GEOGRAPHIC DESCRIPTION –INDONESIA

Indonesia is an archipelagic island country in Southeast Asia, lying between the Indian Ocean and the Pacific Ocean. It is
in a strategic location astride or along major sea lanes from Indian Ocean to Pacific Ocean. The country's variations in
culture have been shaped—although not specifically determined—by centuries of complex interactions with the physical
environment.

The island of Bali is part of the Republic of Indonesia, the largest archipelago in the world with over 18,000 islands.

A popular tourist destination known for its natural attractions, perfect climate and relaxed atmosphere, this island of
flowers, temples and friendly people is considered a real gem by travelers worldwide.

This tropical island is one of the most stunning, and yet, now dangerous destinations on the planet. Recent terrorism
attacks here and in other areas of Indonesia have stifled western tourism rather dramatically.

• Name Bali

• Population 3,325,000

• Capital City Denpasar

• Languages Bahasa Indonesia (official), English, Dutch and many local dialects.

• Flag

• Official Currency Indonesian Rupee (IDR)

• Currency Converter

• Religions Hindu (95%), others

• Geographic Coordinates

• Latitude/Longitude 08° 39' S, 115° 13' E

 • Relative Location Bali is located in the eastern and southern hemispheres. It's positioned in Southeast Asia, in
central Indonesia, and sits just to the east of the island of Java, and just west of the island of Lombok. It's
bordered by the Bali Sea and the Indian Ocean.

HUMAN RESOURCE MANAGEMENT SPECIALIST

HUMAN RESOURCE OF THE COUNTRY

Indonesia is said to have a population of 230 million people, it is the world's fourth most populous country. The county has
the world’s largest population of Muslims. Based on the 2000 census there are 86% Muslims, 5.7% Protestant, 3% are
Catholic, 1.8% Hindu, 3.4% Buddhist and other or unspecified .The country has an average age of 27 which is quite
young as compared to the developed countries. The counties official language is Indonesian. The other languages
include Javanese, Sundanese, Madurese etc.

Across its many islands, Indonesia consists of distinct ethnic, linguistic, and religious groups. The Javanese are the
largest—and the politically dominant—ethnic group. Indonesia has developed a shared identity defined by a national
language, ethnic diversity, religious pluralism within a majority Muslim population, and a history of colonialism including
rebellion against it. Indonesia's national motto, "Bhinneka Tunggal Ika" ("Unity in Diversity" literally, "many, yet one"),
articulates the diversity that shapes the country. Despite its large population and densely populated regions, Indonesia
has vast areas of wilderness that support the world's second highest level of biodiversity. The country is richly endowed
with natural resources, yet poverty remains widespread in contemporary Indonesia.

The literacy rate of Indonesia is said to be very good compared to the other developing countries and other muslim
dominated countries.

Adult Literacy Rate 2000-2004, Male , % 92

Adult Literacy Rate 2000-2004, Female, % 83

Adult Literacy Rate 2000-2004, Total, % 88

Youth Literacy Rate 2000-2004, Male, % 99

Youth Literacy Rate 2000-2004, Female, % 98

Youth Literacy Rate 2000-2004, Total, % 98

Adult Literacy Rate = The percent of people over the age of 15 who are literate. Data taken over a 5 year period. The
definition of literacy varies by country

Youth Literacy Rate = The percent of people between the ages of 15 and 25 who are literate. Data taken over a 5 year
period. The definition of literacy varies by country

LABOUR LAWS IN INDONESIA

Labour Laws of Indonesia

A. National Child Labour Laws

The basic minimum age law in Indonesia is Act No. 1 of 1951, which was passed but never implemented. It would set the
minimum working age at 14 years. However, draft implementing regulations are still under consideration and the actual
legal working age remains 12 years, as enacted under a Dutch Colonial Government Ordinance of 1925 on Measures
Limiting Child Labour and Night Work of Women.

Meanwhile, the Ministry of Manpower Regulation, No. PER-01/MEN/1987 legalizes the employment of children under the
age of 14 who must work to contribute to the income of their families. It requires parental consent, prohibits dangerous or
difficult work, limits work to four hours daily, and requires employers to report the number of children working.
Enforcement of any restrictions on child labour is weak. According to the U.S. State Department's Country Reports on
Human Rights Practices for 1993, in September 1993, the Government of Indonesia announced it would review its child
labour regulations with a view towards tightening enforcement of restrictions on child labour. At the end of 1993, the
review was not complete and no changes in practices have since been implemented. In its report entitled "Situation
Analysis on Women and Children," UNICEF confirms that Indonesia's child labour laws are inadequately enforced, and
calls for a review of national enforcement procedures.

B. Education Laws

According to the International Labor Organization, compulsory education is required up to age 13. The government of
Indonesia is planning to expand universal education from six grades to nine grades. Although the government has a
"compulsory education" program, it is not truly "compulsory" as there is no penalty for parents who do not enroll their
children. UNICEF estimates that more than one million children drop out of primary school every year, primarily because
the cost of supplies, uniforms, and other expenses are a burden for disadvantaged families, but also because of a
professed need to supplement family income.

C. International Conventions

Indonesia is a party to the U.N. Convention on the Rights of the Child. It has not ratified ILO Conventions No. 59
Concerning Minimum Age for Admission to Employment in Industry or No. 138 Concerning Minimum Age for
Employment.

Indonesia: Proposed amendments to labour law will weaken workers' rights

The Indonesian Government to introduce amendments to the Labour Law (No. 13/2003) which would seriously weaken
the rights and entitlements of Indonesian workers. The proposed amendments would weaken employment relationships
for many workers through extension of contract labour provisions, and that a series of other amendments concerning
retirement provisions, severance pay entitlements, outsourcing and disciplinary actions against workers would have major
negative impacts on job security, incomes and working conditions.

The efforts of Indonesian trade unions to oppose these amendments, which would without question lead to deteriorating
living standards and growing insecurity for the working men and women of Indonesia.

