreign direct investment. Furthermore, the two nations met in 2013 to aim for deeper industrial cooperation and increase bilateral trade from $66.2 billion in 2012 to $80 billion in 2015. These ties demonstrate the increased and continual cooperation between the two

T E R R O R I S M

P R O S P E C T S

F U T U R E . . .

T H R E A T S

Political stability is threatened as terrorist activities have been increasingly

targeting Indonesia. Bombings and attacks in Bali in 2002 and 2005 as

in 2003 and 2004 can be traced to a regional militant group known as Jemaah Islamiah. While four years passed with no terrorism, severe attacks on

well as ones on Jarkartaâ&#x20AC;&#x2122;s JW Marriott Hotel and the Australian Embassy

these types of bombings had clearly not disappeared. Despite constant and

two major hotels in Jarkarta transpired in 2009, verifying that the threat of

recent events elucidate the sizeable risks for both individuals and businesses.

considerable efforts made by the military and police to eliminate terrorism, these

Overall Data Source: MarketLine

O V E R V I E W

This vast polyglot nation, since the onset of the New Order policy, has gradually utilized industrial and manufacturing sectors as vehicles for economic progress. In liberalizing trade and foreign policies, the country drew in large and consisted amounts of overseas investors until the financial crisis of 1997. The crisis drew Indonesia into a recession until an influx of exports of petroleum and natural gas as well as a reconstruction of fiscal policy led the country back on track. Annual growth has been recorded above 5% every year since 2004, with the expectations of 2009. While the GDP hit 6.2% in 2012, a lull in foreign investment as well as lowered export pricing is expected to bring it down to 5.3%. A widening account deficit since 2011, amongst other factors, has cause a bit of a macroeconomic imbalance, further exacerbating economic vulnerability. This issue was illustrated in an instance in 2013, when fears of a Quantitative Easing taper by the US Federal Reserve sent the value of the rupiah plummeting. Yet Indonesiaâ&#x20AC;&#x2122;s banking sector remains sturdy in spite of these imbalances, with steadily viable government finances and consistent support from massive foreign investors, like General Motors, hoping to tap into the countryâ&#x20AC;&#x2122;s vast consumer market. Overall Data Source: MarketLine

T H R I V I N G

S E C T O R

B A N K I N G

slowdown of the Indonesian economy, resilient capital adequacy

Regardless of the many ups and downs and overall

and signs of profitability have kept the country’s banking sector stable. The system-wide capital adequacy ratio for Indonesian

commercial banks was more than double the statutory requirement at 18.48% in 2013. Tier-1, the most liquid form of

capital, made up more than 90% of the overall capital while the return of assets remained a steady 3% in 2013, thanks to high

net interest margins (NIMs) and overall economic progression. In addition, with non-performing loans (NPLs) decreasing quality has also improved the overall strength of the sector.

to 1.91% of total loans in 2013 from 2.18% in 2012, the asset

Since the turn of the millennium, the Indonesian

government has taken successful measures to maintain its debt sustainability. The country’s authorities have managed to pull the general government gross debt down from the radically high 95.1% (of the GDP) in 2000 to an astounding 24.4% in 2012. Driving such a drastic reduction were factors like prudent monetary policies and strong economic growth, in addition to Indonesia’s 12 year fiscal outperformance of Thailand

and Malaysia, whose public debt percentages either stayed consistent or increased. The country’s current debt status is

SUSTAINABLE PUBLIC DEBT

boosting the strength of sovereign bonds and lowering yields.

predicted to remain stable, with a forecasted 24.3% in 2018, thus

2 0 1 3

E S T .

2 0 1 3

E S T .

PUBLIC DEBT

TAXES&REVENUES

OF GDP

24.2% 2 0 1 3

15.8%

E S T .

2 0 1 3

LABOR FORCE

E S T .

EXPENDITURES

$120 MIL $166 BIL 2 0 1 3

E S T .

UNEMPLOYMENT RATE

6.6% 2 0 1 2

E S T .

POPULATION BELOW POVERTY LINE

11.7%

Data Source: CIA - The World Factbook

R E

S L O W E C O N O M I C G R O W T H

S H A L L O W F I A N A C I A L S E C T O R

The

Indonesian

economy

Considering

the

many

rough

recently

patches the nation has endure in the past

began exhibiting signs

with political and economic administration,

of deceleration despite

it makes sense that Indonesia’s financial

the period of excessive

sector is still shallow and underdeveloped.

growth from 2007 to

In 2012, money supply (as a percentage

2012,

from

of the GDP) was at 40%, well below the

a 6.2% growth rate in

ASEAN 3 (comprises Malaysia, Thailand,

2012 to a projected

and the Philippines) average of over

5.3% for 2013. In the

100%. Furthermore, in 2012, the amount

time following the global

of claims on the private sector, local

fiscal crisis of 2009,

currency bonds, corporate bond issuance,

Indonesia’s

and pension fund assets (all percents of

trading

dropping

significant

allies,

China

the GDP) were all significantly lower than

and India, sustained the

that of the other ASEAN 3 countries.

economy’s

momentum

For a rapidly-developing economy like

through a rebound in

Indonesia, this sort of lagging reveals

commodity prices and

a lack of credit and will only hinder the

simple monetary policies.

country’s further growth. Poor credit or

Yet, foreign investment

a lack of access thereof can be a major

recently shifted to other

obstacle for business, causing the restraint

emerging markets, thus

of banks and financial corporations

raising commodity prices

to extend credit, ultimately driving up

until 2011 and rendering

borrowing costs. Taking the necessary

Indonesia’s

foreign

steps to deepen this sector would benefit

and domestic demand

the economy through increased credit

much

and liquidity in the financial system.

inactive.

The

vast

diversity

F U R T H U R A C C O U N T D E F I C I T of

Indonesia across many sectors has

presented an intriguing investment

consecutive surpluses, a deficit

venture for behemoth American

was recorded Indonesiaâ&#x20AC;&#x2122;s current

U S I N V E S T M E N T S

account balance. After a surplus

engineering,

chemicals,

K S

heavy

to a deficit of 3.0%, caused

foreign opportunities in fields like

primarily by lowered commodity prices on major export items

Javaâ&#x20AC;&#x2122;s extensive cocoa resources

like rubber, coal, and palm oil in

logistics, farming, and construction. provided the perfect place for a

combination with the increasing

the food-processing giant Cargill

demand for oil due to major

in 2013 while General Motors

government subsidies. 2013 only

just spent $150 million on an automotive plant outside of Jakarta

survey

conducted by Ernst & Young in 2013 found that the 35 largest US investors in Indonesia anticipate investing a collective $61 billion in

U T

industry.

dominated

R E U T U

the Japanese and South Korean-

showed

further

deterioration

with the deficit hitting over 4.0%,

to further compete and benefit in

of 0.2% of the GDP in 2011, the percentage had dropped

DuPont, as they seek out new

R E

R O

corporations like General Motors, Coca Cola, General Electric, and

In 2012, after 15 years of

over

and 3.0%

still for

forecasted 2014.

This

widening leaves Indonesia very vulnerable to possible external shocks

reduced

foreign

investment or portfolio outflow. In worst cases, the detrimental

the next three to five years. Thanks to

effects of these incidents could

the countryâ&#x20AC;&#x2122;s abundant and diverse

further

compromise

value

resources, this lucrative prospect

Indonesian

rupiah,

could ignite a powerful and ongoing

depreciating it even more than

upsurge

the recorded 30% in 2013.

economic

growth.

the

Overall Data Source: MarketLine

U N E M P LOY ME N T In the past, unemployment rates in Indonesia have been on the higher side, averaging at 8.6% from 2000 to 2011. However, the rate made a sizeable drop in 2012 to 6.1% and is projected to gradually decrease over the coming years. Both strict labor regulations, resulting in a surge of temporary workers, and high severance wages negatively affected recruitments and

have

subsequently

impacted future job prospects. I N T E R E S T R A T E

attempts

inflationary

moderate

pressure

and

combat the depreciation of the rupiah, the Indonesian central bank raised the key interest rate by 175 basis points, to 7.5%, from June to November 2013.

O V E R V I E W

Despite economic and political growth and prosperity, Indonesia still struggles

with some social issues, including low human development as well as high infant mortality rates. Nevertheless, a number of efforts are being to combat these issues and raise the standard of living. The country’s declining population growth rate and rising labor force participation rate already assists in doing so, and the government is taking the steps necessary to achieve their goal of provide every citizen in the population with social insurance by 2029. Other areas of concern, such as increasing religious intolerance and

C U R R E N T S T R E N G T H S

ethnic violence, pose even more threats to the social stability and harmony of the country.

D E M O G R A P H I C A D VA N T A G E

labor

force

participation

rate

refers

“participation amongst individuals of all age groups based on the working age population” (MarketLine), the range for which is 15 to 64 years of age. From 66.2% in 2006, Indonesia’s rate increased to 69.2% in 2013. Conversely, the country has seen a decrease in the population growth rate since 2006, from 1.3% to 1.0% in 2013. These efforts not only improve the national standard of living, they also assist the country in containing wages and expanding their competitive presence in the global arena.

Overall Data Source: MarketLine

L O W

H D I

R A N K I N G

Socially speaking, Indonesiaâ&#x20AC;&#x2122;s status and performance in various

parameters has been relatively unfavorable. With a .617 Human Development Index (HDI) rating in 2012, the country is currently ranked 121st out of 187 total countries. The HDI is a tool that measures the overall social development of a country by taking factors such as life expectancy, education attainment, and income into account. A final statistic, as well

as one for each individual dimension, is expressed as a value between 0 (minimum) and 1 (maximum). Indonesia in fact falls after a number of its in the Index. Evidently, this poor ranking is an area of concern and the government must take action on improving Indonesian social landscape.

peers, such as Singapore (18th), Malaysia (64th), and Thailand (103rd),

H U M A N

T R A F F I C K I N G

Since 1991, Indonesia has seen an influx of human smuggling and

trafficking. However, some cases have involved security personnel who were found guilty of smuggling refuge seekers to Australia. The activity of linger, despite efforts made by the Indonesian and Australian authorities to enhance patrol in coastal zones. Over 7,500 people were smuggled in August of 2012, contrary to the only 200 in 1991. Most refugees heading to Australia seek jobs and a safe haven, however sinking boats have significantly raised the smuggling death toll in the past few years. Unfortunately, the joint agreement signed between Indonesia, Australia, and Taiwan, hoping to tackle the trafficking issue, did little to impede the rising issue.

R E

smuggling had existed prior to 1991 in the country and still continues to

Overall Data Source: MarketLine

H I G H

I N F A N T

M O R T A L I T Y

R A T E S

Recorded at 26.06 deaths per every 1,000 live births in 2013, Indonesiaâ&#x20AC;&#x2122;s infant

mortality rate is high by comparable standards. While the rate has reasonably decreased from 43.5 deaths to 1,000 births in 2003, it still remains larger when paralleled to other countries in the Association of Southeast Asian Nations group. In 2013, Malaysiaâ&#x20AC;&#x2122;s rate was recorded at 14.12 and Thailandâ&#x20AC;&#x2122;s at 15.41. This issue can be predominantly traced to the poor public health intervention systems, illustrating the immediate need for advancements in medical care.

all health care benefits and the other responsible for employee benefits, such as pension and death and workplace injury benefits. The Indonesian government will pay for all social protection of those individuals in poverty and will then look to a continued staircase approach in the funding of these new institutions. Employees in the informal sector will adhere to a contributory scheme, paying fixed monthly rate, while formal sector workers will pay a statutory contribution of 5% of their wages, divided between the employee and employer. If this new system prevails, Indonesia can expect overwhelming support towards the further development of not just the countryâ&#x20AC;&#x2122;s social structure, but the nation in its entirety as well. Overall Data Source: MarketLine

are currently in charge for administering this new system, one handling

overall employment benefits system by 2029. Two non-profit organizations

R O

healthcare system that will cover all Indonesian citizens by 2019 as well as an

newer arrangement being implemented in 2014 aims to create a universal

R E E C T

insurance, death benefits, and severance payments. In addition, an even

new policy provided for pensions, national healthcare and work injury

The revision of social security law began in 2004, when a brand

S E C U R I T Y

S O C I A L

U N I V E R S A L

T E R R O R I S M

T H R E A T S

Due to the widespread geographical composition of Indonesian as well as

its moderately-sized population, the combination of politics and religion has been,

pluralism at risk. For instance, Ahmadiyah Mulisms, whose religion does not fully comply with the more conservative Islam teachings, have become the target for vicious attacks, one of which involved three Ahmadis boy who were beaten to death

of conservative Islamic parties and more liberal secular parties puts the country’s

for the most part, avoided. Yet, a radicalized fringe coming from the confrontation

new possible targeting of non-Muslims minorities, like Hindus, who worry that their

in 2011. The passing of an anti-pornography law in 2010 caused a stir of fear for the

of sanctioning a rise in vigilante-style justice authorized by and carried out by mobs.

archaic traditions could even be outlawed. Furthermore, this law gives the impression

like the Islamic Defenders Front, are alleged to be behind the Ahmadis attacks.

During this time, minorities are put at the most risk, as these radical fringe groups,

Indonesian concert due to protesters and suspected threats. Additionally, Hindus and Muslims also have a history of violent conflict. In January 2012, a clash between the two caused the burning of over 60 houses and in October 2012, a horrendous display of violence caused the deaths 14 people, in addition to the hundreds injured and more than 1,500 displaced. Also, in September 2012, a terror scheme targeting

Christianity. From a suicide church bombing in 2011 to the cancellation of Lady Gaga’s

The violence and intolerance spills over into other religions as well, like

craving retaliation for an alleged ‘ethnic cleansing’ of Rohingya Muslims by Buddhists.

Indonesian Buddhists was uncovered by police forces, presumably devised by extremists

The district of Poso, Central Sulawesi, historically identified as the location for

breeding grounds for these religious extremists. A local newspaper survey in 2012 found that the rising religious terrorism caused Indonesian residents to feel increasingly insecure and frightful. Despite the steady deterioration of religious involvement in political parties, this surge of extremism as fringe groups actively pursue violence and intolerance, poses a very serious threat to Indonesia’s social landscape stability.

previous clashes between Christians and Muslims, is today assumed to be the new

E C H N O L O G I C A L

OVE RV I E W ndonesia presently holds a decent

ranking

Global

within

the

Competitiveness

Report of 2013 to 2014, yet the number of granted patents has been restricted due to low R&D spending. The country currently suffers

from

terrible

and

widespread software piracy, despite the many measures taken to reduce the problem. A strategic partnership with Japan is also in the works to hopefully foster improved research

and

development.

Overall Data Source: MarketLine

H I G H

R E

I N N O VA T I O N

The most recent Global Competitiveness Report ranked Indonesia in

an impressive 38th place out of 148 countries based upon innovation and sophistication. The country also placed 24th in the pillars of capacity of innovation and 40th for the availability of scientists and engineers, both ahead of one of its peers and competitors, Thailand. When comparing institutions who spend money on R&D programs, Indonesia again scored at a high 23rd place amongst 148 other countries, proving its business expenditures in R&D both worthwhile and successful.

P O O R

I N

R & D

S P E N D I N G

Still, Indonesia could benefit from increased spending for R&D, as

they only spend less than half of a percentage point of their current GDP on such ventures. This issue proves the need for increased fostering of innovation, as it will ultimately obstruct further technological innovation. Poor R&D funding has also limited the number of patents the country can acquire, leaving Indonesia with only eight patents in 2012. This performance especially dismal when compared to the 210 patents that were granted to Malaysia and 36 to Thailand that same year.

C H A L L E N G E

S T R E N G T H

P RO S P E C T

R I S K

R & D P A R T N E R S H I P

S O F T W A R E P I R A C Y

W I T H

J A P A N

In late 2012, Former

E R U T

BSA

Global

Software Piracy Study found that Indonesia has one of

Fukuda and Indonesian Vice

the worst records of software

President Boediono called for

piracy in the world, estimated

and discussed a new strategic

around 86%. The study further

partnership to promote R&D

articulates on the impacts

within

Prime

two

countries.

of such a high percentage,

agreement

stresses

claiming that losses due to

entrepreneurial development in

piracy stood around $1.46 billion

acknowledging the importance

in 2011. In attempts to eradicate

of entrepreneurs in the scope

the piracy issue, Indonesia

technological

established

The

the

Indonesia this

2011

Minister

Japanese

also

partnership

innovation. hopes to

for focus

the

Software

Association and Information and

Communications

on increasing the depth of

Technologies Council. However,

education in order to create a

the association has yet to

future impetus for research and

manage an effective full-scale

development and also assist

crackdown on piracy, and it is

in the creation of potential

uncertain whether it will ever

entrepreneurs. Hopefully, this

do so. A piracy issue as extreme

pact will stimulate the current

as this one has the potential to

national

landscape

deter foreign investment and

and help keep Indonesia on

dampen innovation investment.

R&D

the forefront of innovation. Overall Data Source: MarketLine

E V O L U T I O N Earlier Indonesian policies were oriented less towards the core development of technology and more towards the joint venture technological transfers from FDIs. Yet, in the ever-changing international climate, the Indonesia government saw the need for a revision of its policies, directing new interests toward developing indigenous technology.

C O P Y R I G H T S In 1987, Indonesia amended its copyright laws, bringing it into conformity with international standards, and in August 1989, a bilateral copyright agreement between the US and Indonesia went into effect, extending protection to copyrighted works.

I N TE RNE T USE RS I N I ND ONE SIA ( 1 9 9 2 - 2012 )

O V E R V I E W

With its total tax rate lower than the regional average, Indonesia has a fairly

strong and effective competition law. In attempts to attract and compete for increased direct foreign investments, the Indonesian government has promised to liberalize key divisions like infrastructure, healthcare, as well as the creative industry. Yet, an inefficient bureaucracy and high tax compliance costs takes an observable toll on the nationâ&#x20AC;&#x2122;s legal environment. In addition, foreign investors run the risk of encountering impending issues with the arbitrary intervention of the Indonesian government,

Overall Data Source: MarketLine

utilize operative competition laws as a primary instrument. Concerning Prohibition of Monopolistic Practices

Unfair

Business

Competition,

Indonesiaâ&#x20AC;&#x2122;s first competition law enacting in 1999 and effective since 2000, forbids any single domestic company from controlling more than 50% of the total market. After the passage of that law,

economic performance, countries like Indonesia

In order to attain and maintain sound national

L A W

C O M P E T I T I O N

E F F E C T I V E

Competition (KPPU) was immediately instituted and

the Commission for the Supervision of Business

Indonesiaâ&#x20AC;&#x2122;s current total tax rate, which includes profit and labor taxes, as well as other kinds of taxes,

L O W T O T A L T A X R A T E

operations, contrary to occasionally criticisms.

has successfully countered a large number of cartel

Pacific average, at 32.2%, according to the World

is somewhat lower than that of the East Asia and

of its neighbors, like the Philippines at 44.5% and

Bank. In addition, Indonesia ranks lower than some

Indonesia, this kind tax rate is an appealing factor

Malaysia at 36.3%. Considering an emerging economy

for in obtaining and securing foreign investment.

