source: http://xa.yimg.com/kq/groups/21665946/331957291/name/Publication+Music.pdf

1. BKPM
2010
Overview of Music Industry
Music Definition
Music is creative activities which are re‐
lated to creation/composition, perform‐
ance, reproduction, and distribution of
sound recordings.
Industry category in music sub sector is
classified from International Standard In‐
RAPID MAPPING OF CREATIVE INDUSTRY:
dustrial Classification (ISIC) or Klasifikasi
Baku Lapangan Usaha Indonesia (KBLI)
year 2005. According to ISIC and KBLI year
INVESTMENT AND DEVELOPMENT
2005, this sub sector is categorized as pho‐
nograph record sound recording, cassette
tape, compact disk (CD), recorded media
reproduction (re‐recording), computer
MUSIC
from master copies, re‐recorded floppy
and hard disk. Industry classification can
be seen in Table 1.
Table 1. Industry Classification for Advertising
Industry Code Description of Industry
Industry Category Remarks
(3 digit) Code
221 Publication Industry Processing Industry 22130
223 Recorded media repro‐ Processing Industry 22301
duction, film and video
Source: Ministry of Trade (2007) on Study of Creative Industry in Indonesia
Music sub sector has experienced high
A Positive Contribution to growth in accordance with Gross Domes‐
Economy tic Product (GDP) since the last five years
According to ASIRI (Asosiasi Industri Reka‐ (2002‐2008). Indonesia Statistic marked
man Indonesia), music expense in 2002‐ that music sub sector has grown 25.2%
2006 was Rp 3.6 trillion. In 2003, this num‐ from 2002 to 2008 or noticed as the 4th
ber increased to Rp 4.5 trillion, and be‐ ranked of creative industry sub sector.
Content: came greater in 2004 to Rp 5.6 trillion. The GDP number in 2002 was counted Rp
This number continued increasing in 2005 4,871,363 billion and continuously in‐
Advertising Definition 1 creased in 2003 into Rp 5,812,289 billion.
into Rp 7.2 trillion and slightly increased to
A Positive Contribution to Economy 1 Rp. 7.8 trillion in 2006 (Ministry of Trade, By 2008, music sub sector contributed
2007). In 2002, there are more than 2 mil‐ significantly in number Rp 18,864,815
Job Creation 2 billion or multiplied by more than three
lion CD’s had produced, and increased
Investment on Advertising 2 year by year. compared to 2002 (Table 2).
Trade Performance 3
Business Activity 4
Value Chain 4
“In 2002, there are more than
People: Main Resource for Creative 6
2 million CD’s had produced,
Advertising
and increased year by year”
Industry and Market: Competitive 8
and Value Added Product
Investment Procedures for Creative 9
Industry

2. Table 2. Music Contribution to National GDP
2002 2003 2004 2005 2006 2007 2008 Trend
GDP (in billion Rp) 4,871,363 5,812,289 9,664,968 12,510,352 13,059,658 15,281,326 18,864,815 25.2%
Contribution to Crea‐
3.0 3.5 5.0 5.8 5.1 5.1 5.2
tive Industry (%)
Creative GDP (in
160,337 167,357 192,128 214,540 256,848 297,557 360,663 14.8%
billion Rp)
Contribution to Na‐ 0.27 0.29 0.42 0.45 0.39 0.39 0.38
Source: Indonesia Statistic, 2009
Job Creation Statistical data (Figure 1) clearly showed that during 2002‐
In regard with job creation, this sub sector has quite significant 2008, music was counted Rp 45.7 million in average per year
contribution of labor force absorption. The statistic in Table 3 while other sub sectors were Rp 59.4 million in average, during
showed that music absorbed 234,128 labor forces in 2005, but the same period. Moreover, compared with over all creative
decreased 49.7% to 116,438 in 2008. Overall, the growth showed industry performance, this sector reached the highest value
negative 8.1%. Rp. 68.09 million per person in labor productivity in 2008,
slightly exceeded other sector productivity that only reached
Compared to other sub sectors, music was counted more signifi‐ Rp. 64.91 in the same year.
cant in workforce contribution than interactive game, advertising,
and Software and Computer Services. This sub sector counted Investment on Music
2.1% in average to national creative industry. In 2002, the number of music companies was 9,254 units. This
Table 3. Music Contribution to National Work Force
2002 2003 2004 2005 2006 2007 2008 Trend
Workforce 178,807 145,731 206,962 234,128 111,298 115,773 116,438 ‐8.1%
Share to creative industry (%) 2.2 2.2 2.8 3.2 1.6 1.6 1.5
Labor productivity (000 Rp) 22, 509 31,238 33,695 33,721 64,913 65,611 68,093 21.53%
Contribution (%) 0.20 0.16 0.22 0.25 0.12 0.12 0.11
Source: Indonesia Statistic, 2009
Music sub sector created quite significant value in which labor number increased significantly during 2002‐2008 to 14,047
productivity rose 21.53% during 2002 to 2008, and it was noticed companies by 2008 and marked that this sub sector contrib‐
as the highest number than other sub sectors, despite In average uted 0.41% of national creative industry in average (Table 4).
was only Rp 45,683 million. In 2002, this sub sector valued about In number of units, music sub sector contributed quite signifi‐
Rp 22.5 million and increased to Rp 31.2 million in 2003 and re‐ cant to national companies rather than advertising, Software
mained rising year by year until Rp 68.09 million in 2008. and Computer Services, and interactive game over the same
period. This sub sector was noticed 0.17% in average.