Sources of regulation

Several pieces of legislation and regulations comprise the law on termination of employment in Indonesia. Act No. 13 of
2003 concerning Manpower (“the 2003 Act”) consolidated the existing termination law and most of the rest of the current
labour law. While the 2003 Act did not explicitly repeal the Termination of Employment in Private Undertakings Act, 1964
(“TEPU”), it covers much of the same ground and reflects relatively recent changes in Indonesian labour administration.
The second major piece of Indonesian labour legislation is Act No. 2 of 2004 concerning the Industrial Relations Dispute
Settlement (the 2004 Act), which declares the TEPU as “no longer suitable with the needs of the society”, but still
applicable, as long as its provisions are not contradicting the new legislation.

Employment laws

• Conditions of employment: Under Indonesian law, the minimum age for employment in Indonesia is 15 years,
while the maximum work period is seven hours per day or 40 hours a week. Working hours may be extended to
nine hours a day, 54 hours a week with overtime pay.
 • Termination of employment: It is standard procedure for employers to have their new permanent employees
undergo a three-month probationary period. During this time the employers can, at their discretion, dismiss these
new employees. However, after this period, dismissal requires permission from the Committee for Settlement of
Labour Disputes of the Department of Manpower. Should permission be granted, the company is required to
provide severance payment, merit payment or service payment to the terminated employee.

• In 2003, the new Labour Law 13/2003 was implemented, which features a severance package that includes a
severance payment, a service payment and other compensation. Its introduction has been hotly debated by the
business community, due to additional costs for companies and the balance sheet liability associated with the
severance package.

• Maternity leave: Three months on 100% of wages

• Paid leave and holidays: There are generally 13 paid public holidays each year. Based on Government
Regulation No 21 Year 1954, employees are entitled to a maximum of 12 working days of paid annual leave. An
employee is entitled to receive sick leave for a period of up to 12 months. Employees are also given paid leave
for occasions such as the birth of a child (one day) and a death in the family (two days).

• Fringe benefits: Indonesian workers are generally entitled to fringe benefits from their employers. Some of these
are:

- payment of income tax due on salaries and wages

- an annual bonus of one month's pay, usually paid at Lebaran (the annual Moslem festival)

- medical expenses

- travel and meal allowances.

Demographic Indicators

There is no question about that the fertility rate in Indonesia has declined steadily since the national family planning was
launched for the first time in 1968. In 1961, Crude Birth Rate was 46 percent and it remained high in 1971 (40.6 percent).
But after 1971, CBR dropped very fast and steadily and was estimated at 24 percent in 1994. The total fertility rate (TFR)
has declined rapidly since 1971. During the period between 1967 and 1971, women had an average of 5.6 children during
their reproductive lives and the average declined to 2.8 in 1994.

Indonesia's experience in fertility transition is largely related to the expansion of family planning programs, the wider use
of contraceptives, the increase in level of education, especially among women, and the wider coverage of primary health
care programs. In the recent time, more than 47.1 percent of married women are using modern method of contraception
during their child bearing years. This figure varies according to provinces; 70 percent in Bali, 57 percent in Yogyakarta,
20.4 percent in East Timor and 18.9 percent in Irian Jaya.

There is a wide variation in the TFR among the provinces in Indonesia. Some provinces such as Jakarta, Yogyakarta, Bali
and East Java already reached TFR below 2.5, while the TFR in the rest of the country is still 3.0 or higher. Even in West
Nusa Tenggara, the TFR has declined very slowly from 6.65 in 1971 to 4.97 in 1990.

Human resources development: Aware of the need for human resources development, the Indonesian government has
made a concerted effort to improve the quality of human resources. In its Repelita VI five-year development plan, the
primary goal of human resource development in Indonesia is "to increase the capabilities of each individual and thus all of
Indonesian society as a whole". Furthermore: "This will be reflected in religious beliefs, improvements in physical and
mental health, development of knowledge and skills, increased adherence to a productive work ethic, a sense of national
responsibility, and increased awareness and understanding of the importance of preserving natural resources and the
ecosystem."

Other government initiatives include the development of leadership and entrepreneurial skills, and an increased
number of national development proponents in key industries who have "patriotism, perseverance, initiative, discipline,
social awareness, and awareness of their rights and duties".

Conclusion
In my opinion the country is one of the most populated counties which help us know that there is a decent amount of
labour force available. The country also has a good level of literacy for both male and female which will help the company
in getting quality workforce. The only drawback of the county is its labour management and conditions of the labour. The
labour in that country are exploited in many ways which will be studied further in Labour compliance specialist

CULTURAL LIAISON
CULTURE OF INDONESIA

Indonesian culture has been shaped by long interaction between original indigenous customs and multiple foreign
influences. Indonesia is central along ancient trading routes between the Far East and the Middle East, resulting in many
cultural practices being strongly influenced by a multitude of religions, including Hinduism, Buddhism, Confucianism and
Islam, all strong in the major trading cities. The result is a complex cultural mixture very different from the original
indigenous cultures.

Examples of cultural fusion include the fusion of Islam with Hindu in Javanese Abangan belief, the fusion of Hinduism,
Buddhism and animism in Bodha, and the fusion of Hinduism and animism in Kaharingan; others could be cited.

Indonesian art-forms express this cultural mix. Wayang, traditional theater-performed puppet shows, were a medium in
the spread of Hinduism and Islam amongst Javan villagers. Both Javanese and Balinese dances have stories about
ancient Buddhist and Hindu kingdoms, while Islamic art forms and architecture are present in Sumatra, especially in the
Minangkabau and Aceh regions. Traditional art, music and sport are combined in a martial art form called Pencak Silat.

Western culture has greatly influenced Indonesia in modern entertainment such as television shows, film and music, as
well as political system and issues. India has notably influenced Indonesian songs and movies. A popular type of song is
the Indian-rhythmical dangdut, which is often mixed with Arab and Malay folk music.

Despite the influences of foreign culture, some remote Indonesian regions still preserve uniquely indigenous culture.
Indigenous ethnic groups Mentawai, Asmat, Dani, Dayak, Toraja and many others are still practising their ethnic rituals,
customs and wearing traditional clothes.

