Indonesia: Moving ForwardSource: OECD, 2018; Jakarta Post, 2018 Over the next 3 years (2017-2019),...

Dina SetiawatiDirector of Exhibition and Promotion MediaIndonesia Investment Coordinating Board (BKPM)

Indonesia: Moving Forward

Tokyo, 26 November 2018

© 2018 by Indonesia Investment Coordinating Board. All rights reserved

INDONESIA INVESTMENT COORDINATING BOARD

Why Indonesia


Source: IMF, October 2018

“Indonesia is a clear example on how a country can grapple with difficult economic circumstances and do that with success” (Christine Lagarde, AM IMF-WBG Bali 2018)

“The scorecard of Indonesia is excellent: Whether you look at the increase in per capita GDP, which has more than doubled.

If you look at poverty reduction, which is now down to 11 percent.

If you look at growth. If you look at inflation, which is kept under control......

If you look at reserves, massive improvement.

If you look at the structure and the solidity of the banking sector, massively restructured. Same thing.

And if you look at debt, a very respectable track record as well, with [public and private foreign debt each] of only 17 percent to GDP.

And if you look at the fiscal rules that are enforced in the country, again, a very good track record.”

Indonesia’s Economy has demonstrated consistent growth for the last 50 years


The latest OECD economic survey of Indonesia was presented on Oct 10 by OECD secretary general Angel Gurría in Nusa Dua, Bali, on the sideline of the International Monetary Fund-World Bank (IMF-WB) Annual Meeting.

Key Points1) Living standards are rising steadilyThanks to a steady economic expansion and helpful government policies, poverty rates and inequality are falling, and access to public services is broadening.

2) Raising revenues is the key fiscal challengeStrengthening the tax administration is a government priority and is crucial for improving compliance.

3) The youthful population is an opportunityHalf of Indonesia’s population is under 30 years old. This favourable age structure will contribute to future prosperity, if policies are put in place.

4) Tourism can boost regional developmentGrowth in tourism has been remarkable. Annual visits have almost tripled over the past decade, with China becoming the largest source.

“Indonesian economy was growing at healthy rates, and a demographic dividend would further boost growth in the coming years.” (Angel Gurría –OECD Secretary General)


Source: OECD, 2018; Jakarta Post, 2018

Over the next 3 years (2017-2019), it is estimated that $75 trillion global economy will expand by another $6.5 trillion in size.

Source: World Economic Forum (WEF), 2017.Percent of estimated global growth

United States

Japan

France

Germany

Italy

United Kingdom

China

Spain

Countries with GDP of more than USD 1 trillion per year,

and the year they joined

TRILLION DOLLAR CLUB

Canada

Brazil

India

Russia

Mexico

South Korea

Australia

Indonesia

The top-5 economies that will generate that growth (%):

1970

Source: SEASIA

1979

2005

1988

1990

1990

1990

1998

2004

2006

2007

2007

2007

2007

2008

2017


Indonesia is the 5th biggest contributor to the world economic growth

USA325.7

Brazil209.3

China1,386.4

India

ASEAN647.4

1,339.2

Equal to 40.8%of ASEAN total population[World Bank, 2018]

305.7Million peopleof Indonesia population in 2035[CEIC, 2018]

42%of the population are generation X and Y[Presidential Advisory Council RI, 2018]


Indonesia is the most populated country in ASEAN

Comparison of the World’s Top-5 Total Population in 2017 (million people)Source: World Bank, 2018

263.9Million peopleof Indonesia population in 2017[World Bank, 2018]

INDONESIA

The Investment Coordinating Board of the Republic of Indonesia

7

ASEAN FTA(10 members)

Trade Preferential System(41 members of OIC)

China• ASEAN-China FTA

Japan• Japan-Indonesia EPA• ASEAN-Japan CEPA

Korea• Korea-Indonesia FTA• ASEAN-Korea CEPA

Pakistan• Pakistan-Indonesia FTA

Hong Kong• ASEAN-HK, China FTA

Australia• Australia-Indonesia CEPA• ASEAN-Australia & NZ CEPA

New Zealand• ASEAN-Australia & NZ CEPA

Chile• Chile-Indonesia FTA

ASEAN FTA • 10 members

Indonesia-EFTA • Indonesia, Iceland, Norway,

Lichtenstein, Switzerland

Regional CEPA • ASEAN, Australia, China,

India, Japan, Korea, NZ

Trade Preferential System• 41 OIC members

Preferential Tariff Agr.• 8 developing countries

A Production Base to Reach Global Market

Regional CEPA(ASEAN & 6 countries)