Figure 1. Comparison of Labor Productivity
80
70
“Compared to other sub
60
50
sectors, music was counted
40 more significant in workforce
30 contribution than interactive
20 game, advertising, and
10 Software and Computer
0
2002 2003 2004 2005 2006 2007 2008 Average
Services ”
Music Creative Avg
Page 2 MUSIC

3. Table 4. Total Number of Music Company (unit)
2002 2003 2004 2005 2006 2007 2008 Trend
Company 9,254 8,758 11,549 11,435 12,805 13,551 14,047 8.3%
Share to creative industry 0.29 0.33 0.37 0.42 0.50 0.48 0.47
Contribution to national 0.20 0.16 0.22 0.25 0.12 0.12 0.11
Source: Indonesia Statistic, 2009
Trade Performance only Rp 47,833 million and decreased
Music sub sector has positive contribu‐ Business Activity
to Rp 31,509 million in 2003 before The music industry is one of the fastest
tion in export trade, but the trend of returned to increase to Rp 155,633
export value during 2002‐2008 was growing export sectors of the global
million in 2004, and gradually de‐ service economy. Because it is based on
negative. Statistically (Table 5), in 2002, creased to Rp. 78,606 million in 2007.
export value of music sub sector was creative expression and related intangi‐
The final increasing of import to Rp
Table 5. Total Export of Music
2002 2003 2004 2005 2006 2007 2008 Trend
Export (million Rp) 724,457 1,004,425 379,260 225,989 238,300 131,409 77,821 ‐ 33.02%
Share to Creative Export 1.2 1.7 0.5 0.3 0.3 0.1 0.1
(%)
Contribution to national 0.14 0.19 0.05 0.02 0.02 0.01 0.005
(%)
Source: Indonesia Statistic, 2009
only Rp 724,457 million. Nevertheless, 140,178 million in 2008 created 12.6%
this number increased significantly to trend record, over the period. ble assets, intellectual property plays a
Rp 1,004,425 million in 2002 and re‐ critical role in determining its perform‐
Export‐import calculation will derive
mained decreasing drastically for the ance. The export potential of music is
net trade information
next five year to Rp 77,281 million in already recognized in
during 2002‐2008. From
2008. In aggregate, export trend of some developing coun‐
previous data that can be
music sub sector was ‐33.02% from seen in Table 7, the total “Music industry in tries (UNCTAD, 1999).
2002‐2008. Despite of that, this sub export is much higher Indonesia is the one of
sector is the biggest contributor of na‐ Music industry in Indo‐
than import in constant promising industry in nesia is the one of
tional export performance in average, range. This sector marked
compared with advertising, interactive last decades” promising industry in
positive trade Rp 676,624
game, and Software and Computer last decades. This sub
million in 2002 and in‐
Services. sector could absorb
clined to Rp 972,917 mil‐
many labor forces. It also needs sup‐
From import side (Table 6), perform‐ lion in 2003, before decline to Rp
porting from Indonesia music industry
ance of music also did not show any 223,627 million in 2004 and Rp. 93,021
began in 1954, when Suyoso Karsono
significant effect to national share that in 2005. The trade deficit was much
formed the first recording company
was noticed 0.04% in average. The im‐ bigger in 2008 in which music sub sec‐
“Irama”. He established his garage for
port value was relatively volatile in five tor marked negative trade of Rp 62,357
recording several band albums.
years. In 2002, the import number was million.
Table 6. Total Import of Advertising
2002 2003 2004 2005 2006 2007 2008 Trend
Import 47,883 31,509 155,633 132,969 90,893 78,606 140,178 12,6%
Share to Creative Import 1.08 0.78 2.80 1.92 1.50 0.97 1.34
Contribution to national 0.02 0.01 0.06 0.05 0.03 0.03 0.05
Source: Indonesia Statistic, 2009
BKPM Page 3

4. Table 7. Trade Performance of Music
2002 2003 2004 2005 2006 2007 2008
Export (million Rp) 724,457 1,004,425 379,260 225,989 238,300 131,409 77,821
Import (million Rp) 47,883 31,509 155,633 132,969 90,893 78,606 140,178
Net Trade (million Rp) 676,624 972,917 223,627 93,021 147,407 52,803 ‐62,357
Source: Indonesia Statistic, 2009
Along with time, potency of music art in Indonesia is becoming ply upstream output of 2.15. As an illustration, every Rp 1
bigger, according to antara news, music artists in Indonesia billion investment on music will create input addition from
could produce approximately 500 songs per day. Moreover, upstream industry of Rp 2.15 billion. That performance has
since 2005 there are more than 50 band groups established per put music sub sector in the 1st rank, from 14 sub sector of
year (Ministry of Trade, 2007). Nowadays, there are five major creative industry backward linkage performance. The most
record companies such as: EMI, Sony, Universal‐Vivendi, Time influenced upstream sector from output shifting are, amuse‐
Warner, Bertelsmann BMG. ment services‐ recreation‐ culture, printed goods, paper and
cardboard.