R E D

T A P E

Considering that Indonesia’s immense population of

251.16 million people has a direct influence of the size of its domestic market, the country is steadily expanding

its potential as a natural hub for foreign businesses seeking presences in Southeast Asia. Yet, an excess

of red tape, recorded at the low rank of 120th out of 189 countries in the World Bank’s 2014 Doing Business companies elsewhere. While the regional average takes seven procedures and 37.8 days to start a

business, Indonesia’s takes 10 procedures and 48 days to do the same. Inefficient bureaucracy like so is

Report, will ultimately hurt the nation as it drives these

business in Indonesia, according to the World Economic

actually the second most problematic factor for doing

Forum’s Global Competition Report from 2013 to 2014.

R E

H I G H

T A X

C O M P L I A N C E

C O S T Lastly, the country’s tax compliance policies come hand in hand with a high amount of administrative burden. The World Bank recorded that firms wishing to do business in Indonesia must comply with 52 tax payments in one year, contrary to the regional average of 25 payments. What is more, it takes these

companies 259 hours to file, prepare, and pay these taxes in Indonesian, where the regional average lies

at 208 hours. This onerous cost of tax compliance especially poses a major, if not detrimental, obstacle for future small businesses and entrepreneurs.

Overall Data Source: MarketLine

E A S I N G O F F D I N O R M S

With the aims of boosting the decelerating economy, Indonesiaâ&#x20AC;&#x2122;s

investment coordinating board (BKPM) revealed plans for easing 2013. The new government policy will increase the maximum foreign investment

pharmaceuticals

by 10% to 85% as well as allow

up to 100% foreign investment participation

FDI restrictions in major sectors in

undertaken

power

projects, which were previously as

public-private

partnerships.

plant

the

Furthermore,

advertising

agencies

ASEAN country investors will

see an increased FDI limit of 51% from 49%. The government also plans to liberalize foreign investments

airport

and

airport services by instituting a 49% FDI in land transportation

and freight terminals. In this beneficial new system, Indonesia

can

expect

increased

long-

term economic growth in the

future, especially after reducing the FDI restrictions in sectors like

infrastructure,

healthcare,

I N C R E A S I N G P R O B L E M S F O R I N V E S T O R S

Arbitrary

intervention

the

Indonesian

government poses a substantial number of potential problems and risks for foreign investment firms. Instances most often depict the government either not honoring deals or attempting to enforce new conditions well after an agreement has been made and signed. For example, in 1998 Cemex, a Mexican cement company,

bought shares in Indonesiaâ&#x20AC;&#x2122;s own cement firm, PT Semen Gresik, but later sued the government for not upholding their end of the bargain, making Cemex

arbitration, the company withdrew from Indonesia

a majority stakeholder. Subsequently, after further

government faced a $2 billion lawsuit after revoking

and sold all of its shares. In 2010, the Indonesian

four separate coal mining licenses held by a local subsidiary of the American firm, Churchill Mining. Then

the government went on to establish new regulations that passed 51% of foreign operation down to local

companies after a period 10 years. A final example in 2013 involved the sentencing of three Indonesian

Chevron employees to two years in prison, raising suspicions and uncertainties within the nationâ&#x20AC;&#x2122;s already unstable oil and gas sector. This criminalization of civil disputes not only reflects poorly on Indonesia, but also repels foreign investors in a sector that desperately needs capital to boost a current lull in production.

N V I R O N M E N T A L

O V E R V I E W

Indonesia’s unique geography and environment offers the country one of its

strongest assets, rich biodiversity. With an estimated 38,000 higher plant species, it ranks amongst the top five countries in the world for plant diversity. Indonesia is also home to the world’s leading palm diversity, which is regrettably being rapidly reduced as large tracts of Sumatra’s forest are being completely demolished to create room for future palm oil plantations. In Riau, roughly 1.4 million hectares of virgin forest have been converted for cooking oil plantations and an additional 3 million hectares are

C U R R E N T S T R E N G T H S

expected to go into the production of biofuels, according to a 2008 Greenpeace report.

R I C H

B I O D I V E R S I T Y

Indonesia boasts a vast biodiversity that is somewhat reminiscent

of the widespread ethnic diversity seen in the country’s cultural makeup. The country ranks second in the world behind Brazil in number of mammal species at 515, 39% of which are endemic. With 511 reptilian species, 1,531 species of birds, 270 amphibian species, 75 species of psittacine birds, and 35 species of primates, Indonesia consistently ranks within the top seven in the world in terms of species diversity. Likewise, the country is also within the top five for plant diversity, with an estimated 38,000 higher plant species. They lead the world in palm diversity at 477 species and has more than half of the 350 species of dipterocarp trees. Lastly, Indonesia falls in third behind Brazil and Columbia in freshwater fish diversity, with some 1,400 species.

Overall Data Source: MarketLine

I N D ON E S I A C AR B ON D I OX I DE E M I S S I ON S ( 2 00 3 - 2 0 1 1 )

Graph Source: MarketLine

D E F O R E S T A T I O N

As an average of 1 million hectares of forest

was cleared per year in the 1980s and an average

is evidently an issue for Indonesia. The forests in

most at risk, with their rich timber resources and

of 2 million since 1996, increasing deforestation the nationâ&#x20AC;&#x2122;s more lowland tropical regions are the

biodiversity. At present, these kinds of forests found in the Sulawesi, Sumatra, and Kalimantan regions

have been mostly, if not completely, cleared out. Corrupt political and economic structures, which view natural resources only as a source of income to be exploited for political and personal gain, can be held responsible for the increasing loss in forests. In addition, the rising palm oil demand and cultivation thereof has also taken its share tool on Indonesiaâ&#x20AC;&#x2122;s environment.

Polluted

rivers,

increased

pests,

specifically 2.1 million hectares of Sumatran land

and forest clearing for plantation establishment,

oil production. As the price for palm oil shot up in

in 2008, are the primary consequences of palm

R E

response to the increased biofuel demand, local famers began transitioning from cultivating food crops to palm oil. In an effort of deforestation reduction, the nationâ&#x20AC;&#x2122;s government approved REDD, the Reducing Emissions from Deforestation and forest Degradation, a policy in 2012 in which Norway gave Indonesia $1 billion in exchange for not cutting down trees for the purpose of palm production.

disperse

seeds that regenerate the growth of fruit trees, keeping forests healthy with the reductions of

Indonesian Ministry of Forestry and

other

non-governmental

organizations established this

stabilizing habitat

the and

consequently

E R U

threat,

orangutan population.

and

penalties

consideration

into

social

and thus implemented taxes However,

this

distorted pricing mechanism green

technology,

government

the

taken

hinders the development of

conservation plan as a response to

has

environmental

consumption.

species. Joint efforts between the

government

to effectively curb careless

as well a threat to the orangutan

becoming progressively scarce, the

deforestation for timber, pulp, generate major carbon emissions

outputs. With energy resources

harmful greenhouse gases. The and palm oil plants, however,

therefore a rise in pollution

actually

an increased in utilization and

orangutans

Fossil fuel subsidies have caused

1992 to 2007. Most importantly,

various environmental factors.

50,000 died over the course of

distorted as a consequence of

could

and

the

benefit

from ensuring market princes for resources as opposed to arbitrarily fixing them. Having

estimated

after

shrunk

orangutan habitat significantly

rising climate change threat. The

of energy in Indonesia as highly

species and thus reducing the

would conserve the orangutan

Records have shown the prices

a new ten-year action plan that

biodiversity, Indonesia instituted

To provide further protection of its

D I S T O R T E D P R I C I N G

WILDLIFE C O N S E RVA T I O N

distorted prices rather than market-driven ones may stand in the way of emission reduction.

Overall Data Source: MarketLine

I S S U E S In an effort to encourage local enterprises, Indonesia put aside the regulatory framework for the protection of

its

environment.

Consequently, firms

local

pursued

cheaper

but more environmentally damaging and

production

harvesting

methods.

This lack of clear authority among

Indonesiaâ&#x20AC;&#x2122;s

central,

regional,

local

and

governments,

has

resulted

regulatory

weak

institutions.

Extensive and unregulated logging

has

increased

the

countryâ&#x20AC;&#x2122;s

problems,

the

resultant

deforestation closely floods

has

linked and

been with

landslides.

GEOGRAPHY

A R E A

L O C A T I O N

The Republic of Indonesia is an archipelago nestled in along the Equator

in Southeastern Asia between the Indian and Pacific Oceans. Exactly 17,508 individual islands make up the archipelago and the total area of the country is precisely 1,904,569 square kilometers, of which 1,811,569 sq. km is comprised of land and 93,000 sq. km of water. Border countries of land

include Timor-Leste (228 km), Malaysia (1,782 km) and Papua New Guinea (820 km). The capital city, Jakarta, lies in the lowlands of the West Java Island, the most populated island in the nation. Jakarta is also the leading city for apparel and textile manufacturing. Indonesia also boasts a strategic location

astride and along major sea lanes between the Indian and Pacific Oceans.

MAIN ISLANDS

JAVA SUMATRA BALI

KALIMANTAN (BORNEO) SULAWESI (CELEBES) PAPUA

HALMAHERA SERAM

CLIMATE

TROPICAL HOT & HUMID,

MORE MODERATE IN HIGHLANDS Overall Data Source: CIA - The World Factbook

N A T U R A L

H A Z A R D S

The country’s unique geographic location and topography renders the country prone to a number of potential natural disasters and environmental dangers. Located in the “Ring of Fire”, an intersection of shifting tectonic plates featuring arc of volcanoes and fault lines around the Pacific Basin, Indonesia frequently runs the risk of seismic upheaval or volcanic eruptions. In addition, occasional floods, droughts, tsunamis, or forest fires also exist as potential natural hazards.

In fact, the country of Indonesia actually contains the world’s largest collection of volcanoes, with roughly 76 having been historically recorded as active. Most of the nation’s volcanic activity occurs on Java, Sumatra, the Sunda Islands, Halmahera Island, Sulawesi Island, Sangihe Island, and in the Banda Sea. Erupting most recently in 2010, Indonesia’s most active volcano, Merapi, has been deemed a “Decade Volcano” worthy of study by the International Association of Volcanology and Chemistry of the Earth’s Interior. Mount Merapi sits on the border between Central Java and Yogyakarta presents a legitimate hazard due to its close proximity to very populated areas of people.

In addition to a constant threat of volcanic eruption, Indonesia also faces challenges in lying very near to the intersection of two major fault lines. In December of 2004, a 9.3 magnitude undersea earthquake sent massive tsunami waves hurling into the coastal regions of Sumatra, tragically killing over 130,000 and leaving more than 500,000 individuals homeless.

L A B O R L AW S

L A B O R L A B O R

L AW S F O R C E

Indonesia’s current labor force figure, recorded in 2012, includes 118,378,606 million

individuals, putting the country as the fifth largest in the world for overall labor force. The number has shown a steady increase over the years and similar growth for the future is expected, reaching an estimated 120 million people in 2013. The World Bank formally defines total labor force for Indonesia as the combination of people ages 15 and up who fit into the International Labour Organization definition of the economically active population. They then go on to outline an economically active population as “all people who supply labor for the production of goods and services during a specified period…employed and the unemployed” (The World Bank). However, the treatment of certain groups, such as the armed forces of part-time workers, is dictated by the particular nation and its practices. Usually, though, the labor force does include the armed forces, unemployed, and first-time job seekers,

I N D O N E S I A U N E M P L OY M E N T R AT E ( 2 00 7 - 2 0 1 7 )

W A G E

T R E N D S

In Indonesia, the average nominal wage for

R E G A R D I N G T E X T I L E S & A P P A R E L

employees rose from 1,630,193 Indonesia rupiah in 2012 to 1,909,478 IDR in 2013. Yet,

In general, it has been found that

real average wages for employees, calculated

significant work deficits exist within

by adjusting the nominal wage for inflation,

Indonesiaâ&#x20AC;&#x2122;s textiles and apparel

either remained stagnant or showed marginal

sector,

increases in recent years. So while increases in

high level of employee stress and

nominal wages are notable and steady, growth

general health problems that, in

within average real wages is much more subdued.

the end, diminish firm productivity.

reflected

through

the

L ABOR ACT I VISM

In the past decade, has notably risen as laws became much more protective of the workforce. However, improved employee benefits and severance packages could almost be too generous as they become a gradual deterrent to new investments.

APRI L 2014

E S T I M AT E D CHILD LABOR

6.3%

(AGE S 10-17)

UNEMPLOYMENT RATE

M I LLION C H I L D RE N

Overall Data Source: The World Bank & International Labour Organization

3.2

L A B O R

L A W S

Since Indonesia became a member of the International Labor Organization in 1950,

the two groups have closely collaborated to create a labor system that fits the priorities of the ILO, as well as the Indonesian government and three major trade unions. This mandate outlines three priority areas for the Decent Work Country Programme (DWCP) for 2012-2015.

“ EMPLOYMENT CREAT ION FOR INCLUSIVE AND SUSTAINABLE GROW TH

SOUND INDUSTRIAL RELAT IONS IN THE CONTEXT OF EFFECT IVE EMPLOYMENT GOVERNANCE

SOCIAL PROTECT ION FOR ALL

Mainstreaming of employment in macroeconomic, labour and social policies through sound labour market analysis and tools Improved policies and programmes to better equip young women and men entering the world of work Optimized employment outcomes of public and community investments Improved policies and programmes on entrepreneurship, business and cooperative development for job creation including financial inclusion Workers’ skills are upgraded through demand-based and competencybased training to better meet labour market needs

Labour administration provides effective services to improve working conditions and environment Tripartite constituents effectively engage in social dialogue to apply labour regulations and international labour standards Strengthened institutional capacity of employers and workers’ organizations to contribute to sound industrial relations according to their respective mandates and responsibilities

Government and social partners have greater capacity to design and implement social protection policies and programmes Barriers to employment and decent work are addressed, particularly gender gaps and for persons with disabilities Effective implementation of the National Action Plan for the elimination of the Worst Forms of Child Labour Enhanced policy, institutional framework and programme implementation for empowerment and protection of Indonesian migrant and domestic workers Integrated HIV policies and programmes for women and men workers

Direct Quote Source: International Labour Organization

S TAT E O F T E X T I L E & A P PARE L I N D U S T RY

TE X T I L E & A P PARE L I N D U S T RY P R O F I L E The textile and garment industry is a valuable asset to Indonesiaâ&#x20AC;&#x2122;s economy, encompassing over 10% of the Indonesia manufacturing workforce, employing about 2 million people directly and 4 million indirectly. The industry also contributes a sizeable amount of foreign exchange to the nation. Most of the main textile production areas exits in in the DKI Jakarta, east, central and west Java, Bali, western Sumatera, Yogyakarta, Batam, and Banten provinces. The United States currently ranks as Indonesiaâ&#x20AC;&#x2122;s biggest export market, accounting for a full one-third of their textile imports, followed by the European Union and Japan. T E X T I L E S Export value of textile yarns, fabrics, and other articles hit $4.55 billion in 2012, a 5.02% decrease from $4.79 billion in 2011. The export volumes of these products rose 4.35% in the year, from 1,097 million kilograms to 1,145 in 2012. A P P A R E L Records indicate that the export value of clothing has been gradually increasing since 2005, aside from a dip in 2009 as a result of the global financial crisis. The value decreased by 5.79% to $7.58 billion from 2011 to 2012, yet export volume registered at 515.57 million kilograms, up a modest 2.12% from 2011.

P R O D U C T S SILK WOOL COTTON FIBER YARN MADE OF SILK WOOL COTTON KNITTED OR NOT KNITTED GARMENT SILK COTTON FABRIC

2 0 1 3

E S T .

2,853

TOTAL SUPPLIERS A C C O U N T E D

F O R

8.9%

TOTAL EXPORTS I N

2 0 1 0

Overall Data Source: Emerging Markets Direct

P O S I T I O N In late 2012, research found the country’s primary contributor to the IPI was the motor vehicles and trailers industry at 146.49 points. Following in second was electrical equipment at 140.74 points and Non-metallic mineral products in third with 130.96 points. Apparel currently ranks 8th overall in the country, with 123.14 points, while the textile industry falls on the much lower end, recording a 12.89% decline from 2011 to 79.23.

S U P P O R T A number of factors are proven to either influence or support the development of the Indonesian textile industry. Disconnect between world cotton prices and changes in labor requirements in the textile sector have taken a negative toll on production. Additionally, Indonesian international textile exports remain elastic in relation to the Indonesian textile prices while the demand for these textiles has an elastic response to the lag in the sector’s labor wage. Garments, on the other hand, have undergone exchange rate fluctuations against the US dollar and demand for such products are influences by the nation’s per capita income. Lastly, the ELECTRICITY BASIC TARIFF (TDL) in 2012 proposed an increase in textile industry production costs over 10%. With expectations of exporting to their home countries, a number of other textile companies across north Asia and specifically, South Korea, Taiwan, China, have made considerable investments in Indonesia’s industry. Ade Sugrajat, Chairman of the Indonesia Textile Association (API), expressed his predictions for these funds to boost total investment in the textile sector to $702 million.

H I S T O R Y

O U T L O O K

Indonesia has a rooted tradition in the production of exportation of ready-made garments and home-fashion textiles. The sector is vertically integrated in almost every phase of production, including a large existing synthetic fiber manufacturing industry in place despite the dominance of imported raw cotton. As one of the largest textile producers in the ASEAN region, production capacity usually runs at a very high utilization rate. However, efforts in equipment expansions and upgrades had to be halted as a reduced FDI, high inflation, and political instability posed more prevalent issues. As a result, Indonesia is struggling to compete with its neighbors in Asia-Pacific, with, according to a survey, close to 10,000 of their production machines being over 20 years old (Sucofindo). In 2007, the Indonesian government began composing a TEXTILE MACHINERY RESTRUCTURING PROGRAM that ultimately delegated funds valued at 117 IDR (Indonesian rupiah) to approximately 200 companies in 2011. Once the new mandated regional minimum wages were put into effect in 2012, Indonesia’s textile and garment industries were expected to experience stiff competition as wage costs rose and export growth slowed in 2013. Yet, global textile consumption is forecasted to expand by an annual average rate of 4%, reaching 87 million tons by 2020. With the expiration of the Multi-Fiber Arrangement, a policy governing textile trade between nations, and the subsequent upsurge of quota-free trading, the apparel and textile sectors saw a shift in supply bases, reductions in sourcing prices, and a reorientation of the buyer-supplier relationship. Overall Data Source: Emerging Markets Direct

AV E R A G E L A B O R C O S T

$0.44

P E R O P E R AT I O N A L H O U R

F U T U R E

O U T L O O K

According to an article published April 15, 2014, the value of Indonesian textile

exports is predicted to hit $13.3 billion by the end of 2014. With the United States, Indonesiaâ&#x20AC;&#x2122;s biggest market for apparel and textile imports, currently seeing gradual economic recovery, Indonesia has experienced a stable five percent year-on-year increase in exports to the US. The government also hopes to see a four to five percent increase in Indonesiaâ&#x20AC;&#x2122;s export share within the world market in the coming 10 years. China, South Korea, and Thailand have all expressed interest in establishing textile manufacturing firms in Indonesia, specifically in Central Java due to its favorable business climate, low wages, and accessibility to major ports.