CLOTH CULTURE

Several Indonesian islands are famous for their batik, ikat and songket cloth. Once on the brink of disappearing, batik and
later ikat found a new lease of life when former President Suharto promoted wearing batik shirts on official occasions. In
addition to the traditional patterns with their special meanings, used for particular occasions, batik designs have become
creative and diverse over the last few years.

INDONESIA-US RELATIONS :-

The United States has important economic, commercial, and security interests in Indonesia. It remains a linchpin of
regional security due to its strategic location astride a number of key international maritime straits, particularly the
Malacca Strait. Relations between Indonesia and the U.S. are positive and have advanced since the election of President
Yudhoyono in October 2004. The U.S. played a role in Indonesian independence in the late 1940s and appreciated
Indonesia's role as an anti-communist bulwark during the Cold War. Cooperative relations are maintained today, although
no formal security treaties bind the two countries. The United States and Indonesia share the common goal of maintaining
peace, security, and stability in the region and engaging in a dialogue on threats to regional security. Cooperation
between the U.S. and Indonesia on counterterrorism has increased steadily since 2002, as terrorist attacks in Bali
(October 2002 and October 2005), Jakarta (August 2003 and September 2004), and other regional locations
demonstrated the presence of terrorist organizations, principally Jemaah Islamiyah, in Indonesia. The United States has
welcomed Indonesia's contributions to regional security, especially its leading role in helping restore democracy in
Cambodia and in mediating territorial disputes in the South China Sea. During Secretary’s Clinton’s visit to Indonesia in
early 2009, she and Foreign Minister Wirajuda announced that the U.S. and Indonesia would begin discussions on
developing a comprehensive partnership between the two countries.

The U.S. is committed to consolidating Indonesia's democratic transition and supports the territorial integrity of the
country. Nonetheless, there are friction points in the bilateral political relationship. These conflicts have centered primarily
on human rights, as well as on differences in foreign policy. The U.S. Congress cut off grant military training assistance
through International Military Education and Training (IMET) to Indonesia in 1992 in response to a November 12, 1991,
incident in East Timor when Indonesian security forces shot and killed East Timorese demonstrators. This restriction was
partially lifted in 1995. Military assistance programs were again suspended, however, in the aftermath of the violence and
destruction in East Timor following the August 30, 1999, referendum favoring independence. Separately, the U.S. had
urged the Indonesian Government to identify and bring to justice the perpetrators of the August 2002 ambush murders of
two U.S. teachers near Timika in Papua province. In 2005, the Secretary of State certified that Indonesian cooperation in
the murder investigation had met the conditions set by Congress, enabling the resumption of full IMET. Eight suspects
were arrested in January 2006, and in November 2006 seven were convicted.

In November 2005, the Under Secretary of State for Political Affairs, under authority delegated by the Secretary of State,
exercised a National Security Waiver provision provided in the FY 2006 Foreign Operations Appropriations Act (FOAA) to
remove congressional restrictions on Foreign Military Financing (FMF) and lethal defense articles. These actions
represented a reestablishment of normalized military relations, allowing the U.S. to provide greater support for Indonesian
efforts to reform the military, increase its ability to respond to disasters and participate in global peacekeeping operations,
and promote regional stability.

Under the terms of the FY 2008 FOAA, signed into law in December 2007, Congress did not reimpose restrictions.
However, it prevented a portion of U.S. security assistance from being released before the Secretary of State reported on
the status of certain measures of military reform, of accountability for past human rights abuses, of public access to
Papua, and of the investigation into the 2004 murder of a prominent human rights activist.

Regarding worker rights, Indonesia was the target of several petitions filed under the Generalized System of Preferences
(GSP) legislation arguing that Indonesia did not meet internationally recognized labor standards. A formal GSP review
was suspended in February 1994 without terminating GSP benefits for Indonesia. Since 1998, Indonesia has ratified all
eight International Labor Organization core conventions on protecting internationally recognized worker rights and allowed
trade unions to organize. However, enforcement of labor laws and protection of workers' rights remain inconsistent and
weak in some areas. Indonesia's slow economic recovery has pushed more workers into the informal sector, which
reduces legal protection and could create conditions for increases in child labor.

Development Assistance From the United States to Indonesia

The U.S. Agency for International Development (USAID) and its predecessor agencies have provided development
assistance to Indonesia since 1950. Initial assistance focused on the most urgent needs, including food aid, infrastructure
rehabilitation, health care, and training. Throughout the 1970s and 1980s, a time of great economic growth in Indonesia,
USAID played a major role in helping the country achieve self-sufficiency in rice production and in reducing the birthrate.
Today, USAID assistance programs focus on basic and higher education, democratic and decentralized governance,
economic growth, health, and the environment.

CULTURAL SPECIALIST ADVICE

Looking at the cultural conditions of Indonesia, which is being exploited by even big companies, I suggest Jenny Active
Wear to follow the following Code of Conduct if it wants to conduct an ethical business.

1. Focusing at the needs of people, keeping in mind the traditional wear of the Indonesian people.

2. The market segment should be kept mid to high end products focusing on the mid end segment much more than
the high end one.

3. The market for garment export business is very promising as many entrepreneurs are starting to open up their
businesses here in order to hedge against the safeguards they see against China.

4. Indonesia’s mid to high level segment is fiercely competitive. So, here price penetration strategy will be extremely
viable.
5. Since the MFA ( multi-fiber agreement ), the garment industry in Indonesia has been holding up pretty well which
the cotton import data confirms.

6. In spite of the relatively bright short-term picture, some exporters are pessimistic about their long-term prospects.
They see China moving fast up the value chain while Indonesia moves more slowly to improve its competitiveness .This
provides an excellent opportunity to enter the market as there is scope for market development.

7. Quoted as the “World’s biggest kept secret”, Indonesian garment market for the mid to high end segment cannot
be beat even by China in price, quality, compliance and labor conditions and service. Plus Indonesia’s vertical integrated
industry is the final “icing on the cake” as per reliable sources.