Currently, the digital downloading of music by consumers is
significantly changing the way of the record companies carry While, the output multiplier for forward linkage is 1.39 which
out their business activities. Digital music is increasingly being means each increasing of output unit in music (i.e demand,
distributed through the internet, both legally and illegally. In investment, or export) will multiply downstream output of
response, to the rising demand for digital music distribution, 1.39. As an illustration, every Rp 1 billion investment on mu‐
and in particularly to combat illegal ‘peer‐to‐peer’ (P2P) web‐ sic industry will create output addition on downstream in‐
sites, the major record companies have tried to establish their dustry of Rp 1.39 billion. The most influenced downstream
own on‐line sales services (Pressplay, MusicNet, Liquidaudio), sector from output shifting are, amusement services‐
but none so far have been successful. (The Transformation of recreation‐culture, printed goods, film and distribution ser‐
the Music Industry Supply Chain: A Major Label Perspective, vices.
Supply Chain Management Research Group Manchester Busi‐
ness School Executive Briefing 2006‐06) Table 8 shows some upstream and downstream industries
which possess significant influence towards output change in
By using Indonesia Input‐Output (I/O) 2003 update 175 sectors, music. From this performance, music sub sector occupied in
Ministry of Trade (2007) stated that music industry has signifi‐ the 13th rank, from 14 sub sector of creative industry forward
cant linkage to upstream and downstream industry. Ministry of linkage performance. As a supporting sector, amusement
Trade (2007) stated that, interactive game industry placed at services‐recreation‐culture, printed goods, paper and card‐
the 2nd rank from 14 sub sector of creative industry in multi‐ board are the most influenced upstream sector from music
plier output value. By using Input‐Output (I/O) 2003 update, the output shifting.
output multiplier is 2.15, which means each increasing of one
unit of final demand in music will multiply national output of
2.15. As an illustration, every Rp 1 billion investment on music Value Chain
will create Rp 2.15 billion of total output of national economy. The music industry is a highly innovative and creative sector
that is at the centre of much supply chain policy activity. In
For backward linkage coefficient is 2.15, each increasing of out‐ this industry there are four main stakeholders who involve
put unit in music (i.e demand, investment, or export) will multi‐ and interact each other.
Table 7. Linkage of Music
No Average Backward Linkage Average Forward Linkage Total Average
1 173 Amusement 0. 173 Amusement 0.554 173 Amusement 0.554
Service 553 Service Service, Rec‐
reation
2 93 Printed Goods 0.503 93 Printed 0.502 93 Printed 0.502
Goods Goods
3 91 Paper and 0.148 172 Film and Dis‐ 0.065 91 Paper and 0.075
Cardboard tribution Ser‐ Cardboard
vices
Source: Ministry of Trade, 2007
Page 4 MUSIC

5. Figure 2. Value Chain in Music Industry
The flow from upstream to down‐ ing and information dissemination
stream of this sub sector could be seen are professional promoters, disk Under the current structure, the most
from the value chain (figure 2). jockeys, dance clubs, television and dominating force in the industry is
radio stations. These channels labels. Labels command tremendous
This figure describes a complex making propagate information about new power by controlling major marketing
value process in music industry. The releases and provide samples of and distribution channels and by bind‐
particular stage of music industry activ‐ music to the music lovers and po‐ ing their artists to long‐term contracts.
ity will be elaborated as follow: tential customers. They also help Having very limited access to market‐
1. Creation: a person develop communities ing and distribution channels, most
or group, that cre‐ of music fans with emerging artists cannot compete on
ates song or music. similar tastes. Another their own. They either end up joining a
“Under the current
It could be original channel for branding is label or remain small in a niche market.
but also only make structure, the most retailers who, in addi‐ This allows labels to walk away with
a arrangement or dominating force in the tion to selling music, the lion’s share of profit. In general,
rearrangement industry is labels” sell promotional and labels collect about 85 to 90 percen of
from existing song associated merchan‐ the profit from music sales. (Hillis,
lyric. Musicians, dise. Scott (June 9, 1999‐3:43 PM ET). Cox
lyricists and recording artists (all 4. Sales Channel Interaction: a media Unit Invests in Internet Music
combined as artists) with creativity that deploy and distributes music or Firm,Yahoo!News).