Indonesia CEPA and FTA


DB 2015 DB 2016 DB 2017 DB 2018 DB 2019

Starting Business Getting electricity Paying Taxes

Starting Business Getting Credit Paying Taxes

Starting Business Getting Electricity Registering Property Getting Credit Paying Taxes Trading Across

Borders Enforcing Contracts

Starting Business Getting Electricity Registering Property Getting Credit Protectic Minority

Investors Paying Taxes Trading Across Borders

Starting a Business Registering Property Getting Credit

Ease of Doing Business Index with 23 reforms in 2015-2019

114

109

91

72 73

Source: Ministry of Economic Affairs, 2018


Indonesia as Investment Destination of Choice

Source: The Economist, Asia Business Outlook Survey 2018 Source: IMF World Economic Outlook, Database April 2018

Source: UNCTAD - World Investment Report 2018Source: JBIC - Outlook for Japanese Foreign Direct Investment (29th Annual Survey)

34,03

20,69

7,89

7,78

7,75

7,64

6,93

6,34

4,25

4,14

Singapore

Japan

Malaysia

USA

China

South Korea

Netherlands

Hong Kong, PRC

United Kingdom

British Virgin Islands

Top 10 FDI 2013-2017 (in billion US$)

Japan remains the top 5 Indonesia’s largest source investment 2013 - 2017

Java; 93%

Kalimantan, 1%

Sumatera, 5%

Maluku; 0%

Papua; 0%

Sulawesi; 0%

Bali & Nusa Tenggara, 0%

Other; 0%

93% Japan Companies invest in

Java island

Japan is Indonesia’s 2nd

largest source investment

Source: BKPM, 2018


75% Japan’s investment

was realized in Secondary Sectors

2%

75%

23%

Sector

Primary Secondary

Tertiary

Transportation Equipment and Other

Transportation (40%)

Electricity, Gas and Water (10%)

Machinery, Electronic, Medical equipment

industry (8%)

Metal, Metal goods, non-machinery (7%)

House, Industrial Estate, and Office (7%)

Basic chemical, chemical, & pharmaceutical (6%)

Others (22%)


Japan on the top 5 Indonesia’s largest source investment, however its investment realization was fluctuated during 2013 – Q3 2018

2nd

Indonesia’s Largest Source

Investment Jan-Sep 2018

(3.75 Billion US$)

96%Investment

realization is located in Java IslandsJan-Sep 2018

(3.59 Billion US$)

Japan’s investment realization was fluctuated during 2013 – Q3 2018

Japan’s investment performance during Jan – Sep 2018

Source: BKPM, 2018

4,71

2,71 2,88

5,40 5,00

3,75

-

1,00

2,00

3,00

4,00

5,00

6,00

7,00

8,00

9,00

2013 2014 2015 2016 2017 Q3 2018

Commitment Realization

Total Project : 12,120 Projects Local Workers : 674,015 People

Transportation Equipment and Other Transportation

(27%)

Electricity, Gas and Water (23%)

Basic Metal, Metal Goods, Machinery and Electronic

Industry (16%)

House, Industrial Estate, and Office (10%)

Basic chemical, chemical, & pharmaceutical (6%)

Others (18%)

Top 5 Sectors


Japan’s big companies have invested in Indonesia


What Reform Have Been Done


Predictable Minimum Regional

Wages

Tax incentives for

labor intensive industry

Shorter dwelling time

Easier Visa Application and Working Permits

Negative List of

Investment Reform

Incentives for Transport Industry

Acceleration on infrastructure and electricity

3 hours licensing

Lower

electricity rate for industry

Incentive for

property

Land aquisition

acceleration

EODBEase of Doing

Business Improvement

%Affordable housing

e-commerce

Incentive for e-commerce Industry

Logistic

INSW and lower logistic

cost

OSS

Online Single Submission


16 Economic Policy Packages to attract more investment have been issued since 2015

Government develops Online Single Submission (OSS) as integrated online system with data sharing


OSSObtaining Licenses/Permit Related to Investment Activity in Indonesia

Single Business Number (Nomor Induk Berusaha)

Business License

Commercial/Operational License

Etc.