8. Though Indonesia cannot be looked through rose tinted glasses, there are some negative factors which have to
considered while dealing with them viz. US safeguard policies, corruption , low productivity, more man-hours per garment
stack and poor infrastructure and security.

9. If all the above factors are kept in mind, the business will be successful.

The negative points in brief:-

• U.S. and EU Tariff/Safeguards Policies: Manufacturers argue that the U.S. and EU should consider preferential
tariffs for Indonesia as a means to maintain the country's economic and political stability. At the very least, they called for
"the playing field to be kept even" when safeguards are needed (except for China). Market expectations of additional
safeguard actions against China may already be encouraging U.S. and European buyers to diversity and purchase more
products from Indonesia.

• Financing: Manufacturers complained about a credit crunch caused by Bank Indonesia (BI) risk management
guidelines for bank lending to sectors with higher than average rates of non-performing loans (NPLs). The textile and
garment sectors fall into this category, with estimated NPLs of 8-9 percent in 2004. Manufacturers want banks to consider
lending decisions on a company-by-company basis. With greater access to cheap capital, manufacturers say they could
upgrade their textile and garment machines, which are now 10 years old on average. New machinery in turn would
improve quality and productivity and also enable Indonesia to maintain its competitive edge over China in mid to high-end
products.

• Labor: The present labor law provides on average nine months severance to dismissed workers, the highest rate
in the region. Coupled with provisions against contract workers and outsourcing, such generous severance pay
encourages investors to establish factories for less than three years, close them down, and then reopen new factories
employing new workers elsewhere. Manufacturers seek more rational calculations for provincial minimum wage rates,
with increases linked to inflation. Although not enthused with such reforms, several labor union leaders said they were
willing to cooperate with the government and industry to encourage greater investment.

• Infrastructure: Across the board improvements in infrastructure will lead to improved productivity, reduced
operating expenses, and better service. Many manufacturers say Jakarta's port should be "torn down" and a modern
facility built in its place or elsewhere. They complain that the port's inefficiency and unpredictable fees waste considerable
time and money. Other manufacturers worry that a lack of investment in Indonesia's power sector will mean that the
rolling blackouts across Java become more frequent and disruptive.

• Corruption: Manufacturers calculate that various unofficial payments constitute roughly 3 to 4 percent of their
operating expenses.

• Security: Manufacturers complained that U.S. travel advisory warnings were keeping U.S. buyers away. Those
that do business in Indonesia invariably work through agents in Hong Kong and Taiwan, whose reported preference is to
source from China and avoid trips to Indonesia. Manufacturers claim that American buyers who do visit Indonesia find the
business environment friendly and familiar.

• Vertical Integration: Indonesia has all the major components of a vertically integrated industry -- mills, garment
factories and laundries. However, the sector has not benefited as much from integration as it could because mid to high-
end textile mills produce material largely for export to the U.S., the EU and now increasing for China, while garment
manufacturers source the bulk of their material from the U.S. and Europe.

• Productivity: Manufacturers and buyers claim that it takes the average Indonesia garment worker twice as long as
her Chinese counterpart to produce the same number of garments.
 TRADE AND INVESTMENT SPECIALIST

Currency

The currency power of Indonesia in terms of usa is not powerful as some one would expect since the ROI would be very
less for usa company.

The rate goes

Indonesian Rupiahs (IDR) and United States Dollars (USD)

9000 IDR = 1USD$

Foreign investment in Indonesia

Indonesia posted a 41 percent rise in foreign direct investment in the first quarter of 2010 over the same period a year
ago, but domestic investment fell 30 percent, the Investment Coordinating Board said on Sunday.

The strong figure for FDI led officials and analysts to agree that 2010 could be a bumper year for investment.

The board, known as BKPM, recorded Rp 35.4 trillion ($3.92 billion) in realized FDI in the first three months, up from Rp
25 trillion in the first quarter of 2009, it said in a statement.

Gita Wirjawan, the board’s head, said notable investments by foreigners were in the transportation, warehousing and
communications sector, which drew $941.5 million in funds for 23 projects. Mining attracted $711 million in 12 projects.

Singapore was the leading investor in the first quarter, with $676.8 million going to 62 projects, followed by investment
from companies registered in Mauritius, a tax haven, of $446.6 million and the United States, with $436.9 million invested
in 12 projects.

Meanwhile, domestic investment fell to Rp 6.7 trillion in the January-March 2010 period from Rp 8.7 trillion in the same
period of 2009, the statement said, without elaborating on the decline.

The BKPM said the most active sector for domestic investment was transportation, warehousing and communications,
with Rp 1.9 trillion in seven projects.

Gita said he remained optimistic that a nationwide push by the agency through the end of this month would help domestic
investment rebound.
Total investment rose 25 percent in the first quarter, with more than 123,000 workers employed in 574 projects.

BKPM said the data it provided on Sunday was gathered using a new methodology. The agency has changed the
frequency of its data gathering by requiring companies with projects still under development to report to the board. It also
changed activity reports on current projects to every quarter, instead of every six months as previously required.

Investors who have obtained formal approval from the BKPM must also submit an Investment Activity Report every six
months, instead of once a year as before,

www.thejakartaglobe.com/...foreign-investment-in-indonesia...2010.../372699 -

Infrastructure

Much of the railroad network, however, was built before World War II, overburdened by users, and in need of substantial
overhaul. Maintenance of railroad rolling stock thus was given special attention in FY 1989 and FY 1990 through a US$28
million World Bank loan. More than 50 locomotives, 140 passenger cars, and 2,000 freight cars were scheduled for repair
and rehabilitation. Government funds also were provided under Repelita V for 15 new foreign-made diesel locomotives
(mostly from Canada and Japan) and 265 Indonesian-made freight cars designed for hauling coal, cement, fertilizer, and
palm oil. Funds also included purchases of foreign made signal equipment and automatic crossing gates.