and talent create music. This is a song, through Television, Radio,
creative process, but it also requires RBT, Store and Film. Music is a
collaboration and coordination "liquid" product. Unless it
among a diverse set of entities. is stored on "containers",
2. Production: a company that pro‐ such as CDs and audio‐
vides software programming and cassettes, it perishes.
hardware to mixing, recording and Retailers, such as Virgin
reproduction a music from musi‐ and Borders, keep these
cian. “containers” in their
3. Commercialization: a company that stores for the music lov‐
creating promotion through album, ers to buy them as they
and facilitates an artist to promote would buy cloths and
their new album through concert. toys. Another method of
Also includes branding, information music distribution is
dissemination and community through private and pub‐
building. Major channels for brand‐ lic shows.
BKPM Page 5

6. Mapping of Existing Condition in Music
People : Main Resource for + Indonesian Musician well‐known in placed as a tourism complement
Creative Music abroad. An indicator that Indonesian
musician getting well‐known abroad, Industry and Market : Com‐
Like other creative sub sector, people
other than succeed in interna‐
also the main resources in music since
tional competition events, is Java petitive and Value Added
creative people will create attractive Product
Jazz Festival that held annually at‐
music. Nowadays music distributed by
tended by world class jazz musicians, Music is one of the leading creative
internet or online media. On years
collaborates with local musicians. industries driving the media and enter‐
ahead, music used as a promotion and
This activity, make Indonesian Musi‐ tainment sector that is now worth an
also marketing media that creates value
cian acknowledged in the world. estimated US$1.4 trillion, with experts
and potential profit for clients. There‐
predicting this figure will grow to
fore, creative people in this industry
+ Numerous Musical school and US$1.8 trillion by 2010 (PWC) (Figure
should be more creative and innova‐
young age vocalist and children. 3). Music is becoming an increasingly
tive. The music industry is one of the
Though concentrated in big cities, important economic driver in the digital
fastest growing export sectors of the
however music school for young age era. The largest sector underpinned by
global service economy (UNCTAD,
and children, even adults grows nu‐ recorded music sales is the global com‐
1999). Because it is based on creative
merously. mercial radio advertising market, which
expression and related intangible as‐
was worth US$34 billion in 2008. Re‐
sets, intellectual property plays a criti‐
+ Musician became preferred profes‐ cord companies provide radio stations
cal role in determining its performance.
sion. Wishing becoming a musician with content they need to attract the
for children and teenagers in 1990’s audience that advertisers want to
Here are some existing positive condi‐
and prior to it, generally gets chal‐ reach.
tions that can be transformed into
lenge from parents. Income prospect
strength and opportunities for music
did not promising. However, nowa‐ However with only 1% of advertising
industry:
days this opinion has changed. Par‐ revenues flowing back to record com‐
+ Creative Indonesian music people.
ents prefer their children to partici‐ panies, or just over US$190 million in
Highly creative Indonesian music
pate in music course, music competi‐ performance rights income from radio
people proven with its creation pro‐
tions, such as: Mothers and children broadcasts to producers in 2008, radio
ductivity level, many problems oc‐
competition in “Supermama”. That networks currently squeeze incredible
curred in music industry. Music crea‐
shows Music profession proved to value from recorded music.
tion is never stopped yet, this music
be promising.
creation has reached world wide.
Sales of physical and digital recorded
Even so, there remain some handicaps music products fell by 5% in 2008, yet
+ Fast growth number of creative
that are potential as threat and weak‐ revenues streams such as performance
music people. So many new singers
ness to reach high qualified creative rights income and licensing revenues
and bands created, while senior
people in this industry. continued to grow strongly. Overall the
singers of the bands still exist. Num‐
‐ Lack of music curriculum. Education recorded music sector still experienced
bers of creative music people never
for musician is very rare, many musi‐ a small drop compared to 2007.
stop growing in Indonesia.
cians was born from self educated
process
+ Large aspirant creative music peo‐
ple potency. Indicators that
‐ Lack of appreciation for music
strengthen the condition are, many
teacher profession. There are
competition events had established.
many uncertified teachers in
Such as: Indonesian Idol, AFI, Kontes
elementary, secondary and sen‐
Dangdut, Rock Festival, Dream Band,
ior high school who teach music
kompetisi Ring Back Tone Indosat,
and many other potential events
‐ Inappropriate of music formal
create new music quality people.
education. Many bachelor de‐
gree from music do not have
+ Improvement in worldwide festival.
place to express their music
Such high potential can be devel‐
ability
oped by enormous chance to reveal
existence abroad, such as festivals
‐ Lack of government attention
where Indonesian musician shows its
for traditional music. During the
improvement.
time, traditional music was only
Page 6 MUSIC

7. ware in music device are much bet‐
Figure 3. Broader Music Sector
ter. Most of sound of music device
instrument, much more better imi‐
tate by a keyboard. To input sounds
of music instrument, song creator no
longer has to recognize such variety
music instrument. ICT likely this
thing happens.
