INDONESIA INVESTMENT COORDINATING BOARD
invest in
© 2013 by Indonesia Investment Coordinating Board. All rights reserved
Rudy Salahuddin Director of Promotion Development
Prepared for Indonesia Investment Seminar, ASEAN-Japan Centre| Fukuoka, 10 July 2014
Investing in Indonesia: Opportunities for Growth
The Investment Coordinating Board of the Republic of Indonesia
2
10
15
20
25
30
35
40
45
50
55
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Brazil China India Indonesia Korea Russia
Total Investment (% GDP) (Bloomberg, 2013)
Growing Investment’s Share to Total GDP
32%
The Investment Coordinating Board of the Republic of Indonesia
3
Investment Realization in Indonesia Based on Capital Expenditure (USD Billion) Excl. oil, gas, and financial sectors Assumption:
Q1-Q2 rate USD 1 = IDR 9,300
Q3-Q4 rate USD 1 = IDR 9,600
Source: BKPM, 2014
4.2 6.8 8.4 10.2
13.6
10.8
16.6
19.5
24.6
28.6
2009 2010 2011 2012 2013
DDI FDI
15.0
23.4
27.9
34.8
42.2
Sustainable Investment Growth total investment realization
in 2013 (IDR398.6 trillion), 2.1% above the 2013 target, IDR390.3 trillion.
USD 42.2billion
27.3% increase from 2012 (IDR313.2 trillion)
22.4 % increase
67.8 % share
from 2012
of total investment realization
39.0 % increase
32.2 % share
from 2012
of total investment realization
FDI 2013
DDI 2013
The Investment Coordinating Board of the Republic of Indonesia
4
19%
14%
6%
5% 4%
52%
Source: BKPM, 2014.
FDI Realization in Indonesia by Origin Country Top-10 Countries in Q1-2014 (USD million) Excl. oil, gas, and financial sectors
Rank Country 2009 2010 2011 2012 2013 Q12014
1 Singapore 1,429 5,565 5,123 4,856 4,671 1,281
2 Japan 685 713 1,516 2,457 4,713 952
3 Mauritius 159 23 73 1,059 780 396
4 South Korea 613 329 1,219 1,950 2,205 350
5 Australia 80 214 90 744 226 318
6 US 100 931 1,488 1,238 2,436 262
7 Netherlands 1,195 608 1,354 967 928 217
8 China 22 566 135 310 376 191
9 British Virgin Island 293 1,616 517 856 786 157
10 Thailand 51 45 87 68 107 154
Total (Top-10 Countries) 4,914 10,580 12,570 15,493 18,708 4,279
Total (103 Countries) 10,817 16,215 19,474 24,565 28,616 6,856
Japan The biggest investor in 2013, but the number is
declining in Q1-2014
0
1,000
2,000
3,000
4,000
5,000
6,000
2009 2010 2011 2012 2013 Q1-2014
The Investment Coordinating Board of the Republic of Indonesia
5
Japan’s Investment in Indonesia by Sector Top-10 Sectors in Q1 2014 (USD million)
Excl. oil, gas, and financial sectors
Rank Sector 2009 2010 2011 2012 2013 Q1
2014
1 Transport Equipment Industry 370 133 465 1,510 3,001 420
2 Metal, Machinery & Electronic Ind. 83 158 306 459 580 156
3 Textile Industry 23 74 70 56 216 1.7
4 Chemical & Pharmaceutical Ind. 38 5 430 65 172 68
5 Paper & Printing Industry - 7 88 139 6.4
6 Food Industry 56 85 39 46 136 94
7 Electricity, Gas & Water Supply 7 - 56 111 -
8 Trade and Repair 38 177 34 44 86 23
9 Rubber and Plastic 28 45 85 34 83 19
10 Housing, Industrial Park and Office 0.2 - 0.4 38 71 35
Total (All Sectors) 685 713 1,516 2,457 4,713
Source: BKPM, 2014.
