Investment Opportunities in Indonesia - ASEAN-KOREA … · Investment Opportunities in Indonesia...

INDONESIA INVESTMENT COORDINATING BOARD

Investment Opportunities in Indonesia Sector of Electronic Components, Automotive Spareparts, and Bioenergy/Biomass

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© 2013 by Indonesian Investment Coordinating Board. All rights reserved

Ikmal Lukman Director for Sectors Investment Promotion BKPM

The Investment Coordinating Board of the Republic of Indonesia

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Land Area 1,904,443 sq km

Sea Area 3,116,163 sq km

Total Area 5,020,606 sq km

Coastal Line 81,000 km

Population 245.6 Million people (4th biggest population)

Main Towns

Jakarta (Capital) Surabaya Bandung Semarang Medan Samarinda Makassar

9,608 2,765 2,394 1,556 2,097 727 1,339

Population (‘000)

Jakarta (Capital) East Java West Java Central Java North Sumatera East Kalimantan South Sulawesi

16.4 14.8 14.6 8.5 5.2 6,1 2.3

GDP Share (%)

The rising population share of Indonesia’s

middle class, those who spend USD2 - USD20

per day (% of population):

37.7% 2003

56.5% 2010

GDP Size (PPP) USD 1,323 Bi

GDP percapita (PPP) USD 5,280

Source: World Bank

Source: various

GDP/Capita (USD ‘000)

9.9 2.3 1.9 1.5 2.3 10 1.6

Why Indonesia

Country Snapshot: The Biggest Archipelago


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China 1,3

Billion

India 1,2

Billion

US 310

Million

Indonesia 245 Million

The Big 5 Indonesia is the 4th most populous nation in the world.

Brazil

Of the 240 million people in Indonesia, over 60% of the population is under 39 years old,

providing a dynamic workforce.

Age 100+

Age 0

Year 2010 Year 2030E Year 2050E

Why Indonesia

Demographic Bonus: Dynamic Demographic Base


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45 million (25%

population)

81 million (37.7% )

93 million (42.7%)

134 million (56,5%)

170 million (70%)

0

20

40

60

80

100

120

140

160

180

1999 2003 2009 2010 2015

Sources: Bank Indonesia & BPS-Statistics Indonesia, 2012 (projection)

Number of population in middle income

(per capita expenditure per day $2-20)

Note: Per capita expenditure per day is adjusted to the 2005 purchasing power parity terms. Source: SUSENAS and World Bank staff calculations.

Proportion of the population based on per capita expenditure per day

5.5% 18.0% = 40 million people =

Why Indonesia

Growing Middle Class: Higher Demands for Better Services and Products

more than the total population of Malaysia and Singapore combined.


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Why Indonesia

The Second Fastest Economic Growths among G20 Countries in 2012

Nominal GDP Growth Projection

0.0 2.0 4.0 6.0 8.0 10.0

Brazil

Korea

Mexico

Turkey

Russia

Argentina

Saudi Arabia

Indonesia

India

China

2017

2013

2012

The IMF projects Indonesia will be at

the top 3 fastest economic growths among G20 countries.

International Monetary Fund; World Economic Outlook Database, April 2012.

China 7.8 %

India 5.5 %

Indonesia 6.2 %

Indonesia’s 2012 growth hits 6.2% The Financial Times, 5 February 2013


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McKinsey Global Institute:

The Archipelago Economy:

Unleashing Indonesia's

Economic Potential

September 2012

Why Indonesia

Indonesia Today…


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McKinsey Global Institute

September 2012

Why Indonesia

Indonesia Today… and Indonesia in 2030


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Why Indonesia

Abundant Opportunity

• The burgeoning consuming class will give rise to new markets, including transportation, housing and utilities. The new wave of consuming class in Indonesia is huge opportunity.

• With an additional 90 million consumers expected in Indonesia, consumer spend in urban areas could increase at 7.7% a year to become a USD 1.1 trillion business opportunity by 2030.