However, development of digital and
ICT technology also has negative effects
to the music industry. ICT simplify pi‐
racy. Most of music in MP3 format cop‐
ied illegally. Latest music software ena‐
bling pirates to make their own compi‐
lation album. It is well known that pi‐
rated copies of CDs and cassettes cost
the industry huge amounts in lost reve‐
nues every year and that efforts to
overcome the problem through
In Indonesia’s music industry, digital from approximately around 3 mil‐ stronger copyright regimes have been
technology is tended to play significant lions times their RBT’s songs only partially successful.
role. Information technology and com‐ download each for IDR 7000.
munication, whether in a music sup‐ When copyright regimes are lax or non‐
porting software, telephone communi‐ + ICT opens new distribution path existent, it is a relatively easy matter
cation and internet to music supporting through music internet. Other than for pirated copies of music recordings
hardware (computer, sound hardware, RBT, distribution path through music to find a market. Worldwide pirate
digital music device, iPod, etc) are going internet download, or listen through sales in the year 2000 amounted to 1.8
to dominate the digital music market. internet streaming grows numer‐ billion units valued at around $US4.2
ously. This condition also supported billion, the principal problem areas
+ Information and Communication by proper ICT’s technology. being Eastern Europe, the Middle East,
Technology (ICT) opens new distri‐ Asia include Indonesia, Africa and Latin
bution path through ring back tone + ICT enriching music creation. ICT’s America.
(RBT). ICT utilize its music sold support, especially in music soft‐
through RBT. Potential business of ware, helps song creators in creates, Table 8 shows the ten major pirate
ring back tone (RBT) in cellular com‐ and help label in mixing process. This markets in the world, ranked by value
munication grows numerously. For process finalized by computerization of pirate sales in 2000. In some coun‐
example, a music group, such as process. Nowadays some of song tries, such as South Korea and Thailand,
Samson, has potential income in the creators has dependency to com‐ new copyright laws have recently been
amount of IDR 21 Millions acquired puter. Further ICT’s supporting soft‐ introduced, lowering levels of piracy
dramatically; in other countries, how‐
Figure 4. World Digital Music Revenues 2008 ever, the inadequacy or absence of a
national law against piracy means that
legal action cannot be taken against
infringing copies, and music creators,
publishers and record companies are
denied a proper return.
Besides the people and technology
factors, here are some existing positive
conditions in Indonesia music industry
that can be transformed into strength
and opportunities for music develop‐
ment:
+ High demand for domestic music.
From demand side, domestic mar‐
ket was highly appreciated. It
showed from 80% market share of
music was Indonesia’s.
BKPM Page 7

8. Table 8. The Major Music Piracy
ditional element in modern music Yet, there are still some weaknesses
Countries, 2000
has attracted international market. and threats to build competitive music
industry and optimize market opportu‐
Rank Country Value (US$ million) + Positive Growth of Indy label. Sim‐ nities as following:
ple mechanism in Indy label that had ‐ Most of music product is less com‐
1 China 600 develop could attract many artists in petitive in international market.
2 Russia 240 music industry. One of the indicators According to statistical data on ISIC
is enthusiasm in Indy band concert. and KBLI (Table 9), music is classified
3 Mexico 220
on HS 851910 (Coin or disc‐operated
4 Brazil 200 + Various distribution channel of mu‐ record‐players), 851931 (turntables
5 Italy 180 sic. Musician and label are not only with automatic record changing
6 Paraguay 110 uses cassette and CD. Nowadays, mechanism), 851939 (turntables,
7 Taiwan 100 they use Ring Back Tone (RBT), ad‐ without record changers), 851999
8 Indonesia 65 vertising jingle, internet music (other sound reproducing apparatus,
download and theme song as a mar‐ not incorporating a sound recording
9 Malaysia 40 device ), 852020 (Telephone answer‐
keting media. Indonesia is the 4th
10 Greece 40 place as a world RBT market share, ing machines), 852032 (magnetic
after Japan, South Korea and China. tape record digital) and 852090
Source: International Federation of the Pho‐ (audio recording equipment, without
nographic Industry, 2000 sound reproduction). RCA rate for
+ Confidence to compete with foreign
music. Music from foreign country is each HS was 2.5, 50.4, 0.13357,
not a threat, but it could be opportu‐ 3.227, 0.636, 0.1712, 0.1060 and
+ Potential growth for ethnic music in
nity, because it can be made as a 0.16316 in 2008. HS (851910,
domestic market. Ethnic music such as
new knowledge to enrich domestic 851931 and 851999) are competitive
contemporary concept was growth
music. in the international market.
positively. Balawan, Vicky Sianipar and
others are the generator in this music
+ Indonesia’s music expansion to in‐ Factors those made music industry in
stream.
ternational market, especially to Indonesia less competitive are several
Malaysia. Domination of Indonesia’s taxes that imposed on music industry
+ Positive acceptance for Indonesia’s
music in Malaysia’s market. such as:
ethnic music in international markets.