Component of Japan’s Investment Based on Group of Sectors in Q1 2014
>90% of Japan’s investment
flowed to secondary sectors, Transport equip. industry covered 64% of investment in 2013
0
500
1000
1500
2000
2500
3000
3500
2009 2010 2011 2012 2013 Q1 2014
6.7%
27.7%
2.8% 6.5% 7.0% 16.7%
92.7%
70.6%
94.1% 93.4% 92.9% 80.6%
0.6% 1.7% 3.1% 0.1% 0.1% 2.7%
2009 2010 2011 2012 2013 Q1 2014
Tertiary Sectors
Secondary Sectors
Primary Sectors
The Investment Coordinating Board of the Republic of Indonesia
6
Japan’s Investment in Indonesia by Location in Q1 2014 (USD million) Excl. oil, gas, and financial sectors
Rank Economic Corridor 2009 2010 2011 2012 2013 Q1
2014
1 Java 675 689 1,450 2,205 4,643 925
2 Kalimantan - 2 0.05 153 45 26
3 Sumatra 0.4 14 17 95 11 1
4 Bali & Nusa Tenggara
5 8 45 4 8 0.3
5 Sulawesi 4 - 1 1 5 -
6 Maluku & Papua - - 3 - - -
Total (All Locations) 685 713 1,516 2,457 4,713 952
Source: BKPM, 2014.
96% of Japan’s total investment in the last 5 years
is concentrated in Java Island
Jakarta
98
.5%
96
.6%
95
.6%
89
.7%
98
.5%
97
.2%
2009 2010 2011 2012 2013 Q1 2014
The Investment Coordinating Board of the Republic of Indonesia
7
Indonesia’s GDP In the last 10 years at 2000 Constant Market Prices by Expenditure 2004-2013 (IDR Trillion)
GDP Growth in 2013
5.8% 2nd fastest
Growing Economy Among G-20 Countries (After China, in 2013)
-
500
1,000
1,500
2,000
2,500
3,000
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
“Indonesia’s Growth
Beats Estimates…” Indonesia’s GDP growth in 2013 beats all estimates in a Bloomberg News survey of 25 economists, where the median was 5.34 percent. (Bloomberg, 2014)
The Investment Coordinating Board of the Republic of Indonesia
8
World’s biggest democracy (after India and US)
3rd The third National Elections
will be held in 2014 after peaceful elections in 2004 and 2009.
Direct Election
The highest democracy Index in ASEAN Indonesia scored 6.76, higher than average in Asia (5.56) and in Latin America (6.36).
(The Economist, 2013)
Unity in Diversity 248 million population
300 ethnic groups
700 languages
various faiths
17,508 islands
The Investment Coordinating Board of the Republic of Indonesia
9
“Remarkable progress over the past 15 years -
economically, socially, and politically...”
(UNDP, 2013) In 2001, transformed from
an authoritarian state to a regional role model.
Decentralization
34 provinces
500 districts
Provinces and districts provided with greater autonomy.
Vision 2025 MP3EI as the master plan (2011-2025) to transform Indonesia into one of the world’s top 10 economies.
The Investment Coordinating Board of the Republic of Indonesia
10 Source: PwC
APEC CEO Survey, 2013
APEC CEOs: Indonesia has capacity to surprise with greater business opportunities than expected...