Consumer Spend in 2011 and 2030


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(in IDR Trillion) 2010 2011 2012 2013 2014 Total

FDI 147.9 172.8 204.1 272.6 329.0 1,126.4

DDI 60.6 67.2 79.4 117.7 177.9 502.8

Total Target 208.5 240.0 283.5 390.3 506.9 1,629.2

(USD 181.0 Billion)

Assumption: USD 1 = IDR 9.000

Total Investment realization to achieved in 2010-2014: USD 181.0 billion

Achievement 208.5 251.3 313.2 N/A N/A 773.0

(USD 85.9 Billion)

Investment Performance

Overall Investment Target: BKPM Strategic Plan 2010-2014

Source: BKPM

0

200

400

600

2010 2011 2012 2013 2014

FDI DDI

Investment Realization Target (in IDR Trillion)


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Singapore: USD 4.9 Bn

(19.8%)

Japan: USD 2.5 Bn

(10%)

South Korea: USD 1.9Bn

(7.9%)

United States: USD 1.2 Bn

(5.1%)

Mauritius: USD 1.1 Bn

(4.3%)

Others: USD 13 Bn

52.9%

The cumulative of investment realization from January to

December 2012 is IDR 313.2 trillion (USD 34.8 billion) or 110.5% from target in 2012 (IDR 283.5 trillion).

Compared to same period in 2011 (IDR 251.3 trillion), it

increased about 24.6%.

Source: BKPM

Investment Realization by Origin Country 2012

2.3 3.9 2.3 4.2 6.8 8.4 10.2 6

10.3 14.9 10.8

16.6 19.5

24.6

2006 2007 2008 2009 2010 2011 2012

DDI FDI

8.3

14.2 17.1

15.0

23.4

27.9

34.8


Overall Investment Realization

Source: BKPM

(USD Billion)


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Food Industry Rp.11,2 T (12,1%)

Non Metallic Mineral Industry

Rp.10,7 T (11,6%)

Mining Rp.10,5 T (11,5%)

Food Crops and Plantation

Rp.9,6 T (10,4%)

Transportation, Storage and

Telecommuni-cation

Rp.8,6 T (9,3%)

Others Rp.41,6 T (45,1%)

Mining USD.4,3 B

(17,3%)

Transportation, Storage and

Telecommunication USD.2,8 B

(11,4%)

Chemical and Pharmaceutical

Industry USD.2,8 B

Metal, Machinery and Electronic

Industry USD.2,5 B

(10,0%)

Motor Vehicles & Other Transport

Equipment Industry USD.1,8 B

(7,5%)

Others USD.10,4 B

(42,5%)


Overall Investment Realization : Jan-Dec 2012, Based on Sector

Foreign Direct Investment Domestic Direct Investment

Source: BKPM


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West Java USD.4,2 B

(17,1%)

Jakarta USD.4,1 B

(16,7%)

Banten USD.2,7 B (11,1%)

East Java USD.2,3 B

(9,4%)

East Kalimantan USD.2,0 B

(8,2%)

Others USD.9,2 B

(37,5%)

East Java Rp.21,5 T (23,3%)

West Java Rp.11,4 T (12,3%)

Jakarta Rp.8,5 T (9,3%)

East Kalimantan Rp.5,9 T (6,4%)

Central Java Rp.5,8 T (6,3%)

Others Rp.39,1 T (42,4%)

Foreign Direct Investment Domestic Direct Investment


Overall Investment Realization : Jan-Dec 2012, Based on Location

Source: BKPM


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Java 59%

Outside Java 41%

Java 56%

Outside Java 44%

A series of improvement of investment climate in both central and local

government’s services have been responded positively by domestic and foreign

investors, and increased the investment distribution outside Java Island.