1. High tax and duty has made decre‐
Ability of Indonesian artists to put tra‐
ment to this industry
2. Excessive Withholding Tax to hold a
performance or music concert.
Table 9. RCA for Music Clasification 3. Excessive international tax to a song
lyric using foreign language
Export of HS 851910 Export of HS 851931
(although by Indonesian musician).
Indonesia: US$ 5.52 million Indonesia: US$ 1668.31million Moreover, government attention in this
World: US$ 266.31million World: US$ 1531.90 million industry is still low, such as:
RCA: 2.5 RCA: 50.4 1. Unsettlement on music distribution
channel;
Export of HS 851939 Export of HS 851940 2. Lack of facilitation to join interna‐
Indonesia: US$ 108.98 million Indonesia: US$ 6.49 million tional competition;
3. Less domestic promotion;
World: US$ 5456.59 million World: US$ 3960.43 million
4. No incentive to access affordable
RCA: 0.13357284 RCA: 3.22753643 infrastructure for supporting musi‐
Export of HS 851999 Export of HS 852020 cians;
5. The highly unstructured and infor‐
Indonesia: US$ 108.98 million Indonesia: US$ 6.49 million mal nature of the sector;
World: US$ 97691.97 million World: US$ 240.77 million 6. A grossly inadequate database: ow‐
RCA: 0.6361747 RCA: 0.17124484 ing to its largely informal nature,
the sector is un quantified in almost
Export of HS 852032 Export of HS 852090 very respect, including by the na‐
Indonesia: US$ 21057.11 million Indonesia: US$ 43.93 million tional statistical agencies, which
World: US$ 20954.23 million World: US$ 4160.03 million lack the requisite accounting or
auditing capabilities to capture the
RCA: 0.10604037 RCA: 0.16316969
Page 8
real economic contribution of this
Total Export sector;
7. Lack of policy support: the sector
Indonesia: US$ 119,766,649.337 million
lacks legitimacy and a policy
World: US$ 14,250,543,869.774 million framework in most Least Develop
Source: UN COMTRADE, 2010 (Processed) Countries including
MUSIC

9. Indonesia as a bonafide export
oriented industry;
8. A poorly implemented IPR regime:
although by now practically all
countries have a modernized legal
system that includes a copyright
system, and that favors IPRs, these
are far from being implemented
and countries lag behind in rights
management, particularly Indone‐
sia;
9. Ineffective or non‐existent institu‐
tional infrastructure, including
trade associations, NGOs, lobby
groups and civil society entities
that represent the industry’s inter‐
ests (such as Music Rights Groups,
etc).
Investment Procedure for Creative Industry
There is actually no difference between
Fiscal Incentives : Custom and
creative industry and non creative in‐ BKPM also introduces Regulation 13 of
dustry on investment. Government of 2009 regarding Guidance and Proce‐ Taxes
Indonesia only differ two types of in‐ dure of Investment Control, Regulation The Government of Indonesia (GoI)
vestment, industry with fiscal incentive 11 of 2009 regarding One Stop Service, has enacted Ministry of Finance’s de‐
and industry without fiscal incentive. and Regulation 14 of 2009 regarding cree of 176/2009 regarding the Import
Electronic Information Services and Duty Exemption for Machinery, Goods,
BKPM regulation 12 of 2009 concerning and Materials for Industrial Establish‐
Investment Licensing System in order to
guidance and procedures for invest‐ ment and Development in order to
improve its service to investors in Indo‐
ment application to replace its earlier Investment. The regulation exempts
nesia.
regulation of 2004. The investment machinery, goods, and materials which
must be made through the following have not been produced in Indonesia,
Moreover, on January 15th 2010, the
procedures: have been produced in Indonesia with
Government, represented by Coordina‐
‐ Application for a registration to the tor Minister of Economic Affair, Minis‐ less specification needed, or have been
BKPM, the respective province, or ter of Trade, Minister of Finance, Minis‐ produced in Indonesia with insufficient
district, or city. The registration ter of State Owned Enterprise, Head of quantities.
statement is issued within one day the Investment Coordinating Board,
of receipt of the application. and Head of the Commercial Free Port Custom incentive is for import substitu‐
‐ Foreign investment companies with and Trade, formally inaugurated the tion industries in the form of exemp‐
a limited liability company status using of Electronic System of Informa‐ tions from import duty/tariff on raw
and so eligible for fiscal facilities may tion Service and Investment Licensing materials or components. Import du‐
firs obtain a principle permit to (SPIPISE) or commonly known as Na‐ ties/tariff ranges is from 0% to 5% in
BKPM. The principle permit is issued tional Single Window for Investment in which 0% tariff is provided for telecom‐
within three days of receipt of the Integrated One Stop Service (PTSP). The munication manufacturing industry,
application. using of SPIPISE was one of 100 days shipbuilding industry and shipping ser‐
‐ Investment companies that intend to program from the Indonesia Cabinet vices.
perform commercial or production and orderly to serve national Integrated
activities must file an application for licensing or non‐licensing. This is to Whereas 5% tariff duties is provided for
a business license to the BKPM or implement the President Decree of Foreign Investment Companies (PMA)
the respective province or district or 27/2009 regarding Integrated One Stop as well as Domestic Investment Compa‐
city. The license will be used at the Service (PTSP) for Investment. nies (PMDN) that support the growth of
latest seven days after receipt of the new industries, both industrial goods
application. and services.