The entire domestic merchant fleet included 35 oceangoing vessels with a capacity of 447,000 deadweight tons; by the
earlier licensing categories there were 259 interisland vessels with a capacity of 466,000 deadweight tons, over 1,000
modernized local ships with a capacity of 158,000 deadweight tons, almost 4,000 traditional ships with a capacity of
200,000 deadweight tons, and 1,900 special bulk carriers with a capacity of more than 2 million deadweight tons. About
60 percent of the total cargo shipped was on special bulk carriers, dominated by crude oil and natural gas; of the general
cargo carried by ship, which in FY 1989 totaled about 40 million tons, about 80 percent was carried on oceangoing or
interisland class vehicles, with the remainder split evenly between local and traditional craft. The importance of the
traditional craft may have been underestimated by official figures, since independent estimates ranged up to 10,000 such
craft, although sailing vessels were largely replaced by motorized craft. Additionally, there were some 21,600 kilometers
of inland waterways on which goods might be carried, 48 percent of which were in Kalimantan and 25 percent in Sumatra.

CURRENCY: The official currency is the Rupiah (Rp) divided into 100 Sen.

ECONOMY: Gross National Product; USD $136,620,000,000 (1993). Public Debt; USD $52,451,000,000 (1993). Imports;
USD $28,327,800,000 (1993). Exports; USD $36,823,000,000 (1993). Tourism Receipts; USD $3,988,000,000 (1993).
Balance of Trade; USD $11,496,000,000 (1994). Economically Active Population; 82,038,109 or 57.3% of total population
(1994). Unemployed; 2.8% (1993).

MAIN TRADING PARTNERS: Its main trading partners are Japan, the USA, Singapore, Germany and Saudi Arabia.

MAIN PRIMARY PRODUCTS: Bananas, Bauxite, Cassava, Coal, Copra, Coffee, Copper, Fish, Ground Nut, Maize,
Nickel, Oil and Natural Gas, Palm Oil, Rice, Rubber, Soya Beans, Sugar, Sweet Potatoes, Tea, Timber, Tin, Tobacco.

MAJOR INDUSTRIES: Agriculture, Fishing, Food Processing, Forestry, Mining, Oil and Gas Production and Refining,
Textiles, Transport Equipment.

MAIN EXPORTS: Crude Oil, Coffee, Fish Products, Natural Gas, Refined Petroleum Products, Rubber, Tea, Timber, Tin
and other Metal Ores, Tobacco.

TRANSPORT: Railroads; route length 6,583 km (4,090 (1988),Roads; length 250,314 km (155,538 mi) (1988). Vehicles;
cars 1,228,180 (1990), trucks and buses 1,424,189 (1990). Merchant Marine; vessels 1,884 (1990). Air Transport;
passenger-km 13,381,714,000 (8,315,009,000

COMMUNICATIONS: Daily Newspapers; total of 68 with a total circulation of 4,591,000 (1992). Radio; receivers
26,000,000 (1994). Television; receivers 11,000,000 (1994). Telephones; units 1,713,000 (1993).
 Trade with Indonesia : 2010

NOTE: All figures are in millions of U.S. dollars on a nominal basis, not seasonally adjusted unless otherwise specified.

Month Exports Imports Balance

January 2010 505.6 1,165.6 -660.1

February 2010 591.3 1,202.0 -610.7

March 2010 568.0 1,388.8 -820.8

April 2010 517.9 1,340.1 -822.2

May 2010 519.8 1,315.0 -795.2

June 2010 470.5 1,392.4 -921.9

TOTAL 3,173.1 7,803.9 -4,630.9

WASHINGTON, USA - The United States and Indonesia launched talks on Tuesday to curb illegal logging that threatens
the Southeast Asian country's rain forests and advanced other initiatives that could lead to a free trade pact, top trade
officials from both countries said.

Conclusion

From the above data we can conclude that trade relations between Indonesia and usa are growing they are more towards
others sectors as such there is no growth in in terms of textiles as such . from my point of view the agreements between
the respected countries can prove to be the boost but this is not the right time to invest in Indonesia as of now .
• http://www.census.gov/foreign-trade/balance/c5600.html

• http://www.census.gov/foreign-trade/statistics/product/enduse/exports/c5600.html

• http://www.census.gov/foreign-trade/statistics/product/enduse/imports/c5600.html

• http://www.embassyofindonesia.org/ina-usa/trade.htm

PRODUCT DEVELOPMENT SPECIALIST

Production: Textile And Apparel Industry

Indonesia is a major player in the textile and clothing industry in Asia. According to the Ministry of Industry, the value of
textile production was estimated at IDR 125,000 billion ($18.7 million) in 2005. The value of textile and textile products
exports reached $8.6 billion in 2005, making Indonesia the eleventh-largest textile exporter in the world. Indonesia, an oil-
producing country, houses one of the world’s largest synthetic fibre manufacturers.

The Indonesian textile and clothing industry is vertically integrated, encompassing almost every stage of production.
Indonesia has the largest share of spindles and looms among Asean countries and its capacity ranks as the fourth
highest in the world. The industry has a number of strengths which should enable it to retain and even expand its share of
international markets. But it needs to implement an extensive modernisation programme with some urgency.

Indonesia’s textile industry supplies most of domestic yarn demand. The primary yarn consumers are weaving and
knitting mills. Excess yarn production generally is exported to South Korea, Japan, and Hong Kong.

Factors of production

Raw materials

Indonesia’s textile industry consumes cotton and manmade fibers, particularly polyester, which accounts for more than 50
per cent of total consumption. With the exception of cotton, all of the other textile fibers are produced domestically. Over
the past decade, the share of polyester fibers in the total consumption of fibers has rapidly increased and captured the
previously dominant position of cotton.

