FREE TRADE AREAS AND FREE PORTS
( Government Regulation in lieu of Law No. 1/2000 dated September 1, 2000) THE PRESIDENT OF THE REPUBLIC OF INDONESIA
Considering :
a. That in facing the development of circumstances at home and abroad, it is necessary to respond to the challenge of global competition in the spirit of regional autonomy, which grants wide-ranging, real and responsible authority to the regions proportionally;
b. That regional autonomy, which is realized by means of the regulation, distribution and utilization of national resources and the financial equilibrium between the central and regional governments, in accordance with the principle of democracy, community participation, equity and justice’s well as regional potentials and diversity, shall be implemented within the framework of the Unitary State of the Republic of Indonesia; c. That a trade area and a free port may bolster the traffic of international trade, which shall bring in foreign
exchange to the state and considerably influence and benefit Indonesia so that as many employment opportunities as possible may be opened up, tourism and foreign and domestic investments boosted;
d. That in the framework of speeding up the development of region in line with the realization of regional autonomy, a number of areas must be stipulated as free trade areas and free ports;
e. That the provisions of law No. 3/1970 on basic provisions of free trade areas and free ports are no longer compatible with the spirit of regional autonomy as regulated in Law No.22/1999 on regional administration, so that it is deemed necessary to improve them;
f. That in connection with the consideration above, it is deemed necessary to stipulate a government regulation in lieu of the law on free trade areas and free ports;
In view of :
1. Article 5 sub-article (1), Article 20 sub-article (2), Article 23 and Article 33 of the constitution of 1945 as already amended by the Second Amendment to the Constitution of 1945;
2. Law No. 22/1999 on regional administration (Statute Book No. 60/1999, Supplement to Statute Book No. 3839);
3. Law No. 25/1999 on the financial equilibrium between the central and regional government (Statute Book No. 70/1999, Supplement to Statute Book No. 388;
D E C I D E S To stipulate :
A GOVERNMENT REGULATION IN LIEU OF THE LAW ON FREE TRADE AREAS AND FREE PORTS
CHAPTER 1 GENERAL PROVISIONS
Article 1 Referred to in this government regulation in lieu of the law as :
1. Free trade areas and free ports shall be areas located in the legal territory of the Unitary State of the Republic of Indonesia and separated from customs areas so that they shall be exempted from the imposition of import duties, the value added tax, the sales tax on luxury goods and excise.
Article 2
The overland and water boundaries of free trade areas and free ports shall be stipulated in the law on the establishment of free trade areas and free ports.
Article 3
In free trade areas and free ports activities shall be carried out in the economic areas, such as in the trade, maritime, industrial, communications, banking ,tourism sectors and in other areas stipulated in the law establishment of free trade areas and free ports.
CHAPTER II LEGAL POSITION
Article 4
Free trade areas and free ports shall constitute legal territories of the Unitary State of the Republic of Indonesia the establishment of which shall be conducted by virtue of a law.
Article 5
The period of free trade areas and free ports shall be 70 (seventy) years as from the time when they are stipulated as free trade areas and free ports.
CHAPTER III
INSTITUTIONALIZATION Article 6
(1). The president shall stipulate a Council of Free Trade Areas and Free Ports in the regions, which shall later be called the Council of Areas.
(2). The chairman and members of the Council of Areas shall be stipulated by the president at the suggestion of the governor along with the regional legislative assembly.
(3). The term of office of the chairman of the members of the Council of Areas shall be 5 (five) years and they may be reappointed for another term of office.
Article 7
(1). The Council of Areas shall set up the Board for the Operation of Free Trade Areas and Free Ports, which shall later be called the Operation Board.
(2). The head and the members of the Operational Board shall be stipulated by the Council of Areas.
(3). The term of office of the head and the members of the Operational Board shall be 5 (five) years and they can be reappointed for another term of office.
(4). The Operational Board shall be responsible for the Council of Areas.
(5). The provision on the organizational structure, tasks and authority of the head, deputy head and members of the Operational Board shall be regulated further in decision of the chairman of the Council of Areas.
CHAPTER IV
TASKS AND AUTHORITY Article 8
(2). The head of an operational board shall be assigned and authorized to manage, develop and build free trade areas and free ports in accordance with the functions of free trade areas and free ports.
(3). In carrying out the management of free trade areas and free ports, an operational board shall be authorized to lay down provisions as long as they do not contradict this government regulation in lieu of the law and other prevailing laws.
CHAPTER V FUNCTION OF AREAS
Article 9
(1). Free trade areas and free ports shall function as places for the development of businesses in the areas of trade, services, industry, mines and energy, transportation, maritime and fisheries, post and telecommunications, banking, insurance, tourism and other areas.
(2). The function as meant in sub-article (1) shall encompass :
a. activities of manufacturing, construction design, engineering, sorting, preliminary inspection, final inspection, packing and repacking of goods and raw materials from at home and abroad, services for the repair and reconditioning of machinery and quality promotion;
b. provision and development of infrastructures and facilities for water and water sources, infrastructure and facilities for communications, including seaports and airports, electrical buildings and networks, post and telecommunications and other infrastructures and facilities.
CHAPTER VI LICENSING
Article 10
To facilities the activities of free trade areas and free ports, operational boards shall be authorized to issue business licenses and other business licenses needed by companies setting up and running businesses in free trade and free ports through of authority pursuant to prevailing laws.
CHAPTER VII
TRAFFIC OF GOODS, QUARANTINE, FOREIGN EXCHANGE, IMMIGRATION, SAILING AND AVIATION
Article 11
(1) Goods subjected to a prohibition provision shall be prohibited to be taken into free trade areas and free ports. (2) The entry and release of goods to and from free trade areas and free ports can be conducted only by
companies already obtaining business licenses from the operational boards.