TE X T I L E

INDONESIA TEXTILE ASS OC IAT I ON

A P PARE L

The API, or Indonesia Textile Association, is an organization established in 1974 that covers the scope of the textile industry from mainstream to downstream (Appendix Fig. 10), including the creation of fibers and filaments, texturizing, spinning, weaving, knitting, dyeing, finishing, and garment manufacturing. It is the largest textile association in the country, with a total of 840 company members with headquarters in Jakarta and offices across the six provinces of West Java, Central Java, Greater Jakarta, Yogyakarta, East Java, and Bali. The API believes in industryfriendly policies that allow Indonesiaâ&#x20AC;&#x2122;s textile and apparel market to benefit. Therefore, the organization shows particular interest in policies related to investment, human resources, energy regulation, infrastructure, financing, and upgraded technology. X

INDONESIAN SYNTHETIC FIBER MAKERS ASS OC IAT I ON

Founded in 1975, the Indonesian Synthetic Fiber Makers Association (APSyFI) is made up of the leading polyester staple fiber, polyester filament yarn, and nylon filament yarn companies in the nation. This organization exists as Indonesia is one of the worldâ&#x20AC;&#x2122;s top ten largest synthetic fibers producers, with 588,000 tons of polyester staple, 833,000 tons of polyester filament, and 32,000 tons of nylon filament. APSyFI also is the source for industry information regarding labor laws, taxation, and electricity, amongst other topics.

A S S O C I AT I O N S Since Indonesia is not a country known for natural cotton resources, the country utilizes primarily imported cotton. In 1986, Sekbertal combined the Indonesian spinning enterprises responsible for turning this cotton into yarn to create the Indonesian Spinners Association. The organization primarily sets out to protect the interests of the spinning sector stakeholders through handling concerns like the quality of imported cotton. Sekbertal also works in cooperation with other globally established organizations like Cotton Incorporated (United States) and the International Cotton Association (United Kingdom).

INDONESIAN SPINNERS ASS OC IAT I ON

X Known as the Indonesian Textiles & Apparel Community, Indotextilesâ&#x20AC;&#x2122;s website provides information and data regarding all aspects of the Indonesia textile and clothing landscape. It offers a full-depth look at the condition of the industry and any potential influential factors through detailed articles, forecasts, and other features. The association seeks to be a source for players within the textile and apparel sector, both companies and countries, by offering accurate market information and communication tools all within a user-friendly interface. Since 2009, Indotextiles has offered a monthly electronic publication for textile businesspeople that outlines new issues and predictions for the future of the industry and trade.

INDOTEXTILES

T R A D E A G R E E M E N T S & L A W S

E D A R T S T N E M E E R G A S W A L &

COUNTRY

TRADE

AGREEMENTS

TRADE

LAWS

TRADE AGREE ME N TS

ASS OC IAT I ON OF SOUTHEAST ASIAN NAT I ONS

A S E A N

Established in 1967 by Indonesia,

Malaysia, the Philippines, Singapore, and Thailand, the Association of Southeast Asian Nations (ASEAN) was formed to create regional stability within Southeast Asia through the promotion of political and economic cooperation. The group was soon joined by Brunei in 1984 after their independence from the UK, Vietnam in 1995, and Laos and Burma in 1997. Finally,

M E M B E R S

B RU N E I D A RU S S A L A M CAMBODIA INDONE SIA L AO S M A L AYS I A

in 1999, Cambodia became ASEANâ&#x20AC;&#x2122;s tenth and final member. Together, ASEAN

M YA N M A R

is dedicated to its established values of communal peace and cooperation and

PHILLIPINES

stands as a major organization within the global arena. With the combined efforts of

S I N G A P O RE

these ten countries, the Association holds a vast influence over the scope of AsiaPacific trade, political, and security issues.

THAILAND V I E T NA M

ASEAN FREE TRADE AREA

A F T A

As a member of ASEAN, Indonesia plays a part in the development of

the ASEAN Free Trade Area (AFTA) policy, which pursues the lowering of intraregional tariff between the ASEAN countries through the Common Effective Preferential Tariff (CEPT) scheme. More than 99 percent of products within the CEPT Inclusion List (IL) of the ASEAN-6 (Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand) have been reduced to the zero to five percent tariff range. With around 80 percent of products in the CEPT ILS and roughly 66 percent with tariffs in the zero to five percent range, ASEANâ&#x20AC;&#x2122;s newest members (Cambodia, Laos, Myanmar, and Vietnam) are not far behind. In January 2003, the ASEAN-6 committed to and successfully eliminated tariffs on 60 percent of products in the IL following the signing of the Protocol to Amend the CEPT-AFTA Agreement for the Elimination of Import Duties.

ASEAN AUSTRAL IA-NE W ZEALAND FREE TRADE AGREEMENT

A A N Z F T A

As a member of ASEAN, Indonesia plays a part in the development of

B E N E F I T S

With AANZFTA, tariffs will be progressively reduced and the elimination

of all tariff lines are projected to be achieved by 2020. In 2010, ASEAN enjoyed zero tariffs for 96.5 percent of products whereas Australia and New Zealand saw 84.7 percent. In addition, more modern and flexible rules of origin, streamlined customs procedures, and more transparent mechanisms will allow for much easier movement of goods. Barriers to trade in services are also being gradually liberalized and the movement of business individuals involved in trade and investment activities will be facilitated as well.

ASEANCHINA FREE TRADE AGREEMENT

A C F T A

In late 2004, China and the members of ASEAN

signed the Agreement on Trade in Goods (TIG), which became an integral part of the realization of an ACFTA for goods, set to be completely established for all ASEAN countries by 2015. Since 2005, the addition of services and investment to the ACFTA for goods has been heavily pursued through negotiations and agreements.

AV E R AG E I M P O RT TA R I F F R AT E S ( % ) I N D O N E S I A A N D C H I NA ( 2 0 1 2 )

B E N E F I T S

With an overall economic region of roughly 1.7 billion customers, a regional GDP of

$2 trillion, and total trade estimated at $1.23 trillion, ACFTA is actually the worldâ&#x20AC;&#x2122;s biggest FTA in terms of population size. The TIG Agreement introduced no-maintenance quantitative restrictions as well as the elimination of non-tariff barriers to lower the costs of trade transactions. Ultimately, the creation of an ASEAN-China Investment area will generate a significant amount of investments for ASEAN members. Also, as US, Japanese, and European corporations seek opportunities in the growing Asian arena, they may also be attracted to invest in the ASEAN integrated prospect with its lowered market risk and increased economies of scale.

ASEAN-KOREA FREE TRADE AGREEMENT

A K F T A

As the free trade second partner to ASEAN, Korea and ASEAN signed

the Framework Agreement in 2005 as well as four subsequent agreements that together form the ASEAN-Korea Free Trade Agreement. The agreement has

created

liberal

and

facilitative

market

access

and

investment

regimes for the some 670 million people in the ASEAN and Korea regions.

B E N E F I T S

By considerably reducing trade barriers, this trade agreement has vitalized trade

and the exchanged in goods, services, and investments between the countries involved. All tariffs and non-tariff barriers are on track to be gradually lifted or eliminated by 2020, thus allowing for the expansion of inter-regional exports and investment. In addition, this new large free market spreading eleven countries is expected to draw in vast amounts of other foreign investment, creating more jobs and simplifying the transfer of more advanced technology.

ASEAN-JAPAN COMPREHENSI VE ECONOM IC PARTNE RSH I P

A J C E P

Signed in Bali, Indonesia, in October 2003, the Framework Agreement

for Comprehensive Economic Partnership (CEP), was followed by four years of negotiations and the eventual signing of the ASEAN-Japan Comprehensive Economic Partnership (AJCEP). However, in April 2013, Indonesia was not involved of the ratification and implementation thereof of the agreement despite the involvement of all other ASEAN signatories. Indonesia and Japan did ultimately reach a separate economic partnership agreement (EPA) in 2008.

B E N E F I T S As with other agreements, the aims of the AJCEP are to create a free-trade area across all borders within the nations involved. Under the agreement, the eight other bilateral EPAs are supplemented through a reduction and elimination of trade barriers related to goods. This is ultimately predicted to establish an environment for the reinforcement of a private-sector manufacturing network within the ASEAN region, under Japanese initiative. These bilateral EPAs will also lay the groundwork for Japanâ&#x20AC;&#x2122;s major role within the economic rise of the East Asian market.

A I F T A

After initial framework established in

2003 and the final agreement made into effect in January 2010, the ASEAN-India Free Trade Agreement allowed both parties to truly expand their economic reach within the Asia-Pacific region. The agreement currently only covers trades in goods, while the other chapters are still under negotiation.

B E N E F I T S

Businesses in both countries have

and will continue to benefit from the increased market access that such a strong partnership can achieve. All members agreed to progressively, over the course of three to eight years beginning in 2010, reduce duties on a substantial number of products. Specifically, both parties are currently working on lifting import tariffs on more than eighty percent of traded products by 2016. Considering Indiaâ&#x20AC;&#x2122;s relatively high tariffs, averaging thirty percent on most products while some commodities even reach ones of up to ninety percent, the ASEAN economies stand to benefit exponentially from this agreement.

ASEAN-INDIA FREE TRADE AGREEMENT

JAPAN-I ND ONE SIA ECONOM I C PARTNE RSH I P AGREE ME N T

J I E P A

Indonesiaâ&#x20AC;&#x2122;s first bilateral trade agreement, the Japan-Indonesia Economic

Partnership Agreement (JIEPA), came into force in July 2008. Formal negotiations began in 2005 and completion took much longer than anticipated, until the Japanese Prime Ministerâ&#x20AC;&#x2122;s three day visit to Indonesia in 2007 brought the agreement to fruition with the signing of a Memorandum of Understanding.

B E N E F I T S

Key aims for this agreement include enhancing bilateral trade and facilitating

Japanese investment to ultimately increase economic cooperation between the two countries. In addition, Indonesian corporations will benefit from the transfer of production and management methods through newly established industrial capacity-building programs. Under the JIEPA terms, the value of tariff-free trade was set to reach 92 percent, with Indonesia committing to the reduction of 93 percent of its 11,163 duties on Japanese commodities and the elimination of 58 percent immediately upon implementation of the agreement. Japan, on the other hand, agreed to reduce 90 percent of the 9,275 tariffs on Indonesian products, with 80 percent disappeared upon implementation.

The agreement also goes beyond trade barriers by implementing measures

like investment rules, intellectual property rights, and government procurement to improve the overall business landscape between the two parties. Unlike any of Japanâ&#x20AC;&#x2122;s other bilateral EPAs, the JIEPA seeks to assist local businesses in meeting the requisite standards of the Japanese markets by improving labor skills and increasing technological capabilities through capacity-building strategies.

A T

O N

ASEAN-EU FREE TRADE AGREEMENT

A E S E A N - E U

F T A

This partnership between the ASEAN members and the European Union hopes

to support ASEAN economic integration through facilitated participation of its members in the FTA negotiation process, specifically with the EU. This FTA is comprised of three components specifically: regional trade-related training and research, reduction of the progressive gap between the CLMV (Cambodia, Laos, Myanmar, & Vietnam) countries and the ASEAN-6 through CLMV local trade policy support, and targeted campaigning for the stakeholdersâ&#x20AC;&#x2122; awareness of the EU-ASEAN FTA negotiation process.

INDIA-INDONESIA COMPREHENSI VE ECONOM IC COOPE RAT I ON ARRANGE ME N T

I I - C E C A With the ASEAN Economic Community (AEC) on the horizon for 2015, India and Indonesia met in October 2013 for the acquiescence of a potential Comprehensive Economic Cooperation Agreement (CECA). The two parties in this bilateral partnership agreed to annual Joint Commission meetings to discuss matters regarding energy, food security, fighting terrorism, maritime security, and the WTO (World Trade Organization). With this and the formation of an Eminent Persons Group, the nations are aiming to create a vision document that will bring this agreement to fruition by 2025.

A U

INDONE SIA-AUSTRAL IA COMPREHENSI VE ECONOM IC

I A - C E P A

The Indonesia-Australia Comprehensive Economic Partnership Agreement

negotiations commenced in Jakarta, Indonesia in September of 2012. The agreement aims to bring these two large economies closer through the strengthening and expansion of their trade, investment, and economic cooperation relationships. The announcement of the commencement of these negotiations follows the 2009 release of a Joint Feasibility Study on a potential Indonesia-Australia Free Trade Agreement as well as the formation of the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA). The IA-CEPA is projected to build upon the outcomes of the AANZFTA..

KOREA-INDONE SIA FREE TRADE AGREEMENT

K I - F T A

In November 2013, South Korea and Indonesia held its sixth round

of negotiations in Bali for the creation of a bilateral FTA. All of these negotiations include comprehensive discussions on matters such as customes, regulations,

investments,

and

goods

and

services

trade

partnerships.

R O

A H K F T A

On April 2, 2014, the Security General of ASEAN met with officials within the Hong Kong

Special Administrative Region Government and give a keynote address about the Progress and Prospects of the ASEAN Economic Community (AEC) at the Credit Suisse Asia Investment Conference. While there, the Hong Kong officials highlighted the regionâ&#x20AC;&#x2122;s rapidly growing economy and how ASEAN could stand to benefit. Since ASEAN is now Hong Kongâ&#x20AC;&#x2122;s second largest trading partner following China, there has been a strong push for the development of an ASEAN-Hong Kong Free Trade Agreement (AHKFTA) that could potentially yield benefits for both parties. Preparations for negotiations on behalf of AHKFTA are now currently underway.

ASEAN-HONG KONG FREE TRADE AGREEMENT

D E

D Y

ASEAN-PAKI STAN FREE TRADE AGREEMENT

A P F T A

To improve and expand upon ASEAN and Pakistanâ&#x20AC;&#x2122;s current

economic engagement, the two sides undertook a Joint Feasibility Study for a potential ASEAN-Pakistan Free Trade Agreement (APFTA). In August 2009, researchers from both parties completed the study and allowed for the acceptance of considerations of the recommendations outlined in the study.

INDONESIA-CHILE COMPREHENSI VE ECONOM IC PARTNE RSH I P AGREE ME N T

I C - C E P A

In April 2013, Indonesia and Chile agreed to begin discussion of a

comprehensive economic partnership agreement (CEPA) to boost trade and support their competitive edge through a fair bilateral agreement. Indonesia primarily seeks to utilize this potential partnership to create a new trading presence in South America, with Chile serving as the hub. The deal would open up new investment routes predominantly within the fisheries, manufacturing, and mining industries of the two nations.

COMPREHENSI VE ECONOM IC PARTNE RSH I P FOR EAST ASIA

C E P E A

/ 6

R O

Japan proposed this agreement in 2005 that would create trade cooperation between the 16 current countries within the East Asia Summit. Specifically, the agreement includes the ten members of ASEAN, plus China, Japan, South Korea, India, Australia, and New Zealand. The arrangement would hopefully bring together all the separate arrangements currently in place amongst the countries to create and liberalize one vast Asian market. However, 13 of these 16 are simultaneously pursuing and negotiating another alternative and completely separate endeavor, the East Asia Free Trade Agreement. I M P A C T

O F R E M O V I N G T A R I F F B A R R I E R S I N A S E A N + 6 C O U N T R I E S

Graph Source: Asian International Economists Network

A S E A N

Known as the Comprehensive Economic Partnership for East Asia (CEPEA),

D E

EAST ASIA FREE TRADE AGREEMENT

E A F T A

D Y

A S E A N

Following the Asian financial downturn in 1997, an impetus of regionalism followed by the recently integrated nature of the East Asian economies generated a sense of identity and unity amidst the nations. This spark of identity ignited the dialogue and cooperation for the framework of what would be known as the ASEAN+3 in 2004. This East Asia Free Trade Agreement includes the members of ASEAN as well as some of Asia biggest players, The Peopleâ&#x20AC;&#x2122;s Republic of China, Korea, and Japan. The framework also includes ideas on the consolidation of other East Asian bilateral and regional FTAs to achieve greater benefits through a larger and more unified agreement. However, despite strong advocacy in this effort, a decision has yet to be reached.

R O

U S I F T A

First proposed in 1997, a US-Indonesia FTA posed a number of very

appealing benefits for both parties involved. While a full FTA could potentially anchor labor, environmental, and anticorruption policy reforms in Indonesia, the agreement is still very much under consideration and may not be possible in the near future. Yet, a steady approach to such a goal could still create incremental gains like freer trade in goods and services as well as a massive increase in direct investment. This could generate not only more American enterprise opportunities, but also give the Indonesian economy the boost it needs and lift millions out of poverty. Such an agreement has the potential to help amend and enhance the political as well as the economic landscapes of the two nations.

UN I TE D STATE S-I ND ONE SIA F REE TRADE AGREEMENT

O N

L U

O N

W H AT I T ME A N S FO R N I X

Since there are no currently established and in effect trade agreements

between the United States and Indonesia, our products will not receive any of the benefits that other foreign imports enjoy. However, a US-Indonesia FTA is has been proposed and it poses a potential for freer traded goods in the future. In the meantime, Nix can enjoy benefits like little to no duty rates if we choose to source and send our fabrics from an Indonesian trade partner, like China or Japan, to our Indonesian garment manufacturers.

U S T R A D E L AW S

I N D O N E S I A E X P O RT L AW S

As a member of GATT (General Agreement on Tariffs and Trade) as well as the

ASEAN FTA, Indonesian exports and imports see very similar customs regulations that one might see with other active trading countries. The country is a part of the International Convention on the Harmonized Commodity Description and Coding System, and there for has every trade commodity classified with a specific code.

INDONESIA CLASSIFICATION

WOMEN'S NEOPRENE SWIMWEAR

6211.12.0000

A P P A R E L

C O M P L I A N C E

T H E T E X T I L E F I B E R P R O D U C T S I D E N T I F I C A T I O N A C T “The importation, manufacture, [or] sale … of any textile fiber product which is misbranded or falsely or deceptively advertised is unlawful and is considered an unfair method of competition and an unfair and deceptive act or practice in commerce under the FTC Act. To avoid being considered misbranded, the Act requires that most textile products have a label attached listing:

C O U N T R Y O F O R I G I N “All products imported into the U.S. must conform to 19 CFR 134, Country of Origin Marking regulations. These regulations require that every article of foreign origin imported into the U.S. be marked in a conspicuous

Generic names and percentages by weight of the constituent fibers in the product + Name under which the manufacturer or other responsible company does business or, in lieu thereof, the registered identification number (“RN number”) of such company + The name of the country where the product was processed or manufactured”

place as legibly, indelibly, and permanently as the nature of the article will permit, and in such a manner as to indicate to the ultimate purchaser in the U.S., the English name of the country of origin of the article at the time of importation.”

U N I TE D S TATE S I M P O RT L AW S In regards to the correct country of origin, importers of textiles and apparel must be in accordance with 19 U.S.C. 3592 (Section 334, P.L. 103465) that assures that “no illegal transshipment or false or fraudulent practices were involved” (USCBP) in the manufacturing of your goods. As far as US laws affecting the importation of our product, swimwear, the following outlines the same standard requirements that most apparel products for women will see. Fuller texts can be read on page 230 of the appendix.

R E Q U I R E M E N T S C A R E

L A B E L

“The Federal Trade Commission’s (FTC) Care Labeling Rule requires manufacturers and importers to attach care instructions to garments. The Rule requires that manufacturers or importers comply with the following: Provide complete instructions about regular care for the garment, or provide warnings if the garment cannot be cleaned without harm + Ensure that care labeling instructions, if followed, will cause no substantial harm to the product + Warn consumers about certain procedures that they may assume to be consistent with the instructions on the label, but that would harm the product. + Ensure that care labels remain attached and legible throughout the useful life of the product”

F L A M M A B I L I T Y C L O T H I N G

O F

“Provides methods of testing the flammability of clothing and textiles intended to be used for clothing by classifying fabrics into three classes of flammability based on their speed of burning. This minimum standard specifies that textiles used in apparel must meet class 1 or 2 flammability requirements.”