The Indonesian government has appealed to the country’s textile sector to lessen their dependence on imports of raw
materials, especially cotton. Speaking at a recent working meeting with the House of Representatives (DPR) commission
of Industry and Trade, Indonesian Minister of Trade and Industry Rini M S Soewandi said that if the country continues to
be heavily dependent on cotton - which cannot be produced in Indonesia and has

to be imported, then its competitiveness in the international market will be negatively affected. As a result, the need of the
hour is to increase the use of flax fiber instead. To support this statement, the Minister referred to the project begun by the
government which has been showing signs of success, and has been producing flax fibers that can be mixed with
polyester materials in producing textiles. Apart from encouraging the marketing of this product, the minister further said
that she expected the domestic textile industry to buy new machines to enhance modernization and efficiency.

Labor

The Indonesian textile and apparel industry is highly labor-intensive, employing approximately 1.2 million workers directly
and an additional 3.5 million workers in other textile-related areas, such as distribution. The largest share of workers are
involved in the production of apparel 676,600 workers) and fabrics (355,600 workers). Manufacturing operations often are
overseen by expatriate management. Indonesia’s textile industry has had one of the lowest labor costs in the region.
However, there have been significant increases in the minimum wage (which is determined on a regional basis)
throughout the country.
Technology

Indonesia accounts for a large share of the installed textile capacity in the ASEAN region, accounting for 57 per cent of
the region’s short-staple spindles, 31 per cent of its shuttle less looms, 67 per cent of its shuttle looms, and 40 per cent of
its filament weaving looms. However, the Indonesia textile production machinery is beginning to become outdated, with
90 per cent of machinery more than 5 years old and the Ministry of Trade and Industry reports that the average age of
machinery in the textile industry is more than 15 years. Although older machinery currently does not appear to be
affecting competitiveness, it is unlikely that new investment will materialize.

Indonesia’s textile and apparel sector has ranked among the fastest growing industries in the nation and consistently has
been the largest source of non oil and gas foreign exchange. Indonesia exports textiles and apparel articles to more than
130 countries; with the primary markets being the United States and the European Union Other markets include other
ASEAN and Asian nations, the nations of the Middle East, and Australia.

Production Capacity and Production

Production Capacity:

Products Plant Capacity

Nylon Filament Yarn ITS 16,440

Tetoron* Polyester Filament Yarn

ITS 9,000

Tetoron* Polyester Staple Fiber

ITS 71,640

TEXTILE

Products Plant Spun Woven Dyed

Polyester/Cotton
Mixed Spun Textile CENTEX 8,040 31,320 51,600

ETX 35,556 104,400 0

Polyester/Rayon
Mixed Spun Textile ISTEM 13,440 21,600 23,040

Acrylic Textile ACTEM 7,200 0 0

Spun Fabrics: Thousand Pounds/Year Woven / Dyed: Thousand Yards/Year

WEAVING INDUSTRY

Current Issue

The decline in the performance of the country's Textile and textile product (TPT) industry including weaving industry as
indicated by sluggish growth of production and sales shrinking is caused by inefficiency with machines too old to be fit for
operation. The abolition of the export quota system by the United States and Europe as ruled by the WTO put the
country's TPT industry face to face with giant rivals mainly from China and India in lopsided market competition. The
quota restriction had been a protection for weak market competitors like Indonesia against powerful rivals.

Around 80% machines and equipment of the country's Textile industry have been more than 20 years in age. The
country's weaving industry had 204,393 units of machines already aged more than 20 years.

Inefficiency has also compounded problem faced by spinning and knitting industries as well as garment industry. Around
5.03 million units of spinning machines, 34.743 units of knitting machines, 325 units of finishing machines and 226,854
units of garment making machines are no longer fit for operation.

The country's textile industry also faces problem in the limited availability of basic materials such as viscose staple fiber,
and cottons fibers for which the country still heavily dependent on imports.

Based on data the industry ministry, rayon fiber production from the only producers PT South Pacific Viscose and PT
Indo-Bharat Rayon totals only 287,000 tons a year and 30% of which are exported. With domestic requirement of 250,000
tons, the country will have to import the shortage in supply of rayon fiber.

Early 2007, the government offered tax incentive for textile industry. Textile producers urged the government for the
inclusion of rayon fiver and polyester industry in the sectors receiving income tax facility.

The tax facility for the Textile industry is offered only to new investment in spinning, yarn, weaving, printing and finishing
industries and garment sectors.

Production capacity tends to be stagnant

The production capacity of the country's weaving industry has not increased in the wake of the 1997/1998 crisis and the
abolition of the export quota in 2005. Expansion of production capacity will require large investment as it will require not
only construction of new facility but also replacing of old inefficient machines.

As a result the country's production capacity has remained stagnant. In 2003 the production capacity of the country's
weaving industry dropped sharply to 1.724 million tons from 2.01 million tons in the previous year.

A number of producers of woven fabric have expanded their capacity but there are more factories forced to stop operation
because of marketing problem. In 2004, the production capacity grew slightly to 1.778 million tons, but fell again in the
following year to 1.777 million tons.

Cost Structure

Textile industry is considered to be a labour intensive industry. It absorbs around 15% of total labour in the Indonesian
manufacturing sector. Most of the labour are categorised as unskilled and as such, labour cost component in this sector is
relatively low. Minimum wages are hard to increase through market mechanism since the supply of labour exceeds
demand by far. Furthermore, the government recognises only one labour union founded by the government, and as such
it has no power to fight for their interests. It is also difficult for the firm to improve labour skills and conduct any training,
because of the high labour turn-over and absentee rate. The consequence is, that the quality of labour is progressing very
slowly.

Indonesia and India have the lowest production cost in the production of woven O-E yarn fabric, compared with Brazil,
Korea, Turkey, Italy and the US, with respectively US$ 0.836/yard and US$ 0.833/yard. Comparing the total cost
structure, Indonesia and India had the lowest labour cost component, but Indonesia had the highest cost component in
raw material.

Cost Structure of Indonesian Textile Industry, 2007 (%)

Cost Element Ring-yarn Woven Ring-Yarn Woven O-E Yarn Knitted Ring-Yarn Knitted O-E-yarn
fabric fabric fabric fabric
Waste 10 7 5 9 7
Labour 1 2 2 1 1
Power 5 8 7 6 6
Auxiliary material 3 5 6 4 4
Capital 31 42 42 33 32
Raw material 50 36 38 47 50
Total costs (US$) 3.63/kg 0.882/yard 0.836/yard 1.597/yard 0.767/yard
Source: ITMF 2007, pp. 14-19.