B. EXISTING INVESTOR

www.oss.go.id

A. NEW INVESTOR(New Registration)

(Re-registration)

Provincial/

Municipality

TASK FORCE

Ministry

TASK FORCE

National

TASK FORCE

Monitoring


What Sector to Invest


Tourism“10 New Bali”

Lifestyle Industrye.g: creative economy, digital industry

MaritimeIncluding fisheries and cold storage

Agriculture

The new big

deal

InfrastructureEnergy, transportation, road, railway, airport, seaport, etc

Manufacturing IndustryLabor intensive, export oriented, import substitute, and value added industry

Special Economic Zone(SEZ)

Industrial Estate (IE)

Including

The Government is promoting 5 priority sectors, while tourism, creative economy, and digital industry become the new big deal


NO Description 2013 2014 2015 2016 2017Jan-Aug Growth.(%)

2018/2017Share.(%) 2018

2017 2018

1 Machineries 27.290,5 25.834,8 22.376,7 21.070,9 21.768,1 13.531,25 17.537,16 29,60 16,80

2 Electrical Equipment 18.201,1 17.226,5 15.518,3 15.430,9 17.931,8 11.114,35 14.160,66 27,41 13,56

3 Plastic & Plastic Goods 7.642,7 7.794,3 6.831,6 6.999,8 7.729,0 5.025,28 5.964,55 18,69 5,71

4 Iron & Steel 9.553,6 8.354,4 6.316,5 6.180,1 7.985,2 4.811,24 6.383,39 32,68 6,11

5 Organic Chemical 7.011,5 7.078,9 5.715,5 4.790,6 5.897,1 3.903,55 4.579,38 17,31 4,39

6 Automotive 7.914,8 6.253,5 5.343,1 5.298,4 6.692,6 4.388,56 5.442,09 24,01 5,21

7 Iron & Steel Products 4.747,7 4.293,0 3.716,5 2.931,6 2.627,3 1.568,90 2.644,10 68,53 2,53

8 Wheat 3.621,4 3.605,9 3.156,1 3.191,8 2.927,2 1.848,56 2.497,75 35,12 2,39

9 Food industry pulp 3.042,1 3.273,8 2.734,6 2.479,9 2.652,2 1.756,46 2.015,94 14,77 1,93

10 Cotton 2.554,8 2.499,6 2.124,4 2.096,2 2.261,8 1.499,09 1.647,88 9,92 1,58

11 Fertilizer 1.747,6 1.822,1 2.011,7 1.555,6 1.702,9 1.135,67 1.298,25 14,32 1,24

12 Optical Equipment 2.353,1 2.070,0 1.922,5 2.353,5 2.588,6 1.523,70 1.939,29 27,27 1,86

13 Chemical Products 2.103,0 2.074,6 1.886,5 1.911,2 2.196,7 1.468,69 1.677,16 14,19 1,61

14 Rubber and Rubber Goods 2.212,9 2.005,3 1.685,5 1.703,6 2.081,5 1.330,41 1.582,77 18,97 1,52

15 Inorganic Chemical 1.914,7 1.817,4 1.605,9 1.500,5 1.617,8 1.055,26 1.395,71 32,26 1,34

16 Confectionery 1.983,2 1.567,5 1.498,6 2.367,5 2.361,0 1.542,19 1.332,44 -13,60 1,28

17 Aluminium 1.777,5 1.656,4 1.468,8 1.420,2 1.874,5 1.216,26 1.451,48 19,34 1,39

18 Woven Textile 1.336,6 1.352,1 1.365,8 1.329,9 1.336,8 899,04 982,93 9,33 0,94

19 Pulp and Paper 1.381,9 1.367,6 1.311,5 1.277,1 1.368,7 905,52 997,12 10,12 0,96

20 Oily Grains 1.482,0 1.504,0 1.291,6 1.202,9 1.503,6 1.077,02 1.050,53 -2,46 1,01


Indonesia’s Investment Opportunities on Substitutional Import Industry

In Million US$

Source: Ministry of Trade, 2018

Top 20 Imported Commodity in Indonesia

100% FDIDistributoraffiliated with

production

67% FDI for distributor not affiliated with production

100% FDIRaw material forPharmacy

From previously open to 85% FDI

100% FDIE-Commerce

in partnership with SMEs

From previously closed to FDI

100% FDIMarketplace

For min. Investment of IDR 100 billion (USD 8 million).

