INDUSTRIAL POLICY FOR ENVIRONMENTAL SUSTAINABILITY

By Harjanto Director for International Industrial Cooperation for Region I and Multlateral Jakarta, 6 May, 2013 Sari Pan Pasific Hotel

THE MINISTRY OF INDUSTRY, THE REPUBLIC OF INDONESIA DIRECTORATE GENERAL OF INTERNATIONAL INDUSTRIAL COOPERATION

TOPIC
I. II. III. IV. V. VI. VII. Background MDGs; Industrial Outcomes Require to Multi Sectoral Approach; 3 Demensions of Sustainable Development; Vision, Mission, and Objectives of the MoI; Industrial Development Goals; Accelerated Industrialization; The five Strategies are Carried Out Through the Application of Six Policy Areas; VIII. Fiscal Policy; IX. Priority Industry; X. Corporate Social Responsibility (CSR) for Industrial Sector
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Background MDGs
1.High Level Panel of Eminent Persons for a Post-2015 Development Agenda together with British Prime Minister David Cameron and Liberian President Ellen Johnson Sirleaf. The Panel which was formed by the UN Secretary General 2.To promote a model of development that is sustainable. A model that recognizes and addresses the challenges of climate change, resource scarcity and environmental sustainability. 3. Successful development with various stakeholders, Business sector, civil society, and the academia
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Industrial Outcomes Require a Multi Sectoral Approach

3 Dimensions of Sustainable Development

Social Development

Sustainable Development

Environmental quality

Economic development

Few Countries on Track

On track for MDG 7 only, not for MDG8

On track for MDG 4 only, not for MDG 5a (21) Bolivia, Botswana, Brazil, Ethiopia, Guatemala, Bolivia, Botswana, Brazil, Ethiopia, Guatemala, Indonesia, Iraq,Iraq, Korea DPR, Kyrgyz Republic, Liberia, Indonesia, Korea DPR, Kyrgyz Republic, Madagascar, Malawi, Mexico, Morocco, Niger, Peru, Liberia, Madagascar, Malawi, Mexico, Morocco, Philippines, Rwanda, Solomon Islands, Tanzania and Niger, Peru, Philippines, Rwanda, S olomon Zambia Islands,Tanzania and Zambia

On track for MDG 5a only, not for MDG 4 (2) not for MDG 4 (2) Eritrea and Equatorial Guinea Eritrea and Equatorial Guinea

On track for MDG 5a only,

On track7 and for both MDGs 8 MDGs 4 and 5a (7) Bangladesh, Bangladesh, Cambodia, Cambodia, China, China, Egypt, Lao PDR, Egipt, Lao PDR, Nepal Nepal and Vietnam

On track for both

and Vietnam

Vision
National industry development is Indonesia to become a strong industrial nation in the world, In the year 2020 Indonesia shall become a New Industrial Developed Country. It means in that year the National industry capability is recognized by the international community as the structural basis for the futures strong modern economy as well as a vehicle for a people-oriented economy.

Mission
1. To become the peoples motivator in conducting production business activities in the manufacture industry, which inherit a high economic value with high competitiveness and making the most out of national basic sources; 2. To prioritize the marketing of domestic primary products (products classified as industrial raw materials) to fulfill the demand on raw materials for the domestic manufacture industries so that they can generate more added values and create new jobs; 3. To become the mainstay for the continuous industry development through optimum development and management of natural resources and exploitation of renewable raw materials to ensure a self-sustained future generation.

Objectives
A strong industry with sustainable competitiveness to become world-class industry, supported by strong basisof science and technology, including nanotechnology,ICT and biotechnology; A strong manufacture industry structure, including a firm cooperation network between small and medium industries (SME) and large industries; A balanced contribution from SME and large industries to the Gross Domestic Production (GDP); Well-distributed industries in all parts of Indonesia based on the potential and support capabilities of each region.

Industrial Development GoalsTabel

Indicator
Industrial Growth (%)

2011
5.83 (6.22)

2012
6.74

2013
7.66

2014
8.59

Non-oil and Gas Growth (%)

Portions of Industrial Products to Non-Oil and Gas Exports (%) Portions of Man-Power to Industry (%)

6.07 (6.83)

7.05

8.02

9.00

52.8 (75.4)

55.8

58.8

61.9

13.1 (13.1)

13.6

14.2

14.7

Note: ( ) Realization

Industrial Development Goals Chart

% 8.5
7.5

6.5

5.5 Industrial Growth (%) Non-Oil and Gas Growth (%) 85.00 60.00 35.00

2011 2012 Pertumbuhan Sektor Industri (%)

2013 2014 Pertumbuhan Industri Non-Migas (%)

Portions to non-oil 10.00 and gas export (%) Portions of Man Power (%) 2011

2012

2013

2014

Porsi produk industri pada ekspor nonmigas (%)

Porsi pekerja di sektor industri (%)

Accelerated Industrialization Policy

To support the achievement of economic development, the industrial sector is expected to be the main sectors that can promote accelerated economic growth.
The targets can only be achieved with determination, good planning, and hard work synergistically among all industry stakeholders.