In the production of ring-yarn woven fabric, Indonesia counted to the lowest producer in 2007 with US$ 0.882/yard, with
India slightly lower. Brazil, Korea and Turkey had production costs around US$ 1/yard. Again Indonesia 旧 competitive
advantage lies in low labour costs, whereas in terms of capital and raw material costs, Indonesia was the highest even
compared to Italy and the US. (ITMF: 16).

In the production of knitted ring-yarn fabric/ottoman, Indonesia had in 2007 the lowest production cost of US$ 1.597/yard,
except India with US$ 1.436/yard. Again labour cost component was in Indonesia the lowest, whereas for capital and raw
material costs Indonesia was the highest (ITMF: 18).

Labour cost has the lowest percentage in total cost, in contrast with capital and raw material, which have approximately
31 - 42% and 36 - 50% respectively. In other word, the price of money (interest) and capital is an important consideration
in the industry.

A break-down of production cost in the Indonesian textile industry reveals that labour costs constitute only a very small
portion of total cost.

Import Content

Indonesian currently ranks as the eighth largest international clothing exporter, with a total value of $6.3 billion in calendar
year 2008. Also in CY 2008, Indonesia was the 12th largest textile exporting country with a total value of $3.7 billion.
However, higher international cotton prices were reflected with lower Indonesian cotton imports in MAY 2009/10 to 2.1
million bales. The United States continues to be the largest supplier of cotton to Indonesia, despite fierce competition from
Australia and African countries.

Plagued with persistent pests and disease, cotton is a minor crop in Indonesia. Production in recent years has held
steady at about 15,000 bales. Therefore, virtually all of Indonesia's commercial raw cotton needs are met by imports.

Cotton is purchased from major world producers contingent on price and quality. The principal suppliers in recent years
include the United States, China, Pakistan, Brazil and Australia

U.S. exporters are in a strategic position to capitalize on long-term developments such as the trend toward the production
of higher quality fabrics that is emerging in some of the larger Indonesia mills. Although price is an important criteria
guiding cotton purchases by Indonesian spinners, quality concerns appear to be equally important. This bodes well for the
future of U.S. cotton in Indonesia..

Domestic Market

The Indonesian industry is highly import-dependent and with the US dollar exchange value soaring in terms of rupiah,
production costs increase substantially. E.g., the industry is almost totally dependent on imports of raw cotton, around
95% of total needs. On the other hand money income for most of the population remains constant or even declines due to
large labour lay-off, except for a small group of farmers producing agricultural products for exports. As a consequence of
the continuing crisis, the number of poor people increases dramatically from some 20 million in early 1997 to an alarming
100 million people currently. Therefore domestic demand for textiles will decline in the next few years, because the poor
will spend their major income on food in the first place.

Foreign Market

Theoretically, with the deep depreciation of the rupiah external value, the cost competitiveness of Indonesia’s export
products will increase accordingly depending on their respective import contents, and thus exports will increase. However,
unfortunately Indonesia cannot capitalise on this increase in competitiveness, as there are a number of domestic
constraints to boost exports. Because of the lower rupiah exchange value, foreign buyers also ask for lower prices, import
content of textile export products is relatively high and local banks’ L/Cs are not accepted by foreign suppliers except to
pay in cash which hampers imports of various materials, supply of containers becomes scarce due to sharp falling import
volumes, political instability and delivery uncertainties cause foreign buyers to relocate their orders to other neighbouring
Asian countries. A number of buyers are known to have cancelled orders already.

The general picture in textile exports during the crisis year, from the second quarter of 1997 to the second quarter of
1998, was that exports reached their lowest level during the fourth quarter of 1997, but rebounched during the first and
second quarter of 1998. Comparing the second quarter of 1997 with 1998, exports in the second quarter of 1998 were still
far below that of 1997, with the exception of like man-made fibres. Thus, the effects of the crisis were also felt in terms of
falling export volumes.

For the future, the Indonesian textile industry cannot always rely on low-cost labour intensive production as it faces
competition from other producers with even lower wage costs. Continued export success requires an increased emphasis
on quality and the modernisation of production techniques.

Conclusions

1. The development of the Indonesian textile industry went backwards, starting from the downstream consumer’s
endproducts of fabrics, knitwear, to the upstream subsectors like spinning, printing, finishing and man-made fibre
manufacturing. Indonesia also has a specific subsector in textile processing, namely the traditional batik printing, that due
modernisation in the printing techniques and use of material and a large variety of endproducts, has grown to a relatively
large industry. The weaving industry is very mixed, since it has a long-standing history, from simple traditional handlooms
in villages to very modern technology in large integrated textile mills. The firm-size in the weaving subsector is also
varied, there are many small firms with old-fashioned technology and a small number of large modern weaving mills.

2. The garment industry developed in the early 1980s with the beginning of exports. The industry developed rapidly with
the fast growth in garment exports. Despite the rapid development in weaving industry, the garment industry which is
producing for the export markets, is still highly dependent on fabrics and material imports, due to high standard
requirements set by foreign buyers. Only few domestic producers can meet these high standards. The garment export
markets are dominated by well-known foreign brands, and local firms mostly produce for these brand-holders and have
no direct access to the foreign buyers.

3. According to ownership, the industry can be distinguished between private-domestic firms, foreign firms, joint ventures
and government-owned firms.

4. The textile and garment industry is highly concentrated in the province of West-Java and the Jakarta area.

5. The number of workers in the textile sector increased quite significantly but percentagewise from total employment in
the manufacturing industry, it declines from 14.65% to 14.20%.

6. Labour costs constitute only a small portion in total production cost in the textile industry, less than 2%. The largest
portions go to raw material purchases and capital coats.

