Indonesia

Implementing a Risk Management Scheme at the Ministry of Trade

Working Together Towards Integrated Border Risk Management

Alliance Project
Status: In implementation

Since Indonesia was prioritized for a potential project at the third working meeting in Neutraubling, the Alliance has been in conversation with its Indonesian partners to prepare a joint project for trade facilitation.

Background

Indonesia is an economic powerhouse in the ASEAN region and in recent years has made great progress in improving its investment and business climate. To further reduce time and costs of trading, the Government of Indonesia has ratified the World Trade Organisation’s Trade Facilitation Agreement (TFA). The TFA creates a significant opportunity to improve the speed and efficiency of border procedures, thereby reducing trade costs and enhancing participation in the global value chains.
One article of the TFA that is of particular importance to reduce trade costs and that encourages coordination between all border agencies is Article 7.4 on Risk Management. The Government of Indonesia wants to develop a holistic approach to risk management encompassing all border agencies – the Indonesia Single Risk Management Strategy (ISRM).

The benefits

Risk management in international trade helps to determine the risks associated with imported and exported goods. At and behind a country’s border, it is a tool to decide which goods and which traders need to be checked. It helps balance the need for control with the need to facilitate international trade.

A risk management scheme will thus enable more efficient and effective control of products on the Indonesian market and facilitate greater compliance with international standards. For traders, an efficient, intelligence-led risk management scheme will result in faster processing of import and export licenses, fewer interventions, and it will reward compliant businesses: They are checked less, and can obtain faster clearance. Dangerous goods or non-compliant traders can be targeted and controlled more effectively, making Indonesia’s market safer for consumers and society.

“BASF has been investing in Indonesia since 1976 and today supports country’s key industries. We are glad to support the implementation of Risk Management Scheme initiated by German Alliance for Trade Facilitation and the Ministry of Trade. With the new scheme, reputable importer and exporter will be able to provide better and reliable support to customers in Indonesia.”

Prawira Atmadja, Director, BASF Indonesia

Project Approach

One of the administrations that is striving towards a risk management scheme is the Indonesian Ministry of Trade, supported by the German Alliance for Trade Facilitation. GIZ is the implementing partner. The joint project focuses on developing and applying systematic risk indicators for two core processes: for issuing import and export licenses; and for controlling goods post-border after customs release. These two processes can then serve as a starting point for developing an integrated risk management system.

Traders are actively involved in the project. Representatives from the Indonesian Chamber of Commerce and Industry KADIN, from EuroCham as well as Member Companies of the German Alliance for Trade Facilitation serve as a sounding board, contributing their industry insights and expertise, and provide sense checks from a trader’s perspective

Sharing experiences and expertise within Indonesia and globally is at the core of the project.

The Ministry of Trade is in contact with the Indonesian Directorate General of Customs and Excise and other border agencies as well as the Indonesia National Single Window (INSW) to exchange information and good practices on risk management and inter-agency cooperation in Indonesia.
Several public-private dialogue events are organized throughout the project cycle.
Further, the project also utilizes international good practices and offers learning opportunities through study visits at administrations that deal with risk management worldwide.

Timeline

The project will be implemented in three phases over 24 months:

Phase I Project set-up and preparation

Phase II Analysis and design of new processes and risk indicators

Phase III Technical project implementation, including setting up risk management pilots and trainings for officers, and evaluation

The partners

The Ministry of Trade of the Republic of Indonesia has the mandate to facilitate, encourage, enhance and promote commercial life and activity in Indonesia by acting as a service and support structure for the domestic and international commercial and trading sector. It will do so by the vigorous pursuit of policies that will develop and maintain a correct framework for a vibrant and productive enterprise sector within the broad guidelines of a market-oriented competitive economy that is open to the world.

GIZ implements the project on behalf of the Alliance for Trade Facilitation. The German Alliance for Trade Facilitation, supported by the German Federal Government, combines the strengths of companies, business associations and ministries to create sustainable change. At GIZ Indonesia, the project is affiliated with the GIZ Business Hub – a project management office that supports the engagement of commercial enterprises in sustainable development.