Information Source: National Institute of Standards and Technology

B U S I N E S S E T I Q U E T T E

C U LT U R E

N E G OT I AT I O N S

R E L AT I O N S H I P S

S S E N I S U B E T T E U Q I T E

SOCIAL

C U LT U R A L

ELELMENTS

DINING

C U LT U RE

T H E

C U L U T R E

In line with the country’s motto, “Unity in Diversity”, Indonesian culture

is primarily characterized by harmony and conformity to society’s rules as well as honor and respect for the individual. The society is also rooted in the value placed upon loyalty to family and friends by Indonesian people. For most of these people, life is simple and they enjoy few modern conveniences, such as running water. Overall, the country is viewed as one big extended family, as the president, schoolmasters, and business leaders referred to as the public’s “fathers”.

M A S C U L I N E

V S

F E M I N I N E

Indonesia, for the most part, is a patriarchal society, however,

women do make up a decent part of the workforce and see equal work opportunities as men in the larger cities. And while Indonesia is a Muslim nation, the status of women is generally considered to be high by outside standards, yet their position and rights vary considerably depending on different ethnic groups. For the country as a whole, the gender ideology emphasizes men as community leaders, decision makers, and mediators with the outside world, while women are viewed as the backbone of the home and family values. They also tend to still be second to male counterparts when looking at responsibilities, salaries, and status within the workforce.

H E I R A R C H Y

Hierarchy plays a major in Indonesia culture and the relationships

thereof are highly respect, emphasized, and maintained. Just as it is in many other cultures, respect is shown to those individuals with status, power, position, and/or age, and the most senior member of a village or office is expected to make the decisions for the group. However, these superiors still advocate for group discussion and consensus when making these decisions, in the attempts to maintain strong group cohesiveness and harmonious relationships. As previously mentioned, these senior members of society are referred to as “bapak” or “ibu”, which translates to the equivalent of father or mother or sir or madam.

N E G O T I AT I O N S

102

I N I T I A L

M E E T I N G S

Even though Indonesian business meetings usually start late, Westerners are

expected and should always arrive time. When entering a meeting, it is necessary to be very aware of the people who will be in the same room and never turn ones back to a senior person or high ranking official. Indonesians never immediately get down to business, so expect an initial meeting to last anywhere from 45 minutes to an hour, with very small talk and not much accomplished. Periods of silence are also anticipated and acceptable.

N E G O T I A T I O N P R O C E S S

S T R A T E G I E S

Negotiations should always start at the top of a corporation and move down to

the operating level when discussing technical matters. Always seek clarification and feedback throughout negotiations yet never be too confrontational or employ pressure tactics, as Indonesians will take offense. They also rarely disagree or argue in public, so the avoidance of any kind of conflict is paramount for a successful negotiation.

However, Indonesians do love to bargain and, for that reason, giving quick

concessions may appear naive. It is completely normal to haggle over a deal, but deferential listening and soft speaking are necessary to maintain harmony. Hard bargainers can and will be respected, as starting prices are often very unreasonable.

When looking at the cultureâ&#x20AC;&#x2122;s overall desire to please, Indonesians will

often give an untruthful answer so as to remain polite and not disappoint anyone. Furthermore, as such indirect communicators, they will also not always say what they mean and it is then up to the listener to interpret the body language and gestures of the individual to understand the true message they are trying to convey.

Contrary to Westerners, Indonesians see the insistence of a contract as a breach

of trust. They do still understand the need for such documents and thus prefer to look at them as guidelines rather than a strict statement of responsibilities and duties. Patience must be exercised when waiting for a decisions, as they do not like to do so hastily. Rather they give the matter sufficient consideration and decisions are made from the top down.

103

W AY S

O F

S AY I N G

“ N O ”

As the gracious and polite people that they are,

Indonesians tend to be very indirect and will always be agreeable regardless or the circumstance to avoid embarrassing or disrespecting another individual. In fact, the Indonesian language has 12 words that say “yes” but really mean “no”. All attempts at literal translation of such words into English still cannot convey the correct message. For example, a translated English phrase like “Yes, but…” would really mean a flat “no” in Indonesia. Even sucking air through ones teeth is another way a saying “no”.

RE L AT I O N S H I P S

106

107

R E L A T I O N S H I P

B U I L D I N G

When building relationships with Indonesians, patience is key. The process

of established and nurturing these business relationships can sometimes be a slow and frustrating process, but they must be allowed to develop over time. Again, these first meetings will be much more about getting to know more about one another than conducting business. Most importantly, Indonesian highly value a personal approach when it comes to doing business and do not take or respond well to phone calls, messages, or faxes. Therefore, it usually requires several face-to-face visits over the course of a couple months to complete and secure a contract. When that relationship level is reached and Westerners have put in a large amount time and effort, the relationship will actually involve much more physical contact and touching.

S AV I N G

F A C E

Within the efforts of maintaining group harmony, the idea of ‘saving face’ is crucial to

understand, especially since a person’s reputation and social standing rest chiefly upon this concept in Indonesian business culture. While foreigners cannot be expected to understand the all nuances of this concept, it is advised to constantly keep an eye on one’s behavior. Consequently, Indonesian people are very careful about how they interact and speak.

In the end, this concept is all about preventing the occurrence of “malu”

or ‘losing face’, the loss of control over one’s emotions or otherwise causing embarrassment. For example, remaining calm at all times creates the perception of control over one’s emotions and not the other way around. Creating any such embarrassment or loss of composure, even unintentionally, could seriously harm business negotiations. For example, publically expressing any forms of anger, disagreement, or ridicule in public is an example of ‘losing face’. These kinds of displays will cause the individual to be judged as unworthy of respect and trust.

SOCIAL & C U LT U R A L ELEMENTS

110

When doing business with Indonesia, it is customary for men to

wear conservative, dark colored business suits. A suit and jacket must

be worn for first business meetings and the traditional long-sleeved batik shirt may also be appropriate in more formal business settings

M E

or gatherings in lieu of a suit and tie. In the end, it is always a wise decision to follow the lead of those whom you are meeting with to get a full grasp on what is appropriate for that particular business environment. For example, some offices tend to be very causal and allow for short-sleeve shirts without a tie. One might also see the term “lounge suit” on an invitation, which also indicates a business suit.

Women doing business in Indonesia are advised to wear suits,

dresses, or blouses and skirts that are elegant and feminine, yet still

M E

conservative. Indonesian people also respect high-quality accessories that may be paired with a woman’s outfit. However, it is best to avoid short, tight fitting, and sleeveless attire as well as more extreme fashion trends. For more formal business meetings, women should also wear hosiery. Since Indonesia is a Muslim-dominated population, it is also necessary for women to honor the Muslim rules of modesty when necessary. This means covering themselves from ankle to neck, avoiding heavy makeup, and wearing a head scarf to cover one’s hair when necessary.

K E E P

I N

M I N D

It is also important to remember when dressing and packing that Indonesia lies

along the Equator, so high heat and humidity are to be expected majority of the year. Always pack enough clothes to remain clean and fresh, and changes of clothes throughout the day will likely be necessary. Wearing layers that can be removed when outside or not in formal settings as well as lightweight fabrics like cotton is also sensible. Unfortunately, despite the humidity, shorts are never appropriate or acceptable for men or women.

111

112

G R E E T I N G S

Greetings in this country can tend to be on the more formal side, as they are

intended to be a sign of respect and carry much importance. A handshake is the most common form of greeting, often accompanied with the word Selamat, meaning “peace”, said slowly and sincerely. Always use the right hand when shaking hands, as the left hand is considered unclean. A slight bow or nod may be accompanied with the handshake as well as a smile. Handshakes are necessary for first-time meetings but the bow or nod is sufficient for any meetings to follow. There may also be occasions when both parties, after shaking, place the palm of their right hand to their heart, indicating respect for the other person. With greetings between men and women, the man is expected to wait for the woman to initiate the handshake. If the woman does not wish to shake hands, she will most often place her hands in front of her chest in the prayer, or “wai”, position and the man should do the same.

113

I N T RO D U C T I O N S

Considering the significance of hierarchy in Indonesian culture, it is best to defer

to the eldest or most senior person in the room first when beginning conversation. It is common for Indonesians to actually enter a meeting room according to rank.

B U S I N E S S

C A R D S

Business cards are exchanged immediately following initial introductions. The card

must go in the right hand while the left hand supports the right wrist, and the writing must be facing the other person. It is customary to present a card to each person in the meeting and the card will be received with both hands together. When presented with another person’s card, the same ritual is to be followed by the receiver. One should take time to carefully read the card and never write on it. While cards printed in English is acceptable, it is a sign of respect to have the reverse side written in Bahasa Indonesian. After accepting a business card, always place it in a business card case, never fold a card or put it in a pocket.

T I T L E S

N A M E S

Indonesian people are very proud of their titles as they signify status, so it is best to address

people by using their professional title or Mr., Mrs., or Miss, followed by the surname. These professional titles may be honorific or academic, again as rank and status are very imporatant in this culture. One important honorific title, “Haji” for men or “Hajjah” for women, is reserved for Muslims who have made the pilgrimage to Mecca as outlined in their faith. Some Indonesians have only one name, although it is becoming increasingly common for people, especially in the middle class, to now have both and first name and a surname. If someone does not have a title, the equivalent of Pak, meaning “Mr.”, or “Bapak”, meaning “Sir”, is used for men and “Ibu” for women.

114

C O L O R S

M E A N I N G S

Green is a forbidden color in Indonesia - advised not to use in ones corporate branding Red = Anger or Celebration Blue = Sadness Gold = Decoration Brown = Earth

S P A C E

T O U C H I N G

Indonesia is known to be an overcrowded society so they often overlook inadvertent

invasions of personal space. In public places they tend to stand very close to one another, but it is never meant to be rude. Allowing for personal space is actually sign of respect within the culture. When doing business, Indonesians will prefer standing at lease and arm’s length from anther, but that distance is shorter between close acquaintances and friends. .

T I M E

Jam Karet, translated to mean “rubber time”, is an popular Indonesia phrase used to

describe the country’s approach to time. Time there is very flexible and nothing is rushed, as the overall attitude sees everything as having its time and place. With this relaxed ideology, Indonesians believe that personal relationships and harmony, as opposed to time deadlines and schedules, bring money. In regards to business, expect to have meetings cancelled without prior notice or the Indonesian associates to show up thirty minutes late. Still, bus, train, and plane schedules will still be adhered to for the most part.

115

G E S T U R E S + B O D Y L A N G U A G E + T A B O O S

• Men and women should not make excessive physical contact in public except to shake hands • Indonesians have a tendency to stare at things that are considered unusual to them, which may, in some cases, be a Westerner • Never put your hands into your pockets when speaking with someone • It is considered offensive and bad form to crook or point an index finger to beckon another; instead, use an open palm • Smiling is very welcome and common and may still occur even when someone disagrees or doesn’t like something • Always use the right hand when passing or receiving objects, touching another person, or handling money or papers • Never touch or pass an object over the top of someone’s head as it is viewed as the most sacred part of the body when the spirit resides • Indonesians favor indirect over direct eye contact, and it is advisable to use direct contact only intermittently during conversation • Remove hats and sunglasses when indoors • Both feet should remain on the floor when sitting and one should not cross their legs • Good and rigid posture is a sign of respect whereas showing anyone the soles or bottoms of shoes is considered an extreme offense • Approval can be shown through a gentle pat on the shoulder in Indonesia, but the American-style “backslapping” is very inappropriate • Taking a photograph is actually a way of honoring someone • Do not chew gum, use a toothpick, or yawn in public • Standing with your hands on your hips may be misconstrued as anger or a threat

116

G I F T

G I V I N G

One of the best ways to show interest and sincerity in establishing a lasting business

relationship is to present your associates with small gifts during the initial meeting. These gifts should be modest yet thoughtful for this occasion, and good ideas for such may be tokens representative of one’s own country or with one’s company logo. Gifts of food, like candy or fruit baskets, are always appreciated by Indonesians and are great ideas for a thank-you gift following a dinner party.

Gift giving is also expected at celebrations of certain occasions, upon returning from a trip, as

a sign of thanks for a particular service, when a visitor comes to tour your workplace, and when you are invited to an Indonesia home. Personal gifts between men and women may be misinterpreted as romantic and therefore Indonesian businessesmen will always state that his wife sent the gift. Gifts will not be opened when given in public to show that the recipient is gracious and not greedy. H O L I D AY

G I F T S

At Chinese New Year, a gift called a “hong bao”, money in a red envelope, is customarily given to children and nongovernmental service personnel you deal with on a regular basis. Also, ensure that only new bills in even numbers and even amounts are given. Employees receive a ‘hong bao’ equivalent to one month’s salary from their employers and it is a national labor law for all Indonesians receive one month’s salary at the end of the Muslim fasting month of Ramadan. C U L T U R A L

D I F F E R E N C E S

In a culturally diverse nation like Indonesia, religion and ethnic group beliefs set the rules for appropriate gift giving. Each culture has a variety of restrictions with items like food and alcohol that could be considered offensive if given as a gift.

AV O I D

T H E S E

G I F T S

MUSLIM RECEIPENTS • • • • • • • •

Alcohol Perfumes containing alcohol Pork Pigskin products (includes some leathers) Personal items such as underwear Knives Toy dogs or gifts that picture dogs Images of nude or partially clad women (even in paintings or sculptures with artistic merit)

117

C O M M U N I C A T I O N

S T Y L E S

Overall, Indonesian speak in quieter, more subdued tones and such should be

mirrored by Westerners through also speaking in a gentle manner. Never allow ones voice to get loud, whether in with anger or joy, as loud individuals come across as aggressive in Indonesian culture. Moreover, it is inappropriate to display any kind of anger in public, whether vocally or through body language, such as distinctive facial or eye movements. Always avoid interrupting or talking over someone else. Face to face interactions are highly valued, especially in the business world. Expats are more likely to get attention and results from a face to face business meeting than from an email or phone call.

T Y P E S I N D I R E C T

Saving face is key to all communication. Harmony must be maintained. Chinese Indonesians in business culture tend to be much more direct. H I G H

C O N T E X T

Many unspoken rules and non-verbal cues. â&#x20AC;&#x153;Yesâ&#x20AC;? may mean only that you have been heard; it may not be an indication of agreement. F O R M A L

Formality and respect is expected in all situations, and especially for those who are more senior in age or hold seniority in the family or company. R E S T R A I N E D

Outward display of emotion is considered immature and a sign of someone who lacks control or is childish.

118

B U S I N E S S

E N TE RTA I N I N G

Many Indonesians have preconceived negative connotations of business travelers and

tourists, therefore social encounters are the best opportunities to dispel those ideas and impress Indonesian counterparts. Always accept social invitations of any kind as these types of occasions are a very important element of business relations in Indonesia. Always respond to received invitations, and it is best to do so in writing. If you must decline, give a plausible excuse as to not cause the invitee to â&#x20AC;&#x2DC;lose faceâ&#x20AC;&#x2122; and possibly remove you from the preferred guest list in the future.

In the early stages of your visit, you may not receive many social invitations. Nevertheless,

patience is again a vital aspect in order to give ample time for your Indonesian counterparts to initiate these necessary first invitations. First and foremost, Indonesians see the office as the only place to discuss business. As a result, refrain from business discussion in a social settings, unless your Indonesian companions initiates the subject. Just like all other Indonesian meetings, social gatherings will usually start late and Indonesians will probably arrive 30 minutes late.

119

R E S T A U R A N T

M E E T I N G S

The person who extended the invitation is traditionally responsible for paying the bill.

If you receive invitations during your stay, be sure to reciprocate before returning home. In most of Indonesiaâ&#x20AC;&#x2122;s finer restaurants, a 10% gratuity charge will be included in the bill. If unsure, it is acceptable to ask if the charge has been added or not. If it hasnâ&#x20AC;&#x2122;t been included, a 10% tip is appropriate. Conversely, in traditional Indonesian restaurants, tipping is not practiced.

I N V I T A T I O N S

It is useful to remember that there is a prevailing belief that you cannot properly host

a gathering in the country until you yourself have been a guest at an Indonesian event. Home invitations are rare due to cramped housing that can often be inhabited by several extended family members. If you are invited to an Indonesian home, you should consider it a rare honor, but might want to suggest a more neutral social situation, like a restaurant, to meet in. If during a visit you receive invitations to social business gatherings, be sure to reciprocate before returning. When extending invitations for social functions to Indonesian businessmen, specifically dinners, it is customary to include spouses. But, be aware that business will not be discussed in the presence of spouses. Do not send invitations printed on white, black or blue paper to Indonesian Chinese, as these colors are associated with sadness. Red or pink, however, can be acceptable colors for invitations.

H O S T I N G Plan nighttime events on the more early side, like 7:00 to 9:00 p.m. Indonesian people usually rise and go to bed early, so guests will probably be gone by 9:30 p.m. They also find buffets to be a more comfortable environment than sit-down dinners with assigned places. With this, always ensure that the food served in a buffet is highly sophisticated. With the large Islamic population in the country, be aware that many of your guests may be Muslims and do not drink alcohol or consume pork products. The guest of honor, to whom you should show the utmost respect, will usually be last to arrive and the first to go through the buffet line. You should always accompany the special guest to the buffet table and explaining what each dish is.

DINING

122

E T I QU E T TE + TA B L E M A NN E RS

general,

the

setting

If invited to a home, it is both standard and expected to arrive 10 to 20 minutes late. Upon

and

dinging context

etiquette of

the

is meal

fairly must

relaxed be

taken

in into

Indonesia,

but

consideration.

arrival, discreetly check to see if your host or hostess is wearing shoes. If not, be sure to remove your own shoes. For greeting, a slight bow is polite when saying hello and goodbye to a host and one must wait to be shown to their seat as guests usually have set positions. In conjunction with their polite mannerisms, Indonesians are very hospitable and will feel personally rejected if their hospitality is denied. To show gratitude the special honor of being invited to an Indonesianâ&#x20AC;&#x2122;s home, never refuse food or drink and offer sincere compliments whenever appropriate.

The host or hostess will be the last to sit down and eat and it is proper to always rise

when they enter a room. The guest of honor or most senior individual has the distinct privilege of beginning a meal and then men will traditionally be served first. It is customary to wait to be asked to begin serving and eating, and then one should refuse twice and, on the third request, begin. When finished, always leave a portion of your meal on your plate to signal that youâ&#x20AC;&#x2122;ve been satisfied with the meal. As with other gestures, always eat and pass food with the right hand.

P R O P E R U S E O F U N T E S I L S

In dining, a fork and spoon are both used,

with the fork held in the left hand and the spoon in the right. The fork is used to push food onto the spoon and both hands should always be kept above the table. In some more causal situations, fingers may be used for eating. When finished, the fork should be placed with the tines down and the spoon should be crossed over the fork also facing down.

123

A L C O H O L I C

B E V E R A G E S

Alcohol is legal in Indonesia, though the sale of alcohol to Muslims is prohibited. The minimum legal age to buy alcohol is 18 but there is no legal age for the consumption of alcohol. Always remember that since most Indonesians are Muslims, they will most likely not drink alcohol. Most Indonesians though, unless highly orthodox, will not object to you drinking alcohol.