Source: BKPM


Investment Challenge: More Equal Investment Distribution

Total Investment 2012 Total Investment 2011

Java

I N D O N E S I A


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FDI Realization in the 3 Sectors 2010-2012 (USD 1.000)

Source: BKPM

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2010 2011 2012

Total FDI

Electronic Components

Automotive Spareparts

Bioenergy/Biomass

Sectors 2010 2011 2012

Electronic Components 79,328 164,743 315,839

Automotive Spareparts 225,278 497,743 1,538,131

Bioenergy/Biomass 53,794 132 8,235

Total FDI (All Sectors) 16,600,000 19,500,000 24,600,000


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FDI Realization in the 3 Sectors 2012 (By Origin Country)

Source: BKPM

70%

18%

4%

1% 0%

7%

Japan

Korea

Singapore

US

Taiwan

Others

43%

10%

4% 3%

0%

40%

Japan

Korea

France

Singapore

Malaysia

Others

99%

1%

Consortium

US

Electronic Components Automotive Spareparts

Bioenergy/Biomass


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INVESTMENT LAW (UU No.25 Year 2007)

INVESTMENT FACILITIES

Mandate equal treatment for foreign and domestic investors

No minimum capital requirement, freedom to repatriate capital.

All business sectors or business types shall be open to investment

activities, except for business sectors or business types that are declared to

be closed and open with requirements.

Simplification of business start up and licensing procedures, including the

“one-stop shop” (PTSP) licensing provision at the Investment Coordinating

Board (BKPM).

Rolling-out of Electronic Information Services and Investment Licensing

(SPIPISE) in 105 PTSP.

Launching of the National Single Windows for Investment.

Establishing an Investor Relation Unit at BKPM for information facilitation

and queries handling from existing and potential investors.

Implementing a regional champion program to help select local

governments accelerate investments in their respective regions.

Launching of investment tracking system.

An acceleration of the VAT refund system for exporters Establishment of a complaint management system and a code of conduct

for tax officials

TAX REFORMS

Investment Policy and Facility


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TAX ALLOWANCE

Government Regulation No. 12 of 2001 jo No. 31 of 2007 Exemption of value added tax of imported capital goods, machinery,

or equipment (except spare parts) which cannot be produced domestically

Submit tax-free letter to the Director General of Taxes

In December 2011, parliament passed a new land acquisition bill (stipulated as Law No 2/2012) which provides certainties in land pricing and timing of land acquisition process.

This will accelerate the construction of desperately needed roads, ports and airports to be better connect an archipelago of 17,500 islands spanning some 5,000 kilometers.

Government Regulation No.52 year 2011, 30% reduction of corporate net income based on investment value for

six years, 5% each year. The imposition of income tax on dividends paid to foreign tax subject

amounting to 10%, or a lower rate according to Tax Treaty Agreement. Tax facilities that could be granted to investors under certain

conditions has been issued. By this regulation, the tax allowance will be eligible for 129 business segments, expanded from 38 segments in the previous regulation.

VAT FACILITIES

LAND ACQUISITION

BILL



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Negative Investment List Presidential Regulation No.36 of 2010

The regulation stipulates the list of business fields closed to investment and business fields open,

with conditions, to investment and it comes into force as of May 2010.

The Negative Investment List is reviewed every 3 years.

In 2010 revision, 40 business sectors are more open for investors.

Closed business fields are certain business fields that

are prohibited from conducting any investment activities.

Closed

Business fields open, with conditions, are certain business fields that may conduct investment

activities under certain requirements.

Open with conditions All of business fields

in the 3 sectors:

Electronic components,

Automotive spareparts,

Bioenergy/biomass

are open to foreign investment without conditions.

Other


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1. Tourism and culture 2. Transportation (for public transportation services) 3. Public health services 4. Mining

5. Construction 6. Telecommunication 7. Port

Facility

Exemption from import duty on the import of machines for a period of 2 years.

Exemption from import duty on the imports of goods and materials for production for a maximum period of 2 years.

Exemption from import duty on the imports of goods and materials for production for a period of 4 years, is granted to a company which is using the locally-produced machines at least 30% of the total value of machines for its production.