(3) Companies as meant in sub-article (2) only can take goods into free trade areas and free ports related to their business activities.
(4) The entry and release of goods to and from free trade areas and free ports through appointed seaports and airports under customs control shall be exempted from import duties, the value added tax, the sales tax on luxury goods and excise.
(5) The entry and release of goods to and from free trade areas and free ports to customs areas shall be subject to the imposition of customs administration in the import and export areas and the provision on the excise area.
(7) The quantity and types of goods for which the facilities as meant in sub-article (6) are given shall be stipulated by the operational boards.
Article 12
(1) The laws on the quarantine of human beings, animals, fish and plants for the Indonesian territory shall remain applicable in free trade areas and free ports.
(2) Operational boards may cooperate with the officials from authorized government agencies to facilitate inspection and other cooperation.
Article 13
(1) The rupiah currency shall be the legal tender in all free trade areas and free ports.
(2) The entry and exit of the rupiah currency between customs areas to and from free trade areas and free ports shall be subject to the regulations stipulated by the government while the entry and exit of the rupiah currency between free trade areas and free ports and abroad shall be subject to the general regulation prevailing in customs areas.
(3). Foreign currencies may be traded in free trade areas and free ports through licensed banks or foreign exchange traders pursuant to the prevailing laws.
(4). In free trade areas and free ports, all international trade transaction shall be conducted in foreign exchange by licensed banks pursuant to the prevailing laws.
Article 14
(1). The laws in the immigration area of the Republic of Indonesia shall remain valid in the free trade areas and free ports.
(2). The granting in immigration facilities to foreigners doing the free trade business in free trade areas and free ports shall be regulated in a decree of the minister of justice and human rights.
Article 15
Operational boards, with the approval of the Councils of Areas, may establish the regulation of conduct in sailing and aviation, the traffic of goods at ports and the provision of port facilities and so well as stipulate the tariffs for all kinds of services pursuant to the prevailing laws.
CHAPTER VIII
SOURCES OF INCOME AND FINANCING Article 16
(1). Operational Boards shall operate their own sources of income to finance their internal affairs.
(2). Operational Boards may also obtain source of income originating in the sources represented by the state’s budget and regional budges as well as other sources not contradicting the prevailing laws.
(3). Operational Boards shall be required to manage their finance pursuant to the prevailing laws.
(4). Every year Operational Boards shall be obligated to draw up a budget of revenues and expenditures, which shall be validated by the Council of Areas.
(5). Every year the financial statements of the Operational Boards shall be examined by financial audit institutions pursuant to the prevailing laws.
Article 17
CHAPTER IX CLOSING PROVISION
Article 18
With the enforcement of this government regulation in lieu of the law, Law No. 3/1970 on basic provisions on free trade areas and free ports shall be declared null and void.
Article 19
This government regulation in lieu of the law shall take effect as from the date of promulgation.
For public cognizance, this government regulation in lieu of the law shall be published in the Statute Book of the Republic of Indonesia.
Promulgated in Jakarta Stipulated in Jakarta On September 1, 2000 On September 1, 2000
ACTING STATE SECRETARY THE PRESIDENT OF THE REPUBLIC OF INDONESIA
Sgd. Sgd.
MARSILLAM SIMANJUNTAK ABDURRAHMAN WAHID
ELUCIDATION ON
GOVERNMENT REGULATION IN LIEU OF THE LAW NO. 1/2000 ON
FREE TRADE AREAS AND FREE PORTS GENERAL
In the framework of facing the development of circumstances both at home and abroad it is necessary to respond to the challenge posed by global competition in a spirit of regional autonomy which proportionately grants to the regions wide-ranging, real and responsible authority. Regional autonomy, which shall be realized by means of the regulation on distribution and utilization of national resources and the financial equilibrium between the central and regional governments, in accordance with the principles of democracy, community participation, equity and justice as well as regional potentials and diversity, shall be executed in the framework of the Unitary State of the Republic of Indonesia.
Free trade areas and free ports can bolster the traffic of international trade which brings in foreign exchange to the state and gives considerable influence and benefit to the welfare of the Indonesian community.
Provisions on free trade areas and free ports as regulated in law No. 3/1970 are no longer compatible with the spirit of regional autonomy on the basis of Law No. 22/1999 on regional administration so that it is necessary to re-regulate free trade areas and free ports.
As the need for the stipulation of free trade areas and free ports is very urgent in an effort to accelerate the growth of regional economy, it is necessary to stipulate a government regulation in lieu of the law on free trade areas and free ports.
ARTICLE BY ARTICLE Article 1 and 2
Sufficiently clear. Article 3
With the opening up of other areas, which shall be stipulated in a government regulation in lieu of the law on the establishment of a free trade and free port, flexibility shall be granted to the regions to diversity the activities in areas other than the economic area.
Article 4
Free trade areas and free ports shall constitute an integral part of the Unitary State of the Republic of Indonesia so that they shall be inalienable from the national law.
Article 5
The allowance of a period of 70 (seventy) years shall be aimed at stimulating foreign and domestic investors to carry out economic and trade activities in free trade areas and free ports and intensifying sound competition in the framework of increasing national income through the increase in the receipts of foreign exchange and foreign and domestic investments.
Article 6
Sub-article (1)
Sufficiently clear. Sub-article (2)
The involvement of the regional legislative assembly in the stipulation of the chairman and members of the Council of Areas shall constitute the implementation of Law No. 22/1999 on regional administrations.
With the limitation of the term of office of the head and the members of an Operational Board, abuse of power may be prevented.
Article 7 up to 18 Sufficiently clear.