C O N VE RSAT I ON

S U BJ E C T S

A P P R O P R I A T E

I N A P P R O P R I A T E

Since the Asian economic crisis and

Avoid the following topic as they

the fall of President Suharto, Indonesians

are considered risky and may

have taken advantage of freedom of speech

viewed

inappropriate:

and enjoy openly expressing opinions on all kind of topics, controversial or not. But as a guest, it is best to stick with the following acceptable topics for conversation: • the weather • family • travel/tourism • sports • food/praising the local cuisine • future plans of the group or organization • the success of the group or organization • anecdotes about your attempts to learn Bahasa Indonesia • current events in general

• Indonesia’s human rights record • bureaucracy • corruption • military influence • criticism of Indonesian ways • commenting on Indonesian customs that you find peculiar • religion • personal success

M A N U FAC T U R I N G &

PRODUCT ION

G N I R U T CAF U N A M NOI TCUDORP

S O U R C I N G G U I D E L I N E S + P OT E N T I A L S U P P L I E R S + E VA LUAT I O N

S OU RC I N G GUIDELINES

128

S O U R C I N G

O V E R V I E W

Nix is dedicated to sourcing products from suppliers who conduct

their business in a just and responsible manner and share our belief in protecting human rights and maintain the environment. All Nix suppliers are expected to make every effort possible to avoid any abusive, exploitative or illegal conditions in their factories. Below are some of our efforts to ensure that our suppliers are honoring their promise to uphold our principles.

129

N I X

C O D E

O F

C O N D U C T

Nix and its employees must, at all times, comply with all applicable laws

and regulations. Nix will not condone the activities of employees who achieve results through violation of the law or unethical business dealings. This includes any payments for illegal acts, indirect contributions, rebates, and bribery. The company does not permit any activity that fails to stand the closest possible public scrutiny. Nix has developed a workplace code of conduct that the company, its employees, and its suppliers will voluntarily adopt and abide which includes:

â&#x20AC;˘ The prohibition of child labor

â&#x20AC;˘ The prohibition of forced labor

130

N I X S OURC I NG GU I DE L I NE S MANAGEMENT SYSTEM: The

factory

will

have

publicly

available

policy

dedicated

social

accountability and compliance with applicable laws and other requirements.

The factory is to operate in full compliance with the laws of their respective

countries and with all relevant laws, rules, and regulations, including those c

oncerning labor, worker health and safety and the environment.

all areas of the facilities and to all related records at all times, whether or not

advance notice has been provided.

The factory will allow the Social Compliance Officer unrestricted access to

CHILD LABOR: No person shall be employed at an age younger than 15 or under the age for completion of compulsory education or country legal working age, whichever is higher. FORCED LABOR: There of

shall prison

not labor,

any

use

indentured

forced

labor,

bonded

whether labor

in or

the

form

otherwise.

HARASSMENT OR ABUSE: Every employee shall be treated with respect. No employee shall be subject to

any

physical,

sexual,

psychological

verbal

harassment

abuse.

DISCRIMINATION: No person shall be subject to any discrimination in employment, including hiring, salary, benefits, advancement, discipline, termination or retirement, on the basis of gender, race, religion, age, disability, sexual orientation, nationality, political opinion, or social or ethnic origin. WAGES & BENEFITS: Employers shall ensure that wages paid for a standard working week shall meet at least the legal or local industry minimum standards, which ever is greater and shall always be

131

HEALTH & SAFETY: Employers shall provide a safe and healthy working environment to avoid accidents and injury to health arising out of, linked with, or occurring in the course of work or as a result of the operation of employer facilities. The factory shall appoint a senior management representative who is responsible for the health and safety of all personnel and is responsible for the implementation of the health and safety elements of this standard. CUSTOMERS: To continue to succeed, we need to win and retain customers by building partnerships with them. Supply products and services that offer consumers good value in terms of price, quality, performance, style, safety and environmental impact. Ensure that any quality or performance problems that occur in our products are dealt with expeditiously with the minimum inconvenience to our customers and consumers. EMPLOYEES: Manage people with consideration and respect t, providing feedback on their performance. Not ask any employee to do anything that is illegal or immoral or that fails to comply with the standards of any recognized professional body of which he or she is a member. Encourage employees to speak up about any instances of wrongdoing or breaches of this Code that they become aware of. ENVIRONMENT: Nix requires all supplier factories and their subcontractors to comply with all local and international laws regarding the protection and preservation of the environment. Our supplier audits also verify that factories have obtained all required operating permits to handle hazardous materials and waste. Factories are also required to have waste management systems in place to ensure the proper handling and treatment of wastewater and hazardous materials as well as to prevent any catastrophic release of chemicals in the environment.

132

C A L I F O RN I A S U P P LY C H A I N AC T Overall Information Source: Fair Labor Association

133

O V E R V I E W

On September 30, 2010, the Governor of California signed into law the California

Transparency in Supply Chains Act of 2010 (SB 657), which came into full effect in January 2012. The Act acts as a disclosure law to require companies that meet certain threshold requirements disclose their efforts in the hopes of eradicating slavery and human trafficking from their supply chains.

Ultimately, the Act aims to educate consumers in California and provide them with a tool

for leveraging their purchasing power to directly combat these global issues. By compelling companies to publicly disclose supply chain information, consumers can then decide from which company they wish to buy or do business. Since no guidelines concerning compliance with this Act

â&#x20AC;&#x153;

have been instituted by the State of California, there is no guarantee that a particular action will be considered as meeting its requirements. The Act currently applies to every active Californian retail seller and manufacturer that has annual worldwide gross receipts that exceed $100 million.

R E Q U I R E M E N T S

O F

T H E

A C T

Beginning January 1, 2012, the Act requires every retailer and manufacturer covered by the Act to: Disclose its efforts to eradicate slavery and human trafficking from its supply chain. Include in the disclosure the extent, if any, to which the company: - Uses third-party verification to evaluate and address human trafficking and slavery risks in product supply chains - Conducts independent, unannounced audits of suppliers to ensure compliance with company standards on trafficking slavery - Requires direct suppliers to certify that materials incorporated into the product comply with the laws regarding slavery and human trafficking of the country or countries in which they are doing business - Maintains internal accountability for employees and contractors failing to meet company standards on slavery and trafficking - Provides company employees and management training on mitigating risks of slavery and trafficking in supply chains

Post the disclosure on the companyâ&#x20AC;&#x2122;s website and provide it to consumers in writing upon request. A company covered by the Act that is not in compliance with the disclosure requirement as of January 1, 2012, may be subject to a remedial injunction from the Attorney General of California

POTENTIAL M A N U FA C T U RE R S

136

G A RME N T S U P P L I E R

P T PA N B RO T H E R S T B K

137 E STABL I SHE D 1980 WE BSI TE www.panbrotherstbk.com FACTORY LOCAT I ON Boyolali MAJ OR PRODUCTS / AREAS OF EXPE RT I SE Cut & sewn knits Polo Shirt / golf shirt Track Suit Wovens Light weight jacket Casual Pants NOTABLE CUSTOME RS Calvin Klein Nautica Marks & Spencer Abercrombie & FItch Macy’s JC Penny Quicksilver J. Crew LEAD T I ME S Around 2 months CAPAC I T Y 1,150,000 pieces per month STAFF 3,500 workers MACH I NE S 2,000 pieces

C O M PA N Y P H I L O S P H Y Pan Brothers and its complementary subsidiaries together form one of Indonesia’s leading textile and apparel groups by focusing on providing customers with value added services and products to help grow their business. Each affiliate company strives to stay at the forefront of their respective industries be it in the latest fabrics or garment production techniques while regularly communicating with its sister companies to anticipate customer needs and predict new trends in the textile and apparel industry. The group’s strength is found in synergised collaboration throughout the supply chain which facilitates innovation and creativity by removing any supply related restrictions. This means that Pan Brothers and its subsidiaries can really work in partnership with its customers to achieve their product vision and brand aspirations. Clients are able to engage with the entire production process thereby creating intimate customer relationships that go beyond the realm of commercial transactions to that of strategic partnerships and shared supply chain management.

ME MBE RSH I PS & A C C R E D I T AT I O N S

138

G A RME N T S U P P L I E R

PT PANCAPRI MA EKABROTHE RS

139 E STABL I SHE D 1990 WE BSI TE www.pancaprima.com FACTORY LOCAT I ON Tangerang

C O M PA N Y D E S P R I P T I O N PT Pancaprima Ekabrothers as a subsidiary company of Pan Brothers Tbk, has over 20 years of experience in the production of jackets and outerwear for

MAJ OR PRODUCTS / AREAS OF EXPE RT I SE Technical & functional Active wear Snowboarding Ski outer wear Jogging Hiking Others sport activities. NOTABLE CUSTOME RS Nike Adidas Salomon The North Face Hugo Boss Stella LEAD T I ME S 3-4 months

international export markets. With state of the art production facilities in Tangerang, Sukabumi and Boyolali in Central Java; the company has a combined annual capacity of no less than 15 million pieces. The product range offers a diverse outerwear range made up of light and heavy woven jackets and coats as well as ski wear, tracksuits and cargo pants for both fashion brands and activewear. Customers can select from a variety of highly durable and resistant fabrics that offer waterproof and breathable properties depending on the client specification. A full selection of insulation options are also available to suit the function of the garment including down and microfiber. All embroidery and branding requirements are also taken care of as well as pattern design and size grading through an on-site computerised system. Long lasting and breathable garments that offer

CAPAC I T Y 350.000 pieces per month STAFF 4,300 workers MACH I NE S 2.650 pieces

wearability and full protection against the elements

140

G A RME N T S U P P L I E R

H O L L I T I N T E R N AT I O N A L

141 E STABL I SHE D 1990

C O M PA N Y P H I L O S P H Y M I SSION To provide value added and dynamic integrated

WE BSI TE http://www.hollit.com/ FACTORY LOCAT I ON Jakarta (13 units)

services from design to production for the world’s leading fashion companies. To provide value for our stakeholders and to be an employer of choice.

MAJ OR PRODUCTS / AREAS OF EXPE RT I SE Product Development Trend Development Cut and sen knits Wovens Light & heavy weight jackets NOTABLE CUSTOME RS Armani Jeans Tommy Hilfiger Guess Inc. The North Face O’Neill Brooks Brothers Calvin Klein Jeans Prada LEAD T I ME S 5 months

V I SI ON To be a point of reference in the global fashion industry which is recognized through our five core reputational pillars of: Value; Innovation; Customer Satisfaction; Supply Chain Management and Strategic Partnership. VALUE S Authentic Inspiring Service minded Entrepreneurial Passionate

C O M M U N A L E F F O RT S LOCAL ORPHAN BREAKFAST

CAPAC I T Y 42,000,000 pieces per month (for all 13 units) TEAM SI ZE 175 people

During the last Ramadan period (the Muslim’s fasting month), the staff and management of Hollit organized a breaking of fast event in an orphanage near the office. Donations were collected from all staff to be given to the orphans. All staff contributed in different ways to make the event successful.

MACH I NE S 13,250 pieces (for all 13 units)

The staff members who organized this event are very keen to repeat the activity on regular basis.

142

G A RME N T S U P P L I E R

P T E R AT E X D J AJ A

143 E STABL I SHE D 1972 WE BSI TE www.eratexco.com FACTORY LOCAT I ON Jakarta

C O M PA N Y P H I L O S P H Y M I SSION “We will excell in design, development, and sourcing, to deliver the right products and services competitively with a focus on quick response”. V I SI ON “To be the leading integrated solution providers in

MAJ OR PRODUCTS / AREAS OF EXPE RT I SE Spinning & Weaving Textile Finishing Bottoms Knits Wovens NOTABLE CUSTOME RS Target Reebok Polo Ralph Lauren Billabong Levi’s Nautica Express Banana Republic VANS LEAD T I ME S 3 months

the world of lifestyle and fashion”. VALUE S Integrity Strive for Excellence Teamwork Proactiveness Result Oriented

E T H I C A L E F F O RT S ENV I ROMENTAL The air washer plants constantly feed clean air to the mill. The water treatment plan returns clean water into the river. E DUCAT ION Our goal is to provide continuous education of our

CAPAC I T Y 2,100,000 pieces per month STAFF 4,500 workers

associates to upgrade their skills and knowledge. We believe in equal opportunities for all. SAFE T Y & HEALTH Eratex is in total compliance with occupational

MACH I NE S 2,300 pieces

health & safety standard, compensation, work hours and benefits for our associates.

144

G A RME N T S U P P L I E R

P T O PE LON GARME N T I N D ON E S I A

A P P RO V E D BY WA L M A RT ' S C O D E O F C O N D U C T AU D I T

Table Source: Walmart.com

145

T E X T I L E FA C T O RY PT Opelon is an integrated supplier, offering an established textile factory in addition to E STABL ISHE D 1992 WE BSI TE www.opelongarment.com FACTORY LOCAT I ON Bandung MAJ OR PRODUCTS / AREAS OF EXPE RT I SE Swimwear Fitnesswear Knits

its garment factory. Located in Bandung, the factory is roughly 20,000 square meters and employs around 400 workers. This textile division manufactures various types of knitted fabrics, especially those with spandex content. It also specializes in knit textiles such as two way tricot, mesh, powernet, and satinet fabrics. The factory houses 70 circular knitting machines, 8 raschel machines, and a complete dye house.

NOTABLE CUSTOME RS Guess Walmart Sears Kohlâ&#x20AC;&#x2122;s JC Penny LEAD T I ME S 1-2 months CAPAC I T Y 120,000 pieces per month STAFF 350 workers

MACH I NE S & E QU I P ME N T SAMPLE ROOM Gerber and Optitex CAD System CUT T ING ROOM AUTO-CAM (Automatic Cutting Machine) SE WI NG L INE S Equipped with the Unit Production System (Hanger System and automic sewing machines)

146

TEXT I LE SUPPL I E R

P T O C E A N A S I A I N D U S T RY

147 E STABL I SHE D 2012 WE BSI TE www.oceanasia.co.id FACTORY LOCAT I ON Serang MAJ OR PRODUCTS / AREAS OF EXPE RT I SE Textile manufacture Dyeing & printing Knits Textile finishing Knitting NOTABLE CUSTOME RS H&M Quicksilver Gap Inc. Belk Next Puma Macyâ&#x20AC;&#x2122;s Calvin Klein LEAD T I ME S 1-3 months CAPAC I T Y 1.2 million tons (knitting) 400,000 pounds (yarn dyeing) 1.5 million tons (dyeing) 350,000 yards (printing) MACH I NE S Over 130 pieces

MISSION To be the preferred supplier of Weft Knitted Fabric in the region, and to have a highly motivated effective & efficient work force to ensure that we surpass all expectations of our customers with the best value & service; thereby providing optimum returns to society and the environment.

E C O - F R I E N D LY E F F O RT S

COST SHEET

150

"LUCINE" TARGET RETAIL PRICE

$200.00 COST

$6.29 GROSS MARGIN

96.86% B R E A K D O W N

151

NIX SWIMWEAR

Alison Wild

COST SHEET Style # Style Name Description

Season SS15 Date: April 4, 2014

#NX129 Lucine Rash Guard Two-Piece

FABRICS

$/yard*

Yield**

Total ($)

Fabric 1

Neoprene

2.44

0.281

0.69

Fabric 2

Mesh

0.55

0.196

0.11

Fabric 3

Nylon Spandex

8.00

0.17

$ $

1.34 2.14

TOTAL FABRIC COST

COMPONENTS

# of Units per garment

Bottom Size Label

Total $/unit

Total ($)

Quantity**

S Hook

1 1

$ $

0.10 0.07

1.01 1.01

$ $

0.101 0.07

Thread

0.002

0.028

Clear Care label

0.026

2.02

$ $

0.053 0.252

TOTAL COMPONENT COSTS

PACKAGING

$/unit

Quantity

Total ($)

Clear Plastic Hangtag

0.045

1.01

0.05

Recycled Paper Hagtag

0.030

1.01

0.030

String Toggle

0.010

1.01

0.010

Hygiene Label

0.030

1.01

0.03

Vinyl Zip Pouch

0.81

1.01

0.82

0.93

TOTAL PACKAGING COSTS

PACKING Cartons Tape Labels

23x15x17

$ $ $

$/unit 1.94 0.019 0.06

Quantity 81 2 0

Total ($) $ 0.024 $ 0.04 $ 0.06

TOTAL PACKING COSTS

LABOR

Minutes

Patternmaking Grading Marking Cutting Sewing Admin

TOTAL LABOR

OTHER Freight Duty Insurance Broker

Cost/ min

0.08

Total ($) $ 0.014 $ 0.014 $ 0.014 $ 0.14 $ 1.36 $ 0.500 $

Container $ 2,995.20

Units/ Cont 37,500

0.12

2.037

Duty Rate Total ($) $ 0.080 7.5% $ 0.419 $ 0.29 $ 0.0220

TOTAL OTHER

$ 0.811

GRAND COST TOTAL

$ 6.29

1% 1% 1% 10%

I M P O RTAT I ON

NO I TATR O P M I

CLAS SIFICATION

LOGISTIC S

REQUIREMENTS

C L A S S I F I C AT I O N

156 Harmonized Tariff Schedule of the United States (2014) XI 62-74 Heading/ Stat. Subheading Suffix

6211

Annotated for Statistical Reporting Purposes

Article Description

Unit of Quantity

General

Track suits, ski-suits and swimwear; other garments: Swimwear: Men's or boys': Of man-made fibers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.8%

6211.11 6211.11.10

10 20 6211.11.40 00

6211.11.80

Men's (659). . . . . . . . . . . . . . . . . . . . . . . . . . . doz. kg Boys' (659). . . . . . . . . . . . . . . . . . . . . . . . . . . doz. kg Containing 70 percent or more by weight of silk or silk waste (759). . . . . . . . . . . . . . . . . . . . . . . . . doz... . . . . 4% kg

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5%

10 20 40 6211.12 6211.12.10

10 20 6211.12.40 00

6211.12.80

Of cotton: Men's (359). . . . . . . . . . . . . . . . . . . . . . . . doz. kg Boys' (359). . . . . . . . . . . . . . . . . . . . . . . . doz. kg Other (859). . . . . . . . . . . . . . . . . . . . . . . . . . . doz. kg Women's or girls': Of man-made fibers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.8%

Women's (659). . . . . . . . . . . . . . . . . . . . . . . . doz. kg Girls' (659).. . . . . . . . . . . . . . . . . . . . . . . . . . . doz. kg Containing 70 percent or more by weight of silk or silk waste (759). . . . . . . . . . . . . . . . . . . . . . . . . doz... . . . . 1.2% kg

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5%

10 20 30

Of cotton: Women's (359). . . . . . . . . . . . . . . . . . . . . doz. kg Girls' (359). . . . . . . . . . . . . . . . . . . . . . . . doz. kg Other (859). . . . . . . . . . . . . . . . . . . . . . . . . . . doz. kg

Rates of Duty

Special

Free (BH,CA, CL,CO,IL,JO,KR, MA,MX,OM,P, PA,PE,SG) 8% (AU)

90%

Free (BH,CA, CL,CO,E,IL,JO, KR,MA,MX,OM, P,PA,PE,SG) 3.6% (AU)

37.5%

Free (BH,CA, CL,CO,E*,IL,JO, KR,MA,MX,OM, P,PA,PE,SG) 6.7% (AU)

37.5%

Free (BH,CA, CL,CO,IL,JO,KR, MA,MX,OM,P, PA,PE,SG) 8% (AU)

90%

Free (AU,BH,CA, CL,CO,E,IL,JO, KR,MA,MX,OM, P,PA,PE,SG)

37.5%

Free (BH,CA, CL,CO,E*,IL,JO, KR,MA,MX,OM, P,PA,PE,SG) 6.7% (AU)

37.5%

157

D U T I E S

Since Indonesia is not currently involved in any trade agreements with the

United States, some sort of duty will be imposed. Every product being imported into the US needs to be classified under the Harmonized Tariff Schedule, and a tariff for such will most likely will be determined upon the its classification.