8. The industry is highly dependent on imports. E.g., around 95% of raw cotton needs must be imported to support the
spinning subsector, and a substantial portion of man-made fibre and filament, special yarn must also be imported.
9. Indonesia is a member of the Multifibre Arrangement and therefore exports to certain developed markets are limited by
quotas. But due to the WTO, AFTA and APEC agreements, import tariffs for textiles and garment will be reduced
periodically.

Recommendations

1. Indonesia must capitalise on the present monetary crisis, which depreciated the external exchange value of the rupiah
deeply, to gain on cost competitiveness and thus increase exports. In order to achieve this goal, a number of major
obstacles must be removed, like import and export financing and red-tape in the export procedures.

2. Currently the textile industry due to the economic crisis, is working below production capacity. This excess can be used
to produce for exports.

3. Develop up-stream textile production including supporting industries to reduce the relatively high import-content of the
industry, including those for exports.

4. Emphasis on training of skilled labours in the textile industry and the education of textile engineers to meet future
intense competition and to improve product quality. Provide tax incentives for firms to do R & D activities.

5. Lower loan interest rates for new investments, production and exports from the current high level of around 30% per
annum.

6. Establish sales representative offices in prospective markets (U.S.A) and introduce own market-brands.

LABOR COMPLIANCE SPECIALIST

HUMAN RIGHTS ANALYSYS

Indonesia continues to be a concern among advocates for human rights. Importantly, both Human Rights Watch, as well
as Amnesty International, criticized the Indonesian government in their annual reports. In its 2007 World Report, Human
Rights Watch stated

“Continuing areas of concern in Indonesia include impunity for past human rights violations, the slow pace of military
reform, conditions in Papua, imposition of the death penalty, and infringements on freedom of expression and religious
freedom.”

Similarly, Amnesty International, in its 2007 Report for Indonesia, stated:

Perpetrators of human rights violations continued to enjoy impunity for violations which occurred in Nanggroe Aceh
Darussalam (NAD) and Papua. In Papua, cases of extrajudicial executions, torture and excessive use of force were
reported. Across the country, ill-treatment or torture in detention facilities and police lock-ups continued to be widely
reported. Three people were executed in September, sparking increased debate about the death penalty. At least 13
people were sentenced to death. Freedom of expression remained under threat with at least eight people prosecuted for
peacefully expressing opinions.

Additionally, on March 6, 2007, the U.S. State Department released its Country Report on Human Rights Practices for
Indonesia, which stated:

The government generally has been unable to adequately address serious human rights abuses committed in the past.
Inadequate resources, weak leadership, and limited accountability contributed to continued abuses by security force
personnel, although with sharply reduced frequency and gravity than under past governments. The following human rights
problems occurred during the year: unlawful killings by security force personnel, terrorists, vigilante groups, and mobs;
torture; harsh prison conditions; arbitrary detentions; a corrupt judicial system; warrantless searches; infringements on
free speech; restrictions on peaceful assembly; interference with freedom of religion by private parties, sometimes with
complicity of local officials; intercommunal religious violence; violence and sexual abuse against women and children;
trafficking in persons; failure to enforce labor standards and violations of worker rights, including forced child labor.
The year 2005 was notable for a series of attacks against minority Christians in Poso, including the 2005 Indonesian
beheadings of Christian girls.

WORKING CONDITIONS

The working conditions in Indonesia are not good. Since most of the people in the country are poor, the labours are
exploited i.e. they are given very less wages and made to work for many hours. Australia’s Oxfam Community Aid Abroad
released the report, "We Are Not Machines," which chronicles the working conditions facing Indonesian Nike and Adidas
workers. Eighty percent of the workers are young women, ages 17 to 29. According to Oxfam, most of the workers live in
extreme poverty, with full-time wages as low as $2 per day. The report also discusses hazardous working conditions, and
some of the indignities experienced by the workers.

CODE OF CONDUCT

Looking at the working conditions of Indonesia, which is being exploited by even big companies, I suggest Jenny Active
Wear to follow the following Code of Conduct if it wants to conduct an ethical business.

• Looking at the needs of the labours in the aspects of occupational health and safety, compensation, hours of
work and benefits.

• Minimizing our impact on the environment.

• Management practices that recognize the dignity of the individual, the rights of free association and collective
bargaining, and the right to a workplace free of harassment, abuse or corporal punishment

• The principal that decisions on hiring, salary, benefits, advancement, termination or retirement are based solely
on the ability of an individual to do the job.

STANDARDS OF CONDUCT

Forced Labour. (Contractor) certifies that it does not use any forced labour - prison, indentured, bonded or otherwise.

Child Labour. (Contractor) certifies it does not employ any person under the age of 15 (or 14 where the law of the
country of manufacturing allows), or the age at which compulsory schooling has ended, whichever is greater.

Compensation. (Contractor) certifies that it pays at least the minimum wage, or the prevailing industry wage, whichever
is higher.

Benefits. (Contractor) certifies that it complies with all provisions for legally mandated benefits, including but not limited to
housing; meals; transportation and other allowances; health care; child care; sick leave; emergency leave; pregnancy and
menstrual leave; vacation, religious, bereavement and holiday leave; and contributions for social security, life, health,
worker's compensation and other insurance.

Hours of Work/Overtime. (Contractor) certifies that it complies with legally mandated work hours; uses overtime only
when employees are fully compensated according to local law; informs the employee at the time of hiring if mandatory
overtime is a condition of employment; and, on a regularly scheduled basis, provides one day off in seven, and requires
no more than 60 hours of work per week, or complies with local limits if they are lower.

Health and Safety. (Contractor) certifies that it has written health and safety guidelines, including those applying to
employee residential facilities, where applicable.
Environment. (Contractor) certifies that it complies with applicable country environmental regulations; and that it has
agreed in writing to comply with NIKE's specific vendor/factory environmental policies and procedures, which are based
on the concept of continuous improvement in processes and programs to reduce the impact on the environment.

Documentation and Inspection. (Contractor) agrees to maintain on file such documentation as may be needed to
demonstrate compliance with this Code of Conduct.