BKPM Page 9

10. By this mean, the regulation implies
some industries with this incentive as
follows:
1. Manufacturers of motor vehicle
components on the import of raw
materials.
2. Electronic components industry to
import raw materials, subcompo‐
nents, and auxiliary materials.
3. Manufacturers of motor vehicle
components on the import of raw
materials, certain subcomponents
for the manufacture and assembly
of large equipments.
4. Special motor vehicle manufactur‐
ers that make goods and materials
imported for the manufacture of
components, equipment, and spe‐
cial vehicle body of car.
5. Industrial machinery and turning
motor development on the import
of raw materials and auxiliary mate‐
rials. Bonded Zones (Perusahaan Di industrial company in custom area.
Kawasan Berikat – PDKB) to
While custom fiscal incentive and tax to another PDKB for further In addition, GoI has granted fiscal
export industries is given for: processing, the release of stimulus since February 1st 2003 which
1. Import Facility for Export Purpose goods or materials to indus‐ consist of:
(Kemudahan Impor Tujuan Ekspor‐ trial companies in other PDKB 1. Removal sales tax on 23 products
KITE), is given to goods and raw/ DPIL or subcontractors frame‐ such as: Television up to 21 inch,
auxiliary materials to process, as‐ work. hand phone, washing machine, re‐
semble, or install in other goods for iii Delivery back of taxable goods frigerator up to 180 liter, Air Condi‐
the purpose of exports. Facilities (Barang Kena Pajak – BKP) of tioner up to 1 HP, camera up to Rp
provided in the form of import duty subcontract framework by 500,000, and microphone and other
and excise tax exemption and sus‐ taxable companies electronic products.
pension of the imposition of Value (Pengusaha Kena Pajak ‐ PKP) 2. Reduction on sales tax applicable
Added Tax (VAT) and VAT‐Luxury in origin PDKB and rate for mine products, such as: VCR,
(PPnBM) on the importation of iv Borrowing machinery and/or VCD, DVD from 20% to 10%, Cas‐
goods and raw materials. factories equipment in sub‐ sette radio from 20% to 10%, and TV
2. Bonded Zones. Bonded area is a contracting project. beyond 21 inch from 30% to 10%.
building, place, or areas with spe‐ 3. Postponement implementation of
cific boundaries in which the busi‐ c. Excise exemption of Import Ex‐ VAT on: Toll road, electric industry,
ness activities of goods and indus‐ cise Goods Import for further electric household, cattle food, and
trial materials processing, design processing and revenues from raw material/capital goods.
and construction activities, engi‐ the Excise Goods DPIL for further
neering, sorting, initial inspection, processing. Non Fiscal Incentives
final inspection, and packaging of There is actually less indicating attrib‐
goods and materials or goods and 3. Bonded Storehouse. Taxable goods ute to classify non fiscal incentives for
materials imported from other Indo‐ imported or delivered from custom creative industry. In accordance with
nesia customs area, which results area to Bonded Storehouse are VAT regulation, it exist Regulation of Minis‐
mainly for export purposes. Facili‐ and Sales Tax free of collection. ter of Communication and Information
ties provided in the form: However, delivery taxable goods Technology (PermenKominfo) of
a. Import duty suspension and VAT outside the Bonded Storehouse to 25/2007 regarding the Use of Domestic
exemption. consume shall subject to VAT and Resources in Advertising Products. The
b. VAT exemption and VAT levied sales tax. regulation has been started to imple‐
Import Duty on: 4. Integrated Economic Development ment since May 2008 through inter‐
i Income taxable goods from Zone (Kawasan Pengembangan Eko‐ ministry coordination control. The pur‐
other Indonesia Custom Area nomi Terpadu – KAPET). VAT and poses of this regulation are to empower
(Daerah Pabean Indonesia Sales Tax are not collectible for im‐ local resources, minimize import de‐
Lainnya – DPIL) for further portation taxable goods in relation pendency, and introduce domestic
processing to development to process for ex‐ competitiveness to global market.