C L A S S I F I C AT I O N

W O ME N ' S N E O P RE N E S W I M W E A R

6211.12.8030 M F N

I M P O RT

A D D I T I O N A L

D U T Y

D U T I E S

R AT E =

T A X E S =

M E RC H A N D I S E P RO C E S S I N G F E E M F P â&#x20AC;&#x153;MFP is charged on formal and informal entries: - MPF on informal entries is either US$2, US$6, or US$9 per shipment, depending on whether the entry release is manual or automated, and whether it is prepared by CBP personnel. - MPF on formal entries (for imports of goods valued over US$2500) is set at 0.3464% of the value of the goods with a minimum charge of US$25 and a maximum of US$485.â&#x20AC;? (Duty Calculator)

LOG I ST I CS

160

O V E R V I E W

Indonesia’s transport system is comprised of a variety of modes that all work complementary

together. The predominant mode, road transport, accounts for roughly 70 percent of freight ton-km and 82 percent of passenger km. Four unconnected railway networks are responsible mostly for bulk commodity transport and long-distance passenger traffic. Since Indonesia is an archipelago nation and comprised on many small islands, sea transport is a vital part of the economy, in both foreign and domestic trade. The sea mode of transportation is highly developed, as it should be, with a significant port city on each major island. Air transport is also well-established, most strategically utilized in particular places throughout the country where land or water transport is non-existent or scarce. In addition, it is based upon an extensive domestic network where all major Indonesian cities can be reached by passenger plane.

P O R T O F D E P A R T U R E

PORTS

RE C O M M E N D E D F O R N I X S W I M W E A R

T A N J U N G

P R I O K

P O R T

As Indonesia’s main port located in North Jakarta, Tanjung Priok handles

two-thirds of all of the country’s international trade and container traffic is expected to grow by over 160 percent by 2015. Considered one of the largest seaports in Indonesia, Tanjung Priok offers a coastal breakwater harbor with good holding grounds and turning areas. It offers all the necessary supplies, such as provisions, fuel oil, water, and diesel oil, and a major ship repair service.

P O R T

O F

S A N

F R A N C I S C O

The Port of San Francisco currently stands as a crossroads of rich San

P O R T O F E N R T Y

Francisco history with its combined efforts in maritime operations, environment and historic preservation, and public recreation. The port is currently an established and operational Foreign Trade Zone, which offers a number of benefits to importers within the US. Several harbor and cargo facilities located near the port’s terminals offers easy access to services like heavy-lift cranes, tug and barge companies, ship repair, and warehousing. With five deep water berths, break-bulk and container lifting cranes, 145 acres of paved cargo staging, and over 550,000 square feet of covered storage, the Port of San Francisco will meet all expectations for importing costs and services.

161

I DE A L

ROU TE

J A K A R T A M A N U C A T U R E R T A N J U N G P R I O K P O R T P O R T O F S A N F R A N C I S C O S A N T A C R U Z , C A

T O T A L T R A N S I T T I M E : 2 2 DAY S & 2 0 H O U R S

Map Source: SeaRates

162

S H I P P I N G C M A

L I N E S

C G M

O V E R V I E W

Founded by Jacques Saade in 1978, the CMA

CGM Group is the largest container shipping company in France and the third-largest in the word. With 650 offices worldwide, 400 ports of call in 150 countries, 170 shipping lines, and fleet of 428 vessels, the Group hit $15.9 billion in revenue in 2013. They put a great deal of effort into remaining on the cutting edge of services offered and have built their success upon resilient values of quality, anticipation, innovation, and imagination.

L I N E

F O R

I N D O N E S I A

FAS JAKARTA INDONESIA FEEDER Frequency: Weekly Vessel Fleet: 1 Ports of Call: 4 Duration: 7 Days M A P

O F

J A K ARTA

I N D ON E S I A

F E E DE R

163

M S C O V E R V I E W

The Mediterranean Shipping Company (MSC) is a privately-owned shipping line from Geneva,

Switzerland founded in 1970. From small beginnings as a conventional ship operator, MSC has expanded its business to the leading global freight corporation that it is today. Its massive maritime fleet positions the company as the second-largest carrier in terms of container slot capacity and number of operational container vessels. MSC prides itself on serving clients as an independent carrier, which allows them to respond and solve any and all issues in a prompt and efficient manner. They currently operate 447 container vessels and continue to work towards maintaining their status as a leading cost effective and customer-centric global transportation solution.

In this vein, they are one of the few carries to offer worldwide coverage under one MSC bill of lading.

With this advantage, swifter connections and more effective on-carriage services are a result as goods are being moved at a much more rapid pace through predetermined transshipment hubs. MSC boasts 200 direct and combined weekly liner services through services on six continents and calling at 316 ports.

B R O A D

L O O K

A T

I T S

R O U T E S

164

H A PA G - L LOY D O V E R V I E W

After acquiring CP Ships in 2005, the Hapag-Lloud Group became one of the top five shipping

companies in the world. With approximately 330 sales offices in 114 countries, this Hamburg-based company networks a fleet of more than 150 modern ships through an advanced IT system, making the firm an industry leader in transport innovation. In the efforts to become more sustainable, Hapag-Lloyd established an integrated Quality and Environmental Management System, in which the management system currently covers all happenings within the international door-to-door transport chain.

E X A M P L E

O F

S H I P P I N G

S C H E D U L E

165

F RE I G H T

C OM PA N I E S

K H R I S N A

C A RG O

O V E R V I E W â&#x20AC;&#x153;Khrisna Cargo is a visualization of world-class freight forwarding company which aims of providing high quality handling and shipping services. With 18 years of experience in the cargo industry and good track record in providing service of excellence, Khrisna Cargo has assisted various clients both businesses and individuals for their handling and shipping requirements.â&#x20AC;?

E STABL I SHE D 1991 WE BSI TE www.kic.co.id HEADQUARTE RS Bali OFF I CE S IN Surabaya Yodyakarta SE RV I CE S Air Freight Sea Freight Customs Clearance Container Trucking Local Handling Document Services Supply Chain Transshipment

E X A M P L E O F O C E A N F RE I G H T S C H E D U L E TO O L

166

D S V - I N D O N E S I A O V E R V I E W â&#x20AC;&#x153;PT DFDS Transport Indonesia was established in 1982. Since then we have opened branch offices in Surabaya, Bali and Semarang and most recently our bonded warehouse in Jakarta Airport. The five offices in Indonesia are strategically located in the main cargo source areas of Indonesia. From these stations import and export shipments can be coordinated to and from almost the entire country. Whether the shipment is being forwarded by sea or by air, our customers can be confident

that

our

staff

will

handle

their

shipments

professionally.

Regular

training

courses keep our staff up to date with new rules and regulations of the trade at all times.â&#x20AC;?

E STABL I SHE D 1982 WE BSI TE www.dsv.com HEADQUARTE RS Jakarta OFF I CE S IN Semarang Surabaya Bali SE RV I CE S Air freight Sea freight Logistics solutions Project transport Customs clearance Cargo insurance

167

M E K A R

C A RG O

O V E R V I E W â&#x20AC;&#x153;With all the activities as mentioned before, PT Mekar Cargo is not only known as a well-established freight forwarder in Indonesia, but we can also inform our customers that we are one of the few independent Indonesian Freight Forwarders able to render complete freight and logistics services. With its head office in Jakarta, PT Mekar Cargo has an excellent professional reputation due to its flexibility and serviceability. Having its agency network throughout the world PT Mekar Cargo is represented in all the main areas in the dynamic world of shipping and logistics.â&#x20AC;?

E STABL ISHE D 1992 WE BSI TE www.mekarcargo.com HEADQUARTE RS Jakarta OFF I CE S IN Surabaya Yogyakarta Bandung Semarang Solo Bali SE RV I CE S Sea Freight Services Air Freight Services Custom Brokerage Logistics Project Transportation Brokerage and Chartering

I M P O RT & E X P O RT RE QU I RE ME N T S

170

I N D ON E S I A E X P O RT RE QU I RE ME N T S

â&#x20AC;&#x153; â&#x20AC;&#x153; e x p o r t i n g a S T A N DA R D C O N T A I N E R o f g o o d s r e q u i r e s 4 D O C U M E N T S , t a k e s 1 7 DAY S a n d C O S T S $ 6 1 5 . - D O I N G

B U S I N E S S

E X P O R T

D U T Y

Duties placed upon exports ultimately provide for national needs, protecting natural

resources, anticipating the significantly rising flow of exports in the global market, and preserving

the stability of local market prices of certain commodities. These duties are calculated based upon the export duty tariff and corresponding HS number, with the maximum duty at 60 percent of an export price. Current products with export taxes include processed metal minerals, crude palm oil, wood, and leather. The export of taxable goods from Indonesia is also subject to 0% VAT

(value-added tax). There are no export duties currently required for the exportation of swimwear.

G E N E R A L

P R O C E D U R E

The exporting company, or manufacturer in this case, must prepare a

common Export Declaration Form (PEB, Pemberitahuan Ekspor Barang) to the relevant Customs Office upon exportation, which is a declaration of the products to be exported. This should also be supplemented by supporting commercial and freight documents like a commercial invoice, packing list, and bill of lading.

171

W O R L D B A N K I N D I C AT O RS I N D O N E S I A T R A D E FAC I L I TAT I O N ( 2 0 1 4 )

W O R L D B A N K I N D I C AT O RS C O U N T RY S C O RE C A R D ( 2 0 1 4 )

D O C U ME N T S + +

B I LL

PE B

L AD ING

COMME RC IAL +

PACKING

(EXPORT

N E E DE D +

INVOI CE L IST

DECL ARAT ION

FORM)

172

U S I M P O RT RE QU I RE ME N T S G E N E R A L

P R O C E D U R E

Importing through US customs involves the filing of both product release documents as

well as duty assessment documents. After these documents are presented, customs officials will determine if further examination of the shipment is necessary. This procedure is necessary to assure that no legal or regulatory violations exists within the goods, and then the products will be released. To expedite the process, it is advisable to complete invoices as clear as possible, with the inclusion of a detailed description of the merchandise within each package. In addition, assure that the country of origin is clearly marked and all special merchandise laws have been complied with (most often these apwply to food, drugs, alcohol, and cosmetic imports). The five documents necessary for Indonesian imports into the United States includes: bill of lading, commercial invoice, customs import declaration, delivery order, and packing list.

D O C U ME N T S + + +

B I LL

L AD ING

COMME RC IAL

CUSTOMS +

I MPORT

DEL I VE RY +

N E E DE D

PACKING

INVOI CE

DECL ARAT ION ORDE R L IST

173

F I N A L R E M A R K S

L A N I F S K R A M E R

RISKS

BENEFITS

SWOT

CONCLUSION

RISKS & BENEF I TS

178

S W O T

A N A LY S I S

T R E N G T H S Garment & textile industries is vertically integrated, thus all aspects of the supply chain are involved, from the production of raw materials to construction and finishing Apparel & textiles sector is a huge segment of the Indonesian economy, as both a large source for jobs as well as export earnings Strong relationships with major importers and retail corporations

E A K N E S S E S Aging machinery currently used hinders production and drives up energy costs High interest rates Lack of supportive infrastructure Significant dependence on imported cotton for domestic and export needs

P P O R T U N I T I E S Increased global and regional exports through ASEANâ&#x20AC;&#x2122;s evolution into a textile and apparel manufacturing hub New government modernization scheme for the sector Vast local apparel market of roughly 240 million people Elimination of tariffs between ASEAN nations and new ASEAN trade agreement with China

179

H R E A T S Rise in smuggling Additional crowding and competition in the sector with the upsurge of Bangladesh, Sri Lanka, and Vietnam markets Fluctuation of the rupiah causing limitations for majority cash-onhand enterprises Increasing international technical and trade barriers

W H AT

I T

ME A N S

FO R

N I X

One major strength noted by the analysis and in other parts of the report

highlight Indonesiaâ&#x20AC;&#x2122;s successful vertically integrated supply chain. A number of garment manufacturers profiled have textile factory subsidiaries or partners that could be a great and convenient sources for our unique fabrics. Since our suits are majority made of neoprene, a synthetic manmade fiber, our product category helps us evade the higher rates and duties usually expected for Indonesianâ&#x20AC;&#x2122;s apparel sector due the use of either natural or imported resources. However, the obsolete production machinery might not be able to keep up with demand and fulfill our needs on time, as we will be consistently trying to utilize the latest innovations in fabric and construction techniques to further enhance our products for a specific active use.

180

181

The ultimate purpose of this profile

With the combination of these insights

and analysis was to extensively asses all

and research on the current state of the textile

element country and evaluate if the country

and apparel industry, an evaluation can be

would be a viable option for a global sourcing

made on the opportunities presented for apparel

strategy. A thorough PESTLE analysis gave

manufacturing, namely swimwear, in Indonesia.

a number of insights into Indonesia current

In fact, the underwear, nightwear, and swimwear

socio-economic-political

and

divisions of garment production in Indonesia

climate by assessing current strengths and

has performed rather impressively in recent

challenges as well as future prospects and risks.

years. This success was not driven by affordable

landscape

pricing as one might expect, but rather 1. Despite a successful transition in a

increases in popularity and value share as major

democratic system of government, the

conglomerates expanded their private-label

country still faces issues with corruption that

brands to include these apparel categories.

require further attention 2. While Indonesia’s strong banking sector

In the end, Indonesia holds a number

is both well-capitalized and profitable, the

of significant advantages for foreign investors,

nation’s economy remains susceptible to

especially those seeking cheaper alternatives to

external shocks as a result of a widening

China’s rising wages. Low labor costs, political

current account deficit

stability, availability of raw materials and

3. A universal protection plan in the works will

cheap industrial land all make an attractive

improve the country’s social outcomes and

and convincing case for the Indonesian market.

performance in the overall social landscape

Yet, remaining infrastructure issues and lack of

4. Large amounts of software piracy pose

energy supply in the textile production sector,

a threat to Indonesia’s advancement in

pose risks that are certainly as cause for further

technological innovation in sophistication

discussion. Plus, the nation’s main weakness in

5. Red taping is an ongoing challenge as the

expanding export market share in apparel is its

government begins to ease FDI restrictions

relative slowness when it comes to adapting to

in major sectors

new styles in the fashion industry, like swimwear.

6. Deforestation could pose detrimental to Indonesia’s rich and beneficial biodiversity

Still, in looking at both hard data and personal gained insights, I b e l i eve t h a t I n d o n e s i a’s i n c r e a s i n g l y r o b u s t e c o n o m y a s we l l s u p p l i e r s’ r i s i n g i n t e r e s t s i n i n n ova t i o n a n d f a s h i o n t r e n d s m a ke s s w i m we a r a p a r t i c u l a r l y i n t r i g u i n g s o u r c i n g ve n t u r e .

A P P E N D I X

X I D N E P P A

184

C O U N T RY T R A I T S

185

SOCIAL

POL I T ICAL

ECONOM IC

186

S U M M A R Y

A country not just diverse in landscape, Indonesia’s

culture is also both vast and unique. With a total population predicted to hit 253,609,643 by July 2014, the country currently

ranks at number five in the highest country populations densities in the world. This population is relatively young, with 21.7% of inhabitants aged between 0-14 years of age and 66.5% aged between 15-64 years putting the median age at 29.2. In 2013, research pin the average life expectancy at 71.9 years for the

total population, with 69.33 years for men and 74.59 for women.

Developed communities range from rural areas of hunter-

gatherers to urbanized city centers filled with the modern elite. As of 2012, 44.9% of the overall population lived in these urban areas and the rate of urbanization is estimated around 2.45% in

terms of an annual rate of change for 2010 to 2015. The idea of a traditional family unit remains important for most societies as well as a collective philosophy of the group over the individual, whether the group may be one’s family, village, or island.

While Indonesian, English, and Dutch are the primary

languages spoken, over 300 different regional languages exist in Indonesia. The official language, Indonesian or ‘Bahasa Indonesian’ is a standardized dialect of the Malay language established around the time of the country’s independence in 1945. The country is currently home to the world’s largest Muslim-

majority nation, as it makes up 87.2% of the overall religion breakdown, with Christian Protestant falling in second at 7%.

187

251.16 million T O T A L

P O P U L A T I O N J U L Y

A G E

1 2 9 6

POPUL AT ION (IN M I LL IONS)

E S T .

S T R U C T U R E 100+ 95 - 99 90 - 94 85 - 89 80 - 84 75 - 79 60 - 74 65 - 69 60 - 64 55 - 59 50 - 54 45 - 49 40 - 44 35 - 39 30 - 34 25 - 29 20 - 24 15 - 19 10 - 14 5-9 0-4

M A L E

3 0 AGE GROUP

F E M A L E

0 3

6 9

1 2 1 5

POPUL AT ION (IN M I LL IONS)

R E L I G I O N MUSLIM

8 7. 2 %

CHRISTIAN

ROMAN CATHOLIC

2.9%

HINDU

1.7%

OTHER

0.9%

UNSPECIFIED

0 . 4%

Age Structure Graph Source: CIA World Factbook

188

O F F I C I A L

L A N G U A G E

BAHASA INDONESIAN E T H N I C

G R O U P S

"UN I T Y I N D I VE RSI T Y" " B H I N N E K A

T U N G G A L

C O U N T R Y

M O T T O

I K A "

189

As previously mentioned, Indonesia is a very

ethnically diverse country, with 15 primary ethnic groups and over 300 total groups composing the culture makeup. Javanese, an ethic group native to the Indonesia island of Java, makes up the largest ethnic sector at 40.1% of the total population, or over 100 million people. Javanese people primarily inhabit the center and eastern parts of the island while the Sundanese occupy most of the western side. Majority of the Javanese people practice a moderate form of Islam and speak Javanese, a regional variation in Austronesian family of languages, which runs somewhat similar to the other primary Indonesian languages.

While Indonesian is technically the official

language, most people speak their regional language, like Javanese, when in more informal environments, such as in the home or local community. The Indonesian language is used in more professional environments, like work or school. As previously mentioned, aside from the Javanese and Sundanese, a huge variety of other smaller ethnic groups make up the cultural diversity of the country and are spread out amongst the many Indonesian islands. In fact, most citizens will actually associate and define themselves locally before nationally, putting great emphasis upon their own ethic group, family, and place of birth. In fact, the government focuses a great deal of attention on the various ethnic groups to maintain a sense of cohesion and unity within the country. In addition to their national motto “Unity in Diversity”, a national philosophy known as “Pancasila” has been adopted that stresses the importance of universal justice for all Indonesians, regardless of ethnicity.