Accelerated Industrialization Policy

The acceleration is aimed at encouraging the growth of the industrial sector as a major catalyst in improving national economic growth.

The efforts of acceleration is achieved by identifying the various potential strengths and constraints, determine the basic strategy of accelerating the industry, setting the industry accelerated focus on certain priority industry

Accelerated Industrialization Through 5 main Strategies

1.Encourage participation of business sector in the Infrastructure Development; 2. Acceleration of Decision-Making Process to overcome bureaucratic barriers (Debottlenecking); 3. Re-orientation of export policies of raw material and energy resource; 4. Encouraging Productivity & Competitiveness; 5. Improving domestic market integration.

Focus on Industrial Acceleration

Downstream Industry Based On Agro, Mineral Materials, Oil And Gas

Downstream Downstream Rubberbased industry of Industry of Downstream Palm oil Cocoa Industry

Furniture Industry

Petrochemica l Industry

Fertilizer Industry

Basic Metal Sugar canedIndustry based Industry

Downstream Industry Based On Human Resources and Domestic Market

Textile, Garment, and Footwear Industry

Machinery and Equipment Industry

Electronics and Communication Equipment Industry

Transportation Industry

Shipbuilding Industry

Small and Medium Industry

Fashion

Craft Industry

Animation and Multimedia Contents

The five Strategies are Carried Out Through the Application of Six Policy Areas
Domestic Industry Security Policy Infrastructure Development, Improving the Quality of Service Bureaucracy Improvement and Harmonization of Regulations, Fiscal Policy, Industry HR Development Based

FISCAL POLICY
In an effort to strengthen the competitiveness of national industry, the government issued a number of fiscal policies in the form of tax incentives. The government still continues the government-borne import, duty incentives (BMDTP) to industry for goods and raw

Fiscal Incentives For Manufacturing Industry

Tax Holiday for 5 pioneer industry : basic metal industry, refinery, renewable energy, machinery and communication
(Finance Minister Regulation : 130 / 2011) Tax Allowance for Specific business and/or certain areas/region ( GR No. 52/2011) Exemption of import duty on importation of machinery, as well goods and Materials for the Industrial Development in the frame of Investment (Finance Minister Regulation : 176/2009).

Export Duty for Manufacturing Industry Finance Minister Regulation No. 75/2012 The Implementation of Export Duty 20 % for products : a. Leather and Wood b.Cocoa beans c. Palm Oil, Crude Palm Oil, and its derivatives d.Mineral Ore

Priority Industry
To improve the competitiveness of national industries, the MOI will focus on industrial competitiveness enhancement program gradually according to groups of industry : (1) Labor Intensive (2) Small and Medium (3) Capital Goods (4) Natural Resource-Based Industry (5) High Growth Industry, (6) Special Priority Industries.

Priority Industry
To encourage increased competitiveness of national industries, the government will use 4 supporting instruments: (i) the state budget, (ii) fiscal incentives, provision of industrial estates infra-structure, (iii) administrative support, (iv) inviting private sector role in the development with Public Private Partnership scheme

Idustrial Potential Sector

1. Indonesia is rich in resources: a. Forestry resources; b. Marine and Fishery resources; c. Mineral resources; d. Energy Reosurces: Coal, Oil and gas. 2. Large number of population Big Market. 3. Indonesia is located in rapid growth region of economic. 4. Domestic and foreign investment, Financing, as well Domestic Gross Fixed Capital Formation tends to rise 5. Infrastructur and Technology Development are being done. 6. Well trained human resources with regular training schedule

Commitment on Green Industry

The Green Industry is a concept of industrial development based on sustainability to the economic, social involvement, and protection of environmental quality. Industrys commitment to Go Green can be done through several implementation tools in sustainable processing industry such as cleaner production, energy conservation (energy efficiency), resource efficiency, eco-design, ecoproducts, the recycling process , and low-carbon technology

ECO PRODUCTS
Eco products are the products that meet required criteria of environmentally friendly products. Based on the environmental regulation which is applicable to such products or based on the environmental The Indonesian government has begun to formulate criteria of ECO LABEL for environmentally friendly products (detergents, textiles & textile products, finished leather, casual shoes leather).

