Donald Trump’s administration is reviewing the granting of import duty exemption or reduction for Indonesia. If the Generalized Systems of Preference (GSP) facility is revoked, the export of Indonesian products to the US will drop. The US government is proposing several requests to Indonesia if it still wants to obtain the facility.
Last week, Vice President Jusuf Kalla met with ministers to discuss the US’ requests. This is done so that Indonesia can still obtain the GSP facility. According to the Economic Coordinating Minister Darmin Nasution, Kalla asked the ministers to immediately respond so that lobbying efforts to the US government can proceed smoothly.
Moreover, Indonesia is the only country that still faces evaluation. “Previously, there were four countries that underwent GSP evaluation. Currently, there are no more evaluations for three other countries [India, Kazakhstan, and Turkey],” Darmin said, Tuesday (12/19).
The US government proposed several requests for Indonesia if it still wants to obtain low import duty facility. The requests are related to market access, services, and investment. Indonesia and the US have discussed this matter during the first hearing with the United States Trade Representative (USTR) on 19 June 2018. According to Darmin, the Indonesian government has long been trying to make changes related to the three issues, and now the process will be accelerated.
During the second hearing at the end of November, the two countries discussed the issue of Intellectual Property Rights (HAKI). Piracy and policy to increase the use of local components in Indonesia pose challenges to the HAKI implementation. This can hamper US trade and investment in Indonesia. Moreover, Darmin added that the main concerns in the two meetings were related to the National Payment Gateway (GPN) and Data Centres.
According to the US, the GPN policy can hamper its business relations with Indonesia. This policy requires all payment transactions in Indonesia to be processed by national companies. So far, two giant US companies Visa and Mastercard are processing all transactions in their country, before being sent back to Indonesia. Almost all debit cards and Automated Teller Machines (ATM) in Indonesia use the services of these two companies.
With the presence of GPN policy, Visa and Mastercard will have difficulty running their business in Indonesia. Both are allowed to process domestic transactions if they partner with national principals and build data centres in Indonesia. If not, they can only process payment transactions from foreign tourists in Indonesia. Currently, Indonesia has not taken any decisions regarding changes to the GPN policy at US request.
The US also requested a review of the policy requiring companies that operate Electronic Systems to build their data centres in Indonesia. This refers to the revision of Government Regulation (PP) No. 82/2012 on the Implementation of Electronic Transactions and Systems (PSTE).
Indonesia’s Trade Attache to the US, Reza Pahlevi Chairul, became a representative in the two hearings. The hearing results will be a consideration for the US to determine whether Indonesia will still obtain the GSP facility or not.
So far, the US has provided import duty relief for 3,547 tariff posts of Indonesian commodities through the GSP scheme. This program has been running since 1976. In the 1980s, the US conducted evaluations by raising labour problems and various challenges related to HAKI. It was also halted in 2013 and resumed in June 2015.
Last April, the US announced that it would conduct a review of the granting of facilities to a number of countries, including Indonesia. This evaluation is done as a protection effort due to the US trade balance deficit with a number of trading partner countries. Previously, the Trump’s administration had also evaluated 15 countries.