190

P O

S U M M A R Y

The Republic of Indonesia, as it is fully titled, is a

stable democratic country with the executive, legislative, and judicial administrative powers all equally shared. Since declaring their Independence from Japan on

August 17th 1945, and instigating a Constitution, their Constitution has been amended several times, the last in 2002. By direct vote of the population, presidents and vice presidents are elected for five-year terms with the

possibility for a second term if eligible. These elections are considered both just and transparent, despite the strong democratic values that tend to dictate the government. Similar to other countries, the president,

with an appointed cabinet, is seen in Indonesia and a top political figure, with the full authority to direct the administration of the government. The political parties currently in existence include the most popular Democrat

Party (PD), the Functional Groups Party (GOLKAR), and the Indonesia Democratic Party Struggle (PDI-P).

The judicial branch involves the Supreme

Court, or Mahkamah Agung, made up of 51 judges divided into eight different chambers, and the Constitutional Court, currently consisting of nine judges. Supreme Court judges are selected through

a nomination process by Judicial Commission, and then appointed by agreement between the president and parliament. On the other hand, the Constitutional Court judges are nominated in threes: three by the

president, three by the Supreme Court, and three by parliament. All judges can serve until retirement age.

191 The Indonesian government also currently includes two elected legislative assemblies, the Peopleâ&#x20AC;&#x2122;s Representative Council (DPR), similar to the House of Representatives, and the Regional Representative Council (DPD), which make up the Peopleâ&#x20AC;&#x2122;s Consultative Assembly (MPR). The MPR is responsible for duties like amending the constitution and inaugurating and impeaching the president. It does not, however, have the power to actually formulate policy or legislation. The DPR, whose members are elected to serve five year terms, creates and passes national legislation while the DPD provides input to the DPR on certain regional issues. Four members from each of the original 33 Indonesian provinces are elected to the DPD.

P E O P L E ' S C O N S U LT AT I V E A S S E M B LY (MPR)

REG I ONAL REPRE SENTAT I VE COUNCI L (DPD) 132 MEMBE RS

PEOPLE'S REPRE SEN TAT I VE COUNC I L (DPR) 5 60 SEATS

192 C H I E F

O F

S T A T E

HEAD

GOVE RNMENT

P R E S I D E N T Y U D H O Y O N O

The current Head of State and Government, President Susilo Bambang Yudhoyono,

along with Vice President Boediono, won the first-ever direct presidential elections on September 20th, 2004 and was re-elected by a landslide on July 8th, 2009. President A member of the “Partai Demokrat”, or Democrat Party, Yudhoyono is considered a “marketfriendly reformer” (MarketLine) and has been focusing most of his efforts on economic reforms and policies. During his first term, this once army general led Indonesia peacefully through their first period of transitional power in its history. With high ethical integrity, President Yudhoyono has made strong moves towards eliminating government corruption and fighting terrorism. He also successfully steered Indonesia through an era of financial stability, taking much less of a toll from the global crisis in 2008 compared to its neighboring countries.

193

U S

R E P R E S E N T A T I O N

Designated Ambassador and chief of mission Robert O. Black has been the current

diplomatic representation from the United States since November 2013. The embassy is currently located in Indonesiaâ&#x20AC;&#x2122;s capital city, Jakarta. The ambassador position for representation in the United stated is currently vacant, with Budi Bowoleskono in nomination.

T H E D E R I V E D

F L A G

F R O M T H E B A N N E R O F T H E M A J A P A H I T O F T H E 1 3 T H - 1 5 T H C E N T U R I E S

RE D = C OU RAG E

E M P I R E

= PURITY

194

B U R E A U C R A C Y Indonesia, along with India and the Philippines, has the worldâ&#x20AC;&#x2122;s most inefficient bureaucracy according to a survey by the Policy and Economic Research Council (PERC). PERC surveyed over 1,300 expat executives who rated various countries on a scale from one to 10, with 10 being the worst possible score. Indonesia was rated 8.59. Besides slowing down day to day tasks, Indonesiaâ&#x20AC;&#x2122;s bureaucracy also causes problems for expats trying to get entry visas or work permits for Indonesia.

195

F U T U R E O U T L O O K

“Although Indonesia has returned to relative orderliness

since the chaos of the late 1990s and early 2000s, the country faces multiple challenges and threats to its stability that could flare up again if President Susilo Bambang Yudhoyono’s successor proves incompetent or if improved governance fails to take hold. As such, investors will continue to view Indonesia as one of Asia’s riskier destinations.

Indonesia has held two rounds of peaceful parliamentary

and presidential elections, in 2004 and 2009, suggesting that democracy is finally taking root after a highly uncertain period following the fall of President Suharto in May 1998. Suharto seized power from Indonesia’s first president, Sukarno, in 1966 and ruled through a military-dominated authoritarian regime whose political vehicle was the still-influential Golkar party. The immediate post-Suharto period was highly unstable, given that his departure was triggered by economic meltdown. Indonesia subsequently saw the presidency change three times in as many years, and the country was almost torn asunder by separatist rebellions and religious violence, which were only quelled in the early 2000s. Given this recent history, it is still too early to say that Indonesia has taken a decisive turn for the better.” (Business Monitor International Ltd)

196

A R T S

C U L T U R E

“Intertwined with religion and age-old traditions from the time of early

migrants the art and culture of Indonesia is rich in itself with Western thoughts brought by Portuguese traders and Dutch colonists. The art and culture of Indonesia

has been shaped around its hundreds of ethnic groups, each with cultural differences that have shifted over the centuries. Modern-day Indonesian culture is a fusion of cultural aspects from Arabic, Chinese, Malay and European sources. Indonesian art and culture has also been influenced from the ancient trading routes between the Far East and the Middle East leading to many cultural practices being strongly influenced

L T U R E

by a multitude of religions, including Hinduism, Buddhism, Confucianism and Islam.”

M U S I C “Home to hundreds of forms of music, it plays an important role in Indonesia’s art and culture. Traces of its origin can be made to the islands of Java, Sumatra and Bali. ‘Gamelan’ is the traditional music from Central- and East Java and Bali. Another very popular style of music is ‘Dangdut’ which is accompanied with free dance style. This style first came up in the 1970s and is quite useful in political campaigns. Other forms of music include the Keroncong with its roots in Portugal, the soft Sasando music from West Timor and Degung and Angklung from West Java, which is played with bamboo instruments. “

D R A M A & T H E A T R E “The Javanese and Balinese shadow puppet theatre shows ‘wayang kulit’ displaying several mythological events. A traditional folk theatre, Randai of the Minangkabau people of West Sumatra, is performed during ceremonies and festivals. Music, singing, dance, drama and the silat martial art are all incorporated together and are based on the stories of the legend.”

Source: 123 Independence Day

197

D A N C E â&#x20AC;&#x153;The traditional dances depict episodes from the Ramayana and Mahabharata from India. Traditional Javanese and Balinese tinge is also seen in the dance forms of Indonesian art and culture. The highly stylized dances of the courts of Yogyakarta and Surakarta are some of the popular variations. Mythological events of Indonesia are also depicted.â&#x20AC;?

198 T H E N A T I O N A L M O N U M E N T O R ' M O N A S '

P U R A

B E S A K I H

T H E P A K E R I S A N VA L L E Y

T H E

T A M A N AY U N T E M P L E

199

A R C H I T E C T U R E

“Indonesian culture, especially its architecture has been to a great extent

dominated and influenced by the Indian, although European influences have also been particularly strong since the nineteenth century. Traditional buildings in Indonesia are built on stilts with oversized saddle roofs which have been the home of the Batak and the Toraja. The Torajan use the buffalo horns, stacked one above another in front of the house as an indication of status. Scenes from the Ramayana adorn the outer walls in different colors. However, Chinese, Arab, and European architectural influences have also been quite significant in Indonesian architecture.”

A R T

“The arts of Indonesia are many, especially Indonesian paintings which are unique

works of art. The intricate and expressive Balinese paintings are quite famous and often express natural scenes and themes from the traditional dances. A long-standing tradition of sculpture can also be seen in the art and culture of Indonesia, some dating back to the Bronze and Iron Ages. Examples of sculpture illustrating the story of the life of Buddha can be seen in the temples of the 8th and the 10th century. Indonesia’s art and culture is also famous for their unique batik, ikat and songket cloth which is even popular today."

Source: 123 Independence Day

“

200

G R A I N S ,

C U I S I N E ( M E D I T E R R A S I A N . C O M )

V E G E T A B L E S

A N D

F R U I T S

The foundation of an authentic Indonesian meal is rice (nasi). In fact, rice is such an important

part of an Indonesian meal that all other foods served with it are simply seen as an accompaniment. Rice is usually plainly boiled or steamed, or is sometimes cooked with coconut milk and spices. The Indonesian version of fried rice, called Nasi goreng, is another popular way to enjoy rice. Noodles, made from rice or wheat flour, are also used in dishes such as mie goreng (fried noodles) or added to curries. The tropical climate throughout most of Indonesia makes it green and lush, and ideal for growing a wide range of vegetables and fruits. The vegetables most commonly enjoyed include onions, garlic, scallions (spring onions), chili, bell peppers (capsicum), cucumber, shallots, celery, potatoes, tomatoes, cabbage, cauliflower, sweet potatoes and carrots. These vegetables are eaten in curries; used to make soups, salads and flavorsome side dishes; or added to fried rice and noodle dishes. Fruits are typically enjoyed as a dessert and snack, and are sometimes used to add a sweet accent to savory dishes. Popular fruits include bananas, mangoes, papaya, lychees

and

exotic

varieties

such

F I S H

durians,

mangosteens

and

rambutans.

S E A F O O D

Indonesia is made up of over 13,000 islands, so it’s little surprise that fish and shellfish

are eaten regularly. A countless variety of fish are eaten, and popular shellfish include shrimp, scallops, crab, squid, oysters and mussels. Fish and shellfish are enjoyed in many ways: wrapped in banana or pandanus leaves and barbecued or steamed; added to curries, fried rice and noodle dishes; marinated and grilled on skewers; or added to soups and salads. M E A T ,

C H I C K E N

A N D

E G G S

Traditionally red meat is eaten sparingly throughout Indonesia. When beef, lamb or goat

is eaten, it’s often in the form of a curry such as Rendang, or it may be marinated and cooked on skewers. Chicken is eaten regularly and is enjoyed in rice and noodle dishes, curries, and soups (such as the spicy chicken soup Soto Ayam). A popular Indonesian appetizer is chicken satay—marinated chicken pieces grilled on bamboo or wooden skewers and eaten with peanut sauce. Eggs are enjoyed in moderation. Sliced boiled eggs or strips of omelet are often used to garnish rice dishes and salads.

201 L E G U M E S

A N D

N U T S

Legumes (beans, peas and lentils) are used regularly in Indonesian cookery. Bean curd (tofu),

which is made from soy beans is used in a variety of traditional dishes. Tempeh—made from fermented, coagulated soybeans—is also popular. It has a nutty flavor and a firm meaty texture, and it soaks up the flavors of the foods it’s cooked with. Green beans are a popular addition to salads, vegetable dishes and curries. Bean sprouts are also eaten regularly and are commonly added at the last minute to hot dishes for a contrasting crunchiness. Peanuts are typically used as a garnish (either crushed or whole) or ground into a paste and mixed with spices and coconut milk and water to make peanut sauce. This rich sauce is used as a satay dipping sauce or is drizzled over Gado gado (a colorful salad of mixed vegetables with contrasting flavors and textures, garnished with sliced boiled eggs). S E A S O N I N G S

Traditional Indonesian cuisine relies on hot, salty, sweet and sour flavors. Soy sauce and sweet

soy sauce (kecap manis) add richness to hot and cold dishes, and are used in marinades and as a

“

condiment. Trassi (shrimp paste) is a dark brown concoction of salted and fermented shrimp, and is used

to enliven and add depth-of-flavor to food. The fiery heat of chili is an ever-present part of Indonesian

cookery. Chili is either thinly sliced and used fresh, or ground into a paste to make a hot chili sauce such as sambal oelek. Richly-flavored Indonesian curries rely on ground spices such as cumin, coriander and turmeric. These spices are also used in sauces and marinades. Other common seasonings include

garlic, ginger, lemongrass, kaffir lime leaves, basil, cilantro, tamarind, and lemon and lime juice.

202

H I S T O R Y

In the 1970s and 80s, during General

Suharto’s “New Order” rule, technocrats (members of a technical elite), were charged with uplifting the

weak economy and did so with significant success. However, the success was short-lived as the policy failed to solve structural problems and charges of corruption and collusion against Suharto diminished the economy. After the transition to

democracy, the mid-1980s saw the eradication of past regulatory economic impediments. In attempts to stimulate growth and employment outside of the oil exportation, the government strived to improve other external and financial

sectors. The years following saw an average GDP growth of 7% and the recognition of Indonesia as a “newly industrializing economy and emerging major market” (GlobalEdge) by most analysts.

However, the Asian financial crisis took

a sizeable hit on Indonesia’s economy in 1997. Foreign investments dropped due to the currency depreciation

and

inflation

and

Indonesia’s

unemployment rose to around 20%, with the GDP contracting 13.1%. During this time, about 25% of the

population lived in absolute poverty. The aftermath and recovery from the crisis involved a number of strategies, including the government acquisition and selling of private sector assets, recapitalization of its banking sector, and infrastructure growth and investment stimulation. The country has

since been revitalized and still remains one of

the

world’s

major

emerging

economies.

203

T O D AY

T Y P E Indonesia’s current economy system is mixed,

with private freedom and centralized planning

and

collectively

devastation from the financial crisis as

playing a part. The market-based economy

well as the massive earthquake of 2004,

involves

and

Indonesia still places much emphasis on

government administration for the prices of

reviving infrastructure and refining the

standard goods like electricity, fuel, and rice.

monitoring mechanism of capitals markets.

government 141

regulation

state-owned

all

enterprises

Since 2005, following the economic

President Yudhoyono created a National Economic Committee in 2010 that would offer strategic advice for more rapid C U R R E N C Y

INDONESIAN RUPIAH (IDR)

national economic development. In addition, the National Innovation Committee was instituted to advocate a culture of innovation and provide recommendations for increased productivity,

ultimately

accelerating

economic growth. The President then established the ‘Master Plan for the E X C H A N G E

R A T E

10,341.6 2 0 1 3

P E R

U S

E S T .

D O L L A R

Acceleration and Expansion of Indonesia’s Economic Development’ in 2011, with $468.5 billion (4,000 trillion Rp) going towards increasing

infrastructure,

investment

spending, and the level of innovation.

Today, Indonesia’s macroeconomic

picture is stable. The country still suffers from poverty and unemployment struggles, R E S E R V E S O F F O R E I G N E X C H A N G E A N D G O L D 3 1

D E C E M B E R

2 0 1 3

83.45 BILLION Overall Data Source: CIA - The World Factbook

and it continues to make attempts to repair the

insufficient

infrastructure.

Despite

these setbacks, we can expect Indonesia’s economy to continue to thrive in the future, as its large consumer base, abundant natural resources, and political stability attract more and more potential investors.

204

205

I N F L A T I O N

R A T E

The banking system for the nation, known as the Bank of Indonesia, first established

and continues to govern itself under one overachieving objective: maintaining the stability of the Indonesian Rupiah. Within this objective, the bank strives to uphold stability in both a stable rupiah for goods and services that accurately reflects the prevalent inflation rate as well as an exchange rate between other foreign currencies.

In 2007 and 2008, the international fiscal crisis was responsible for driving up the

global energy prices, forcing Indonesian government to raise fuel prices by an average of 29% to diminish its fuel subsidy burden. This situation, combined with rising food prices, shot consumer price inflation up to a peak of 12.1% in September 2008. As the global economy slowly began to revert, Indonesiaâ&#x20AC;&#x2122;s inflation rate also declined, reaching historically record lows. With the current inflation rate rising to around 7.7% for 2013 due to higher fuel and food prices, the rate is expected to grow and remain on the higher end for at least the first half of 2014.

I N F L A T I O N ( F O R

7.7% Data Source: CIA - The World Factbook

C O N S U M E R

2 0 1 3

E S T

R A T E P R I C E S )

4.3%

2 0 1 2

206

207

F U T U R E

O U T L O O K

“Indonesia’s large domestic demand base and exposure to commodities are two key factors driving the strong growth outlook for the next decade. That said, government policy reform will be crucial in deter-mining if the country can reach its real growth potential. Indonesia’s growth prospects look rosy over the long term on account of the country’s large domestic consumption base and wealth of natural resources. Indeed, we are forecast-ing real GDP growth to average 6.3% over the next decade, driven largely by domestic demand. Nevertheless, unlocking Indonesia’s full economic potential will require policy reform success – particularly in the areas of bureaucratic efficiency, corruption and investment promotion – and progress on this front could take place at a slow-to-moderate pace.” (Business Monitor International Ltd)

208

FISCAL POLICIES

209

210

F C U R RE N T S TAT U S ď&#x201A;§

Gross debt accounted for 24.4% of Indonesiaâ&#x20AC;&#x2122;s GDP in 2011,

finally reaching a reasonable level after extreme debt of 95.1% of GDP was recorded in 2000. Prudent fiscal and monetary policies in addition to high economic growth were the driving factors in restructuring and reducing public debt. In 2012, the current account deficit marked a deterioration of 3% of the GDP from the .2% surplus in 2011. In May 2013, S&P switched it viewpoint for the country from positive

to stable, citing stalled reforms and a weakened external scenario.

G D P I N I N D ON E S I A ( 1 9 9 2 - 2012 )

C A L

Graph Source: MarketLine

211

GDP P U R C H A S I N G P O W E R P A R I T Y 2 0 1 3

E S T .

$1.285 T R I L L I O N GDP O F F I C I A L E X C H A N G E R A T E 2 0 1 3

E S T .

$867.5 B I L L I O N GDP

RE A L G ROW T H R ATE 2 0 1 3

5.3% GDP

E S T .

GDP From 2000 to 2012, when the country was flourishing as a newly

industrialized

Indonesiaâ&#x20AC;&#x2122;s

averaged at 5.4%, contrary to the 4.2% rate recorded from of dramatic economic reversal in which the financial crisis caused excessive

E S T .

$5,200 GDP R E A L G R O W T H R A T E

5.3%

E S T .

asset

dumping

foreign investors. By 1998, the GDP had actually contracted by 13.1%. Today, the GDP has been gradually rising due to the countryâ&#x20AC;&#x2122;s

2 0 1 3

growth

1991-1999. The 1990s was a time

PE R CAP I TA (PPP) 2 0 1 3

GDP

economy,

fiscally

conservative

policies, resulting in a debt-toGDP ratio of less than 25%.

G R O S S N A T I O N A L S AV I N G 2 0 1 3

E S T .

31.5%

OF GDP Overall Data Source: CIA - The World Factbook *Note: data is in 2013 US dollars

212

INDUSTRI E S COMPOSIT ION

Indonesiaâ&#x20AC;&#x2122;s current GDP composition of origins split into three major sectors:

industry, services, and agriculture. The largest sector, industrial, at 46.9%, is primarily composed of and dependent on the mining, manufacturing, and utility subsectors. Also vital at 38.6%, the service sector includes the production of liquefied natural gas, of which Indonesia is a top supplier. Lastly, the agriculture sector comprises 14.4% of the overall GDP.

I N D U S T RY Within this sector, the process of extracting and producing of bauxite, tin, and silver remains the primary concentration for mining activities. Recent developments in the past decade, however, allowed Indonesia to increase their mineral export base through expanded copper, nickel, gold, and coal output. Chemical fertilizers, plywood, apparel, and footwear make up the other subdivisions in this sector. From 2007 to 2012, Indonesiaâ&#x20AC;&#x2122;s industrial output rate was recorded at an average of 16.4%.