ii Companies that operate in port and delivery to subcontractor
BKPM Page 10

11. The regulation mandates related insti‐ operating IPTV Service as a new promis‐
tution to fully prior domestic entrepre‐ ing business area. As informed, IPTV is a
neur’s participation in advertising in‐ technology providing convergent ser‐
dustry. Only some specific advertising vice in the form of radio broadcast and
products which are allowed to use for‐ television, video, audio, text, graph and
eign resources such as: foreign tourism, data channel to the subscribers through
foreign property, international compe‐ internet protocol networks with quality
tition, global brand with international assured service, safety, reliability, and
icon, and foreign flag ship. In addition, able to give communication service
proportion of domestic expert and for‐ with subscribers interactively and real
eign expatriate (if needed) is strictly time using standard television.
limited of 1 : 3. Moreover, the involve‐ In practice, IPTV provides television
ment of expatriate (if needed) is con‐ programs contents (sports, news, films,
fined of maximum 2 years with provi‐ and others) and other interactive enter‐
sion of knowledge transfer. taining contents (music, game, and
advertising) through a secured IP
Creative industry is uniquely based on broadband network and accurately end
creative idea and intellectual. This sec‐ ‐to‐end managed by service provider.
tor needs priority to be securely pro‐ Regarding this, the initiative of the GoI
tected from intellectual property viola‐ is welcome by telecommunication com‐ vates and mobile advertising.
tion. Some regulations related to intel‐ panies that it positively endorses busi‐
lectual property (Trademark, Copyright, ness expansion to potential market. Indirect Benefit from Non Fiscal Incentive
Industrial Design, Trade Secret, Patent, Moreover, IPTV will improve added for Upstream and Downstream Industry:
etc) has been enacted and strictly im‐ value of wire line and automatically • The regulation of Minister of Commu‐
plemented. This is solely in the purpose revitalize business transformation since nication and IT to endorse the use of
of building conducive atmosphere in declining phase in business cycle inevi‐ domestic resources for advertising
creativity and business as a whole. table product can fully benefit advertising
product as well as human resources:
This commitment has resulted improve‐ Nonetheless, entrepreneur, business TV, mobile, and outdoor advertising.
ment status that Indonesia has been person, or investor can adjust their • The GoI’s commitment on law enforce‐
removed from the US Priority Watch business classification into regulation ment against IPR violation can benefit
List for Intellectual Property Rights vio‐ requirements to indirectly get benefit all sub sectors to do business in condu‐
lation. As informed, Indonesia has been from the incentives. The existing of cive atmosphere.
on the Office of the United States Trade incentives for creative industry is po‐ • Regulation of IPTV can benefit adver‐
Representative’s Special 301 Priority tentially to provide as the government tising product, interactive game and
Watch List for violations of intellectual enacted President Decree of 28/2008 music since telecommunication com‐
property right since 2001. In recent, an regarding National Industry Policy panies welcome the regulation and
Out of Cycle Review (OCR) resulted that wherein Article 4 states some require‐ state their readiness to expand busi‐
the seriousness of GoI on law enforce‐ ments to consider incentive provided. ness to IPTV product.
ment against IPR seems to improve and
classified Indonesia on “Watch List”. Indirect Benefit from Fiscal Incentive
OCR views some significant progress on Given for Upstream and Downstream
IPR enforcement strategy among agen‐ Industry:
cies as well as to conduct public aware‐ • The removal sales tax on 23 prod‐
ness campaign. ucts (TV and Hand Phone) can bene‐
fit advertising product as stimuli
OCR concluded that Indonesia has im‐ given is expected to increase TV and
proved implementation of its regulation hand phone sales and benefits ad‐
aimed at hindering illegal production of vertising sector like Conventional INDONESIA INVESTMENT
pirated optical discs (CD’s and DVD’s) and Mobile advertising. COORDINATING BOARD
by controlling the licensing of factories • Reduction on sales tax applicable
and conducting raids against pirate rate for mine products, such as: VCR, Directorate of Planning for Agribusiness and
optical disc production facilities since VCD, DVD from 20% to 10%, Cas‐ Natural Resources
2006. sette radio from 20% to 10%, and TV Deputy of Investment Planning
beyond 21 inch from 30% to 10% can Jalan Jendral Gatot Subroto No. 44
Jakarta 12190
On Information Communication and benefit as it is expected to rise music
Technology, the GoI has issued the products in VCD/DVD and advertis‐ Phone: +62 21 522 5837
Regulation of Minister of Communica‐ ing products sales as implication. Fax: +62 21 522 5837
Email: info@bkpm.go.id
tion and Information Technology • Import duties/tariff ranges from 0% Website: www.bkpm.go.id
(Permen Kominfo) of 30/2009 regard‐ to 5% in which 0% tariff is provided National Single Window for Investment:
ing Operation of Internet Protocol Tele‐ for telecommunication manufactur‐ www.nswi.bkpm.go.id
vision (IPTV) services in Indonesia. The ing industry can benefit software INVEST IN REMARKABLE INDONESIA
regulation will give legal assurance in and computer services and its deri‐