ENVIRONMENTALLY PRODUCTS
Brand, save on production costs (efficiency of energy use, etc.), can sell goods at a price cheap and could be contributing to reducing carbon emissions (to 3R), and improving the productivity of goods production process applied

ENVIRONMENTALLY FRIENDLY PRODUCTS

1.Cleaner Production

2.3 R 3.Production Supply 3.Low Carbon / CO2 Emission Reduction 4.Reducing CO2 emissions in cement and steel industries.

Challenge of the international context

Sustainable Industrial Development

should:

8/13/2013

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Development Plan of Six Economic Corridors/ MDGs Post 2015 To achieve the target goal, currently has been set six priorities of economic corridors as the center of growth in the region by developing industrial cluster seed resource-based (commodity and / or sector: 1) Sumatra Economic Corridor will be a centre production and processing of crops and granaries of national energy.

(Cont...)

The Development Plan of Six Economic Corridors/ MDGs Post 2015 Industries that will be developed are: Downstream Industry of palm oil and rubber in Sei Mangkei, North Sumatra and Dumai, Riau. Downstream Industry of rubber and coal in Tanjung Api-Api, South Sumatra. Petrochemical Industry in Banten.

(Cont...)

The Development Plan of Six Economic Corridors

(2) Java Economic Corridor will be a driver of industrial and national services. Industries that will be developed include: Textile Industry in Majalengka, West Java and Semarang, Central Java Automotive and Machinery Industry in Cikampek Food and Beverage Industry in West Java

(Cont...)

The Development Plan of Six Economic Corridors 3) Kalimantan Economic Corridor will be centre of mining processing and national energy barn. Industries that will be developed include: Steel Industry in BatuLicin, Southern Kalimantan Downstream of Palm Oil Industry in Maloy, East Kalimantan

(Cont...)

The Development Plan of Six Economic Corridors

4) Sulawesi Economic Corridor will be the center of production and processing of agricultural, horticultural, fisheries, oil and gas, mining. 5) Bali - Nusa Tenggara Economic Corridor will become the gateway of tourism (Bali) and support the national food (fishery-maluku).

(Cont...)

The Development Plan of Six Economic Corridors

6) Papua-Maluku Economic Corridor will be a processing the abundant natural resources and a center development of food, fisheries, energy and mining. Industries will be developed include: Petrochemical of Oil and Gas Condensate based industry based in Tangguh, Papua.

Corporate Social Responsibility

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Technical Barrier to Trade (TBT) and International Standart

Technical Barrier to Trade (TBT) dan Non Technical Barrier (NTB). NTB Global Standar (Technical Regulation, Standar Mutu, ect ). TBT : British Standards: BS-Code (Preservative treatments for textiles, Specification for nylon fabrics, Specification for polypropylene film cords, lines and twines, Woven nylon narrow fabrics for aerospace purposes, Code of practice for wind loads, Specification for fibre rope cargo nets, Narrow Fabrics, etc) Europe Nation Standards: EC-Code (Load restraint assemblies on road vehicles, Safety Calculation of lashing forces, Lashing steel wire ropes, etc) Oko-TEX Standard, etc Sosial Standard : BSCI, WRAP, ICTI, FLA, SA 8000, WRC, etc

Social Standard and World Organization

Sosial Standard from Inisiatif/World Organizationo n Textile al : Business Social Compliance Inisiative (BSCI) Worldwide Responsible Apparel Production (WRAP) International Council of Toys Industries (ICTI) Fair Labour Association (FLA) Social Accountability Intl (SA 8000) Worker Right Consortium (WRC) The fundamental Principle and foundation of all standards is Local Law. Manufacturers must adhere to local labor, environmental Core Issues: Child Labor, Forced Labor, Health and Safety, Freedom of Association and Collective Bargaining, Discrimination, Disciplinary Practices Working Hours, Compensation and Benefits

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SOCIAL COMPLIANCE
Export Textile and Indonesia Textile product to United American, Europe, Japan and another countries to implementation to sertificate program on Golbal Standart Global Standards (Security, to Save,Health, and to effort Environmentally Suistanable (K3L), include Corporate Social Responsibility (CSR), Social Audits and Monitoring Occupational Health and Safety, Environmental and Labor Standards (WRAP, SA-8000, Eco-Tex and ect)

SOCIAL COMPLIANCE

(Cont...)

Social Standard for International Labour Core Labour Standar

International Social Standard BSCI / AVE : Business Sosial Compliance Initiative WRAP : Wouldwide Responsible Apparel Production ICTI : International Council of Toys Industries FLA : Fair Labour Association SA 8000 : Sosial Accountability International WRC : Worker Right Consortium

Compare to social standar on Textile and Textile Product

CODES DISCRIPTION
1) Law & Workplace Regulation 2) Force Labor 3) Child Labor 4) Harassment or abuse (Disciplinary Practice 5) Compensation or Benefit 6) Hours of Works

WRAP
V V V V V V

SA 8000

FLA

ETI

WRC

V V V V V

V V V V V

V V V V V

V V V V V

7) Non-Discrimination
8) Health and Safety 9) Freedom of Association 10) Environment 11) Custom Compliance 12) Security 13) Management System

V
V V V V V

V
V V

V
V V

V
V V

V
V V

Thanks

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