S E RV I C E The

communication

and

banking

subsectors

are

considerably

the

most profitable areas of the service division. Over the last decade, they have acquired notable significance after the initiation of the New Order policies and the increased foreign participation that followed. Outputs in service saw a 15.6% average growth rate from 2007 to 2012.

AG R I C U LT U RE Agriculture and Indonesia have habitually been intertwined since the discovery of the nationâ&#x20AC;&#x2122;s many natural resources, making it one of the largest agricultural product producers and consumers in Asia. However, the advent of the New Order again rearranged the economic organization, placing more emphasis on the manufacturing and services sectors over agriculture. From 2007 to 2012, an 18.6% average growth rate was witnessed for agricultural output.

213

EXPORTS & I MPORTS On account of relatively inexpensive labor and

The Indonesian imports market is expected to

an emerging domestic consumer market, the

expand just as quickly, if not faster, than exports,

year 2010 ushered in a surge of manufactured

as the country’s infrastructure continues to

exports and outputs for Indonesia. 50% of

advance and domestic demand skyrockets.

these exports, like coal, oil, gas, and palm oil, are derived from natural resources and

TOP IMPORT COMMODITIES

drive majority of the economic growth from

MACHINERY AND EQUIPMENT

exports. As a larger share of exports goes

CHEMICALS

towards more rapidly developing markets

FUELS

and the demand for sustainable commodities

FOODSTUFFS

remains strong, Indonesia’s export industry will witness substantial growth and stability.

TOP IMPORT PARTNERS (2012) CHINA 15.3%

TOP EXPORT COMMODITIES

SINGAPORE 13.6%

OIL AND GAS

JAPAN 11.9%

ELECTRICAL APPLIANCES

MALAYSIA 6.4%

PLYWOOD

SOUTH KOREA 6.2%

TEXTILES

US 6.1%

RUBBER

THAILAND 6%

TOP EXPORT PARTNERS (2012) JAPAN 15.9% CHINA 11.4% SINGAPORE 9%

TOTAL IMPORTS (2013)

$178.6 BILLION

SOUTH KOREA 7.9% US 7.8%, INDIA 6.6% MALAYSIA 5.9%

TOTAL EXPORTS (2013)

$178.9 BILLION Overall Data Source: CIA - The World Factbook

MAPS

218

219

G R A P H S & D ATA

222

PESTLE The country is currently organized into 33 provinces which are then divided into separate administrative regions. There are over 250 of these regions, each of which with its own legislative body that serves as the chief administrative authority that answers directly to the public.

223

224

225

226

I N D O N E S I A I N D U S T RY R E S E A R C H T E X T I L E & G A R M E N T I N D U S T RY

FIGURE 10

227

228

Graph Source: Insidefashionlive.com

229

230

TRADE COMPL IANCE R E G U L AT I O N & L AW S T H E

T E X T I L E F I B E R P R O D U C T S I D E N T I F I C A T I O N A C T

Title 15, United States Code, Chapter 2, Subchapter V, Section 70 16 CFR 303, Rules and Regulations under the Textile Fiber Products Identification Act The importation, manufacture, sale, offer for sale, transportation for sale, distribution, or advertising of any textile fiber product which is misbranded or falsely or deceptively advertised is unlawful and is considered an unfair method of competition and an unfair and deceptive act or practice in commerce under the FTC Act. To avoid being considered misbranded, the Act requires that most textile products have a label attached listing: • the generic names and percentages by weight of the constituent fibers in the product; •the name under which the manufacturer or other responsible company does business or, in lieu thereof, the registered identification number (“RN number”) of such company; and •the name of the country where the product was processed or manufactured. The Textile Fiber Products Identification Act also contains advertising and record –keeping provisions. A label is required to be affixed to each textile product and, where required, to its package or container in a secure manner. Such label shall be conspicuous and shall be of such durability as to remain attached to the product and its package throughout any distribution, sale, re-sale, and until sold and delivered to the ultimate consumer. Each textile fiber product with a neck must have a label disclosing the country of origin affixed to the inside center of the neck midway between the shoulder seams or in close proximity to another label affixed to the inside center of the neck. The fiber content and RN or name of the company may be disclosed on the same label as the country of origin or on another conspicuous and readily accessible label or labels on the inside or outside of the garment. On all other textile products, the required information shall be disclosed on a conspicuous and readily accessible label or labels on the inside or outside of the product. The country of origin disclosure must always appear on the front side of the label. Other required information may appear either on the front side or the reverse side of a label, provided that the information is conspicuous, readily accessible, and clearly legible. Packaged hosiery products do not need a label on each piece of hosiery provided the required information is listed on the packaging label and is applicable to all hosiery inside the package. Socks must be marked on the front of their packages or on labels with the English name of the country of origin. This marking must be placed adjacent to the size designation. The marking must be done in a manner that is legible, indelible, conspicuous, readily accessible to the consumer, and as permanent as the nature of the article or package permits. Packaged products, such as t-shirts, must have required labeling on the product and on the packaging, unless the product label is clearly visible through the packaging.

231

C A R E

L A B E L

16 CFR 423, Care Labeling of Textile Wearing Apparel and Certain Piece Goods as Amended The Federal Trade Commission’s (FTC) Care Labeling Rule requires manufacturers and importers to attach care instructions to garments. The Rule requires that manufacturers or importers comply with the following: •Provide complete instructions about regular care for the garment, or provide warnings if the garment cannot be cleaned without harm. •Ensure that care labeling instructions, if followed, will cause no substantial harm to the product. •Warn consumers about certain procedures that they may assume to be consistent with the instructions on the label, but that would harm the product. For example, if a pair of pants is labeled for washing, consumers may assume they can iron them. If the pants would be harmed by ironing, the label should read, “Do not iron.” •Ensure that care labels remain attached and legible throughout the useful life of the product. Care labels must be attached to products prior to sale in the United States; however, care labels do not have to be attached to products when they enter the United States. The importer must ensure the labels are attached prior to sale. Labels must be attached permanently and securely and be legible during the useful life of the product and be seen or easily found by consumers at the point of sale. For packaged items, the care label must appear also on the outside of the package or on a hangtag if it is not clearly visible through the packaging.

F L A M M A B I L I T Y

O F

C L O T H I N G

16 CFR 1610 –Standard for the Flammability of Clothing Textiles Provides methods of testing the flammability of clothing and textiles intended to be used for clothing by classifying fabrics into three classes of flammability based on their speed of burning. This minimum standard specifies that textiles used in apparel must meet class 1 or 2 flammability requirements. Class 3 textiles, the most dangerously flammable fabrics, are unsuitable for use in clothing because of their rapid and intense burning characteristic.

C O U N T R Y

O F

O R I G I N

Marking of Imported Articles and Containers Title 19, United States Code, Chapter 4, Section 1304 All products imported into the U.S. must conform to 19 CFR 134, Country of Origin Marking regulations. These regulations require that every article of foreign origin (or its container) imported into the U.S. be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit, and in such a manner as to indicate to the ultimate purchaser in the U.S., the English name of the country of origin of the article at the time of importation.

DOCUMENTS

234

I M P O RT E R I N G D O C U M E N T S CUSTOMS BOND

235

236

I M P O RT E R' S D O C U M E N T S P O W E R O F AT T O R N E Y 1. THIS FORM MUST BE TYPED. 2. DO NOT ALTER THIS FORM. 3. ORIGINAL TO BE SUBMITTED

DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection

CORPORATE TO CBP. (See Option explained in Instruction No. 2.) GRANT CHANGE to Grant on file (Instruction (Instruction No. 3b.) No. 3a.) NAME

GRANTEE:

GRANTOR:

OMB No. 1651-0050 Exp. 03/31/2014

CBP USE ONLY

DATE RECEIVED

SURETY POWER OF ATTORNEY REVOCATION. The below-described powers previously granted are hereby revoked. (Instruction No. 3c.) This is a name change

ADDRESS

EFFECTIVE DATE

This is an address change

SOCIAL SECURITY NUMBER SURETY COMPANY'S CORPORATE NAME

SURETY NO.

STATE UNDER WHOSE LAWS ORGANIZED AS A SURETY

Port code(s) for CBP port(s) in which authorized to do business and limit on any single oblligation -OR- port(s) being added to the original grant. LIMIT LIMIT LIMIT LIMIT LIMIT LIMIT PORT PORT PORT PORT PORT PORT

Grantor appoints the above-named person (Grantee) as its attorney in fact to sign its name as surety to, and to execute, seal, and acknowledge any bond so as to bind the surety corporation to the same extent as if done by a regularly elected officer, limited only to the extent shown above as to Customs and Border Protection port and amount on any single bond obligation. This grant, or change to a grant on file, or revocation, as specified, shall become active on the effective date shown provided the CBP Form 5297 is received at a port office 5 days before the effective date shown; otherwise the specified actions will be come active at the close of business 5 working days after the date of receipt at the port office. In witness whereof, the said Grantor, by Date Attested Name and Title Name and Title virtue of authority conferred by its Board of Directors, has caused these presents to be sealed with its corporate Use a facsimile of corporate seal and attested by any two principal seal, and not impression seal. Signature: Signature: officers.

Distribution: 3 copies

CBP Form 5297 (06/08)

237

E N T RY S U M M A RY DEPARTMENT OF HOMELAND SECURITY

1. Filer Code/Entry No.

U.S. Customs and Border Protection ENTRY SUMMARY

Form Approved OMB No. 1651-0022 EXP. 08-31-2014

2. Entry Type

3. Summary Date

4. Surety No. 5. Bond Type 6. Port Code

7. Entry Date

8. Importing Carrier

9. Mode of Transport

10. Country of Origin

11. Import Date

12. B/L or AWB No.

13. Manufacturer ID

14. Exporting Country

15. Export Date

16. I.T. No.

17. I.T. Date

21. Location of Goods/G.O. No.

18. Missing Docs 19. Foreign Port of Lading

22. Consignee No.

23. Importer No.

25. Ultimate Consignee Name and Address

City 27. Line No.

State

Zip

City A. Entered Value B. CHGS C. Relationship

35. Total Entered Value

$ 36. DECLARATION OF IMPORTER OF RECORD (OWNER OR PURCHASER) OR AUTHORIZED AGENT Importer of record and that the actual owner,

or purchaser or agent thereof. I further declare that the merchandise

33. A. HTSUS Rate B. ADA/CVD Rate C. IRC Rate D. Visa No.

CBP USE ONLY

Total Other Fees

purchaser, or consignee for CBP purposes is as shown above, OR

State 32.

I declare that I am the

24. Reference No.

26. Importer of Record Name and Address

28. Description of Merchandise 29. 30. 31. A. HTSUS No. A. Grossweight Net Quantity in B. ADA/CVD No. B. Manifest Qty. HTSUS Units

Other Fee Summary for Block 39

20. U.S. Port of Unlading

Zip 34. Duty and I.R. Tax Dollars

Cents

TOTALS

A. LIQ CODE

B. Ascertained Duty

37. Duty

REASON CODE

C. Ascertained Tax

38. Tax

D. Ascertained Other

39. Other

E. Ascertained Total

40. Total

owner was obtained pursuant to a purchase or agreement to purchase and that the

prices set forth in the invoices are true, OR was not obtained pursuant to a purchase or agreement to purchase and the statements in the invoices as to value or price are true to the best of my knowledge and belief. I also declare that the statements in the documents herein filed fully disclose to the best of my knowledge and belief the true prices, values, quantities, rebates, drawbacks, fees, commissions, and royalties and are true and correct, and that all goods or services provided to the seller of the merchandise either free or at reduced cost are fully disclosed. I will immediately furnish to the appropriate CBP officer any information showing a different statement of facts.

41. DECLARANT NAME

TITLE

42. Broker/Filer Information (Name, address, phone number)

SIGNATURE

DATE

43. Broker/Importer File No. Paperwork Reduction Act Notice CBP Form 7501 (06/09)

238

C E RT I F I C AT E O F O R I G I N Certificate of Origin The undersigned___________________________________________________________________________ (Owner or Agent) for________________________________________________________________________________declares (Shipperâ&#x20AC;&#x2122;s Name and Address) the following listed goods shipped on _________________________________________________________ (Name of Carrier) on_____________________consigned to_______________________________________________________ (shipment date) are the products of the United States of America.

Marks and Numbers

No. of Pkgs Boxes or Cases

Weight in Kilos Full Gross

Description of Item

Net

Signed this _______ day of ___________________________ 2008. _________________________________________________________

(Signature of Owner or Agent)

-------------------------------------------------Do No Write Below This Line-----------------------------------------------The Chamber of Commerce of the United States of America certifies, in reliance on the exporterâ&#x20AC;&#x2122;s representation and not on the basis of independent verification that, to the best of its knowledge and belief, the products named in this document originated in the United States of America. Certified this ________day of_______________________, 20___. Chamber of Commerce of the United States of America

239

F R E I G H T C A R R I E R' S D O C U M E N T S INLAND BILL OF LADING Shipper's Domestic Truck Bill of Lading--Non Negotiable B/L #:

Date:

Vehicle #:

Carrier's #:

RECEIVED, subject to the "Common Carrier Rate Agreement" or the CONTRACT between the Shipper and Carrier in effect on the date of shipment, the property described below, received in good order, except as noted (contents and condition of contents of packages unknown), marked, consigned, and destined as shown below. This Bill of Lading is not subject to any tariffs or classifications whether individually determined or filed with any federal or state regulatory agency, except as specifically agreed to in writing by the Shipper and Carrier. Rate individually determined and NOT subject to filed tariffs.

Consigned to:

From:

$0.00

C.O.D. amount $

Bill to:

Remit C.O.D. Amount To:

C.O.D. Fee To Be Paid By: Pieces:

â&#x20AC; HM

Consignee

Shipper Description

Weight

Rate

Freight Charges Prepaid Collect Third Party Subject to Section 7 of the agreement between Shipper and Carrier, if the shipment is to be delivered to the consignee without recourse of the consignor, the consignor shall sign the following statement.

The carrier shall not make delivery of this shipment without payment of freight and all other lawful charges. (Signature of Shipper)

Copy

1 2 3 Received on

Special Instructions: These commodities, technology or software were exported from the United States in accordance with the Export Administration Regulations. Diversion contrary to U.S. law prohibited.

Shipper Carrier Driver Signature Date Exceptions The agreed on declared value of the property is hereby specifically stated by the shipper to be not exceeding

per pound for each distribution package.

â&#x20AC; Mark with "X" to designate Hazardous Materials as defined in the Department of Transportation Regulations governing the transportation of hazardous materials. The use of this column is an OPTIONAL method for identifying hazardous materials on bills of lading per section 172.201 (a) (1)(iii) of title 49, Code of Federal Regulations. Also, WHEN SHIPPING HAZARDOUS MATERIALS the shipper's certification statement prescribed in Section 172.204 (a) of the Federal Regulations must be indicated on the bill of lading, unless a specific exception from this requirement is provided in the Regulations for a particular material.

Shipper's Signature Page 1 of 1

240

OCEAN BILL OF LADING Ocean Bill of Lading Exporter

Page 1 of 1 Document Number

Booking Number

Export References

Ultimate Consignee

Forwarding Agent

Notify Party

Also Notify

Pre-Carriage By

Place of Receipt

Domestic Routing

Exporting Carrier

Port of Loading

Loading Pier/Terminal

Port of Discharge

Place of Receipt on Carrier

Type of Move

Marks and Numbers

No. of Pkgs

Description

Weight (lbs.)

There are:

Ship Ref No.

Measurements

pages, including attachments to this Ocean Bill of Lading.

These commodities, technology or software were exported from the United States in accordance with the Export Administration Regulations. Diversion contrary to U.S. law prohibited. Carrier has a policy against payment solicitation, or receipt of any rebate, directly or indirectly, which would be unlawful under the United States Shipping Act, 1984 as amended.

FREIGHT RATES, CHARGES, WEIGHTS AND/OR MEASUREMENTS SUBJECT TO CORRECTION

PREPAID

COLLECT

Received by Carrier for shipment by ocean vessel between port of loading and port of discharge, and for arrangement or procurement of pre-carriage from place of receipt and on-carriage to place of delivery, where stated above, the goods as specified above in apparent good order and condition unless otherwise stated. The goods to be delivered at the above mentioned port of discharge or place of delivery, whichever is applicable. IN WITNESS WHEREOF

GRAND TOTAL:

original Bills of Lading have been signed, not otherwise stated above, one of which being accomplished the others shall be void.

DATED AT BY Agent

Month

Day

Year B/L No

241

I N S U R A N C E C E RT I F I C AT E

242

A R R I VA L N O T I C E Dock Receipt Booking Number

Exporter

Page 1 of 1 Document Number

Export References

Ultimate Consignee

Forwarding Agent

Notify Party

Also Notify

Pre-Carriage By

Place of Receipt

Domestic Routing

Exporting Carrier

Port of Loading

Loading/Pier Terminal

Port of Discharge

Place of Receipt on Carrier

Type of Move

Marks and Numbers

No. of Pkgs

Delivered By: Truck Arrived Date

Time

Unloaded Date

Time

Checked by Placed in ship on dock location

Description

Weight (lbs.)

Measurements

Received the above described goods or pkgs subject to all the terms of the undersigned's regular form of dock receipt and bill of lading which shall constitute the contract under which the goods are received, copies of which are available from the carrier on request and may be inspected at any of its offices.

For the Master: By Date

243

M A N U FA C T U R E R' S D O C U M E N T S C O M M E RC I A L I N V O I C E

5 6

7 8 3 9

14 15 16

��

244

P RO - F O R M A I N V O I C E

245

19 Place and Date of Shipment

To Gentlemen: Under your Order No. ___________________________________________________________ the material listed below was shipped

via

Shipment consists of:

Marks

Cases

Packages

Crates

Cartons

Bbls.

Drums

Reels * LEGAL WEIGHT IS WEIGHT OF ARTICLE PLUS PAPER, BOX, BOTTLE, ETC., CONTAINING THE ARTICLE AS USUALLY CARRIED IN STOCK.

PACKAGE NUMBER

WEIGHTS IN LBS. or KILOS GROSS WEIGHT EACH

*LEGAL WEIGHT EACH

Form No. 30-036 Printed and Sold by

NET WEIGHT EACH

DIMENSIONS HEIGHT

WIDTH

LENGTH

201 Circle Drive N, Suite 104, Piscataway, NJ 08854

QUANTITY

(800) 631-3098 www.unzco.com

CLEARLY STATE CONTENTS OF EACH PACKAGE

246

BANKI NG D OCUME N TS L E T TE R O F C RE D I T LC Application Form Access Bank Plc RC 125384 Application to establish a Documentary Letter of Credit based on Form “M” Number Confirmed

Unconfirmed

of (Address of Applicant)

1. We (Name of Applicant)

Mobile/Landline

Fax Line

E-mail

2. Request that you establish irrevocable Documentary Letter of Credit on our Account in favour of (Beneficiary’s Name) Address (Beneficiary’s Address) 3. For the sum of

Amount in words

4. LC Expires on 5. Covering the shipment of (Goods)

6. As per Pro-Forma Invoice No 7. To be paid at sight/tenor of

Dated days from

on presentation of the following documents Bill of Lading

No of Original

No of Copies

Commercial Invoice

Combined Certificate of Value & Origin

Certificate of Analysis

Airway Bill

Packing List

No of Original

No of Copies