Criteria

The imports of machines, goods and materials which may be exempted from import duty are granted to a company engaging in activities of:

a. an industry which produces goods and/or b. an industry which produces services.

Service industry which is eligible for the facility:

Exemption from import duty may be granted to the extent that the machines, goods and materials: a. are not produced in Indonesia; b. are produced in Indonesia but the they do not meet the required specifications; c. are produced in Indonesia but the quantity is not sufficient for the need of the industry.


Import Duty Facilities Regulation of The MoF No. 176/PMK.011/2009


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Tax Holiday Regulation of The MoF No. 130/PMK.011/2011

Facility

• A taxpayer can be granted a tax relief facility for a period of between 5 and 10 years, starting from the commencement of its commercial production

• After the expiration of the tax holiday, the taxpayer will be entitled to an income tax reduction of 50% for a further 2 years.

• By considering the purpose of maintaining the competitiveness of national industries and the strategic value of certain business activities, the duration of the tax relief and reduction can be extended based on a decision by the Minister of Finance

Criteria

• Constituting a pioneer industry:

1. Basic metal industries;

2. Oil refinery industries and/or basic organic chemicals originating from oil and natural gas;

3. Machinery industries;

4. Industries in the field of renewable resources;

5. Communication devices industries.

• Having a new investment plan having obtained the approval of competent authorities in a minimum amount of IDR 1 trillion (USD 112 million).


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CONSIDER Is it an open business field? What are the recommendation requirements? Is the proposed business field allowed to obtain fiscal facilities?

FILLING OUT OF APPLICATION

FORM Enclosing all required documents

SELF ASSESSMENT Check List

FRONT OFFICE Examination of the application form and

the attachments by FO Officer

APPLICATION RECEIVED Complete and correct

BACK OFFICE Process of Issuing the Approval/License

APPLICATION RECEIPT & PIN FOR

INVESTMENT TRACKING SYSTEM

APPLICATION RETURNED Due to incompleteness or incorrectness

with notes about the incomplete data, etc. ADMINISTRATION Administration of the

numbering of the

Approval/License

NO

YES

Investment Procedure

Mechanism for Approval and Licensing


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22

Investor

Notary

Ministry of Law and

Human Rights

Registration License

Principle License

Implementation Permits 1. Location Permit 2. Building Construction Permit (IMB) 3. Nuisance Permit UUG/HO 4. Company Registration Certificate (TDP), etc.

Non-Fiscal Facility Producer Importer Registration Number (API-P) Fiscal Facility 1. Customs Facility Approval for Capital

Goods 2. Corporate Income Tax Facility Proposal

Business License

Investor Registration

Application for Principle License

Submission of the Company’s Deed of

Establishment (Articles of Association)

Submission of Certificate of Incorporation

Application for Business License

COMMERCIAL PHASE

PREPARATION PHASE

CONSTRUCTION PHASE

1 1a



1b

1c

2

4

3

5

6

7 Fiscal Facilities

Customs Facility Approval for Raw Materials

8


Investment Phase


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License SOP (days)

1 2 3 4 5 6 7

Investment Registration

Investment Principal License

Representative Office

Permanent License

Producer Importer Identity Number (API-P)

Import Duty Exemption Approval

- Capital Goods

- Raw materials for 2 years operation


The Length of Time to Obtain Investment Licenses at BKPM


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THANK YOU

© 2012 by Indonesian Investment Coordinating Board. All rights reserved

International Representatives Office

invest in

Badan Koordinasi Penanaman Modal (BKPM) Indonesia Investment Coordinating Board Jalan Jenderal Gatot Subroto No. 44, Jakarta 12190 P.O. Box 3186, Indonesia T : +62 21 5292 1334 F : +62 21 5264 211 E : [email protected]

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Investment Opportunities in Indonesia - ASEAN-KOREA … · Investment Opportunities in Indonesia...

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