Open 49% FDI for investment < IDR 100 billion

100% FDIFilm Industry

Production, post-production, distribution,

projection

100% FDITourismSports center,

restaurant, bar, cafe

67% FDITransport

infrastructure & support services

Including cargo handling andair transport


Tourism, Creative Economy and Digital Economy are more open to Investment

12,2

13,6

16,8

2017 2016 2015

Foreign Exchange Reserve from Tourism (USD billion)

Source: Ministry of Tourism, 2017; Detik Finance, 2018

Tourism: The New Star in Indonesia’s EconomyIt contributes significantly to Indonesia’s economy...

↑11% yoy

↑24% yoy

↑3% yoy

↑4% yoy

Labour Absorbed by Tourism(million people)

Source: Ministry of Tourism, 2017

Tourism is Expected to be the largest contributor to the nation’s GDP.

10% 11%13% 14% 15%

2015 2016 2017 (f) 2018 (f) 2019 (f)

Tourism’s Proportion to GDP (%)(f) = forecastedSource: Ministry of Tourism, 2017

The fourth largest contributor to the national’s forex reserve.

Absorbed 8.4% of Indonesia’s total labour

“On the next 20 years, one in new four jobs

comes from tourism sector.” –Chairman Lembong of BKPM, 2018

11,4

11,8

12,2


Top 10 countries to visit in 20191. Sri Lanka2. Germany3. Zimbabwe4. Panama5. Kyrgyzstan6. Jordan

7. Indonesia8. Belarus9. Sao Tome & Principe10. Belize

169 Countries

are granted the VISA FREE facilities

for tourism, family visit, business visit, social

culture, exhibition, and government duty.

Free VISA is given for 30 days stay.

1. China2. Singapore3. Australia4. Malaysia5. Japan

Indonesia’s Largest Tourists Source

Source: gbtimes, 2017; Ministry for Foreign Affairs, 2018

Indonesia among the top 10 countries to visit in 2019 according to lonely planet


Tj. KelayangDanau Toba

Morotai

Wakatobi

Labuan Bajo

Bromo – Tengger - Semeru

Borobudur

Kep. Seribu

Tj. Lesung

Mandalika

4 Tourism Special Economic Zone (SEZ)

6 National Tourism Strategic Area

Indonesia Tourism Development focus on 10 New Tourism Destinations, with total investment around USD 20 Billion


“Those 5 (five) sectors contributed to 12.67% of total Indonesian GDP,

or contribute to 70.68% of GDP from manufacturing industry in 2017”

Food & BeverageIndustry

+9.23% growth6.14% to GDP

AutomotiveIndustry


ChemicalIndustry


ElectronicIndustry


Textile & Garment Industry


Source: Ministry of Industry


Five industry priorities for Making Indonesia 4.0

Industry should be located in industrial Zones

100% FDIAutomotive

Industry

100% FDIMachineryIndustry

100% FDIElectronic Industry

100% FDISmelter &

SteelIndustry

Source: Presidential Regulation No.44 Year 2016


Most of Manufacturing Industries open for foreign investment

Today, allow us to introduce you with 2 Estate Developers


Expansion of Tax Holiday to improve productivity


Tax Payer

One Stop Service at BKPM

Criteria and Requirements check

Document Submission

BKPM Recommendation

Approval byMinister of Finance

5 Working Days

Item Note

Subject New Investors

% Tax Reduction 100 % (single rate)

Period 5 years (Rp. 500 bio - < IDR 1 Trillion)

7 years (Rp. 1 trillion - < IDR 5 Trillion)

10 years (Rp. 5 trillion - < IDR 15 Trillion)

15 years (Rp.15 trillion - < IDR 30 Trillion)

20 years (Min. Rp. 30 trillion)

Transition 50% for 2 (two) years

Eligible 17 Pioneer Industry

1. Upstream industry for basic metal 2. Oil and gas refinery3. Petrochemical industry4. Basic Inorganic Chemical Industry 5. Basic Organic Chemical Industry6. Pharmaceutical raw materials industry7. Semi conductor industry and other main components of computer8. Communication equipment industry9. Healthcare equipment industry10. Machinery industry, such as electric motors11. Machinery component industry such as piston, cylinder head12. Robotic main component industry13. Ship main component industry14. Aircraft main component industry, such as engines, propellers15. Rail component industry, including machinery or transmission16. Power generation machinery industry17. Economic infrastructure

Note:

• New scheme is faster than previous procedure with 45

working days

• Must be submitted before commercial phase.

• Tax Holiday application can be submitted simultaneously at

investment registration or at least 1 (one) year after theinvestment registration issued

Based on Ministry of Finance Regulation No. 35 Year 2018

TAX ALLOWANCEGovernment Regulation No. 18 of 2015

jo. No. 9 of 2016

145business fieldsEligible for tax allowance, expanded from 143 segments in the previous regulation with additional segment: clothing industry.

30 % of investment value Reduction of corporate net income tax for 6 years, 5% each year.

Under certain requirements among others:

investment value or export orientation, manpowerabsorption, local content, and project location(especially outside Java island).

Notes:Certain business fields and location are based on Attachment I and II of Government Regulation No. 18 of 2015 Jo. No. 9 of 2016

SOP to process Tax

Allowance is 25 working days

Investment Incentives: Tax Allowance


Agriculture• Livestock• Corn Plantation• Soybean Plantation• Rice farming• Tropical fruits plantation

Power Generation• Geothermal• Renewable energy

Oil and Gas Industry• Oil refineries• Liquefied Natural & Petroleum Gas• Lubricants


Investment Incentives: Import Duty & Green Lane Facility

a) Not yet produced in Indonesia.

b) Produced in Indonesia but not according to the

specification required.

c) Produced in Indonesia with the specification required

above but does not meet the industry demand.

(a) Import Duty Exemption on Capital Goods:

Based on regulation PMK.176/PMK.011/2009 junto No.

188/PMK.010/2015. Investors can enjoy exemption on

imported duty for capital goods and raw material being

imported. This facility is often referred to as the Master List

Facility. Certain requirements must be met for the goods to be

imported which are:

In conjunction with the import duty exemption facility, investors

also can apply Import Taxes Exemption Facility for Import VAT

and Income Tax Article 22

The VAT exemption facility would only apply to the factory

machinery and equipment constituting one integrated unit,

either in installed or disassembled condition, used directly in the

production process of VAT-able goods by VAT-able investor

producing the VAT-able goods, excluding spare parts.

(b) Import Tax Exemption

The facility is given for 2 years during constructionperiod, or 4 years for companies using locally-producedmachines minimum 30% from total value of machinesfor production)

Four customs checking status:• Red line is for new companies.Physical & document checks before transported from ports.• Yellow line Document check before goods transported from ports.• Green line Document check after goods transported from ports.• Main Partner Priority for companies with proven track

record. No checking required.

Acceleration and certainty in custom clearance process

Faster & Certain• Capital goods do not require screening.• Cutting the processing time from 3-5 days to only 30 minutes.

Simple requirements • Projects under construction • Obliged in reporting quarterly investment activities (LKPM) • Recommendation from BKPM

Green Lane Acceleration Facility

About the Investment Promotion Agency

Indonesia Investment Coordinating Board (BKPM)

Primary interface between business and the government to boost FDI and DDI through the creation of conducive investment climate.

Who We Are

Our Services

Providing information

Connecting Investors to

technical ministries/ local gov’t

Providing consultation on procedures & requirements

Issuing investment

licenses

Debottlenecking obstacles for investment realization

Monitoring the investment realization

Investment Planning Period Investment Realization After-care


THANK YOULETS INVEST IN INDONESIA

Jl. Jenderal Gatot Subroto No. 44Jakarta 12190 - Indonesia

Tel: (+6221) 525 2008 Fax : (+6221) 525 4945Contact Center : 0807 100 2576E-mail : [email protected]

Indonesia Investment Coordinating Board

Badan Koordinasi Penanaman Modal

(BKPM)

Mr. Rakhmat YuliantoDirector of IIPC Tokyo

For further consultation, facilitation, & licensing services in Japan, please contact:

〒100-0011東京都千代田区内幸町 2-2-2富国生命ビル 16階 Fukoku Seimei Building 16 F2-2-2, Uchisaisawai-cho, Chiyoda-ku, Tokyo 100-0011 JapanPhone: 03-3500-3878Facsimile: 03-3500-3879Email: [email protected]

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Indonesia: Moving ForwardSource: OECD, 2018; Jakarta Post, 2018 Over the next 3 years (2017-2019),...

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