The Investment Coordinating Board of the Republic of Indonesia
11
Rank 2005 2006 2007 2008 2009 2010 2011 2012 2013
1 China China China China China China China China Indonesia
2 India India India India India India India India India
3 Thailand Vietnam Vietnam Vietnam Vietnam Vietnam Thailand Indonesia Thailand
4 Vietnam Thailand Thailand Russia Thailand Thailand Vietnam Thailand China
5 US US Russia Thailand Russia Brazil Indonesia &
Brazil Vietnam Vietnam
6 Russia Russia US Brazil Brazil Indonesia - Brazil Brazil
7 Korea Brazil Brazil US US Russia Russia Mexico Mexico
8 Indonesia Korea Indonesia Indonesia Indonesia US US Rusia Myanmar
9 Brazil Indonesia Korea Korea Korea Korea Malaysia US Rusia
10 Taiwan Taiwan Taiwan Taiwan Malaysia Malaysia &
Taiwan Taiwan Myanmar US
The most promising country for overseas business (Japan Bank for International Cooperation Survey 2013)
Source: JBIC, November 2013
Positive Factors 1. Future growth potential of local market
2. Inexpensive source of labor 3. Current size of local market
4. Supply base for assembler 5. Industrial cluster development
Issues of Concern 1. Rising labor costs 2. Underdeveloped infrastructures 3. Execution of legal system unclear (frequent changes) 4. Intents competition with other companies 5. Difficult to secure management-level staff 6. Labor problems
The Investment Coordinating Board of the Republic of Indonesia
12
Indonesia rising two places to enter the top five destinations for the first time.
(Results from UNCTAD’s World Investment Prospects Survey which polls TNC executives on their investment plans)
Top-4 Most Prospective Host Economies for 2012-2014
United Nations Conference on Trade and
Development
The Investment Coordinating Board of the Republic of Indonesia
13
ASEAN’s Most Attractive Investment Destination
Notes: (1) Value next to each bar reflects the percentage of respondents that plan to invest or increase investments while value within the bar shows respondents’ average rating on the investment attractiveness of each country. (2) Each respondent was allowed to select multiple responses. Percentages do not sum up to 100%. The 2012 ASEAN-BAC Survey on ASEAN Competitiveness collated responses from businesses across all ten ASEAN ountries, comprising a mix of small, medium and large firms. A majority of the businesses had been in operation for more than ten years, had trade/investment linkages within ASEAN and had at least general knowledge of ASEAN policy initiatives.
“Half of 405 businesses surveyed
intended to invest in Indonesia over the next years
(2011-2014).”
Source: ASEAN-BAC, 2012
The ASEAN Business Advisory Council Survey on ASEAN Competitiveness 2012
IndonesiaInvestment Coordinating Board
14
• Oct 15th 2013, R&I (Credit Rating Agency from Japan)
reported that Indonesia’s position in BBB- rating is
stable.
• Oct 24th 2013, Moody’s issued “Credit Anslysis :
Indonesia’s Report” which mentioned Indonesia’s
Investment Grade Rating (Baa3) with a stable outlook.
• November 15th 2013, Fitch Ratings reported that
Indonesia still maintain its Investment Grade Rating
(BBB-) with stable outlook.
• In general, Credit Rating Agencies gave positive review
on Indonesia’s strong and stable economic growth,
strong fiscal position and a relatively low debt to GDP
ratio compared to peers.
• Specifically, Fitch Rating gave positive reviews on
Indonesia’s effort in maintaining financial market
stability amid the volatile global financial market due to
The Fed tapering issue.
Indonesia’s current position
Investment grade
Indonesia's
foreign debt
rating
Positive Outlook From Credit Rating Agency
The Investment Coordinating Board of the Republic of Indonesia
15
World’s Most Populous Country
4th
70 % 2015 Population (projected) in Middle Income with per capita expenditure per day USD 2-20
Covering more than
total population of South East Asia
39% More than
Population in working age
60% Population in Middle Income with per capita expenditure per day USD 2-20 Source: Bank Indonesia and Indonesia Statistics Agency, 2012 (Projection)
45
81 93
134
1999 2003 2009 2010 2015
170 million
The Investment Coordinating Board of the Republic of Indonesia
16
Asia and World Population
Source: Coordinating Ministry For Economic Affairs RI, 2011
Global Economic Growth for Each Decades (Average percent per year) Source: World Bank, 2011
Beyond Indonesia: In the heart of the world’s economic growth
The Investment Coordinating Board of the Republic of Indonesia
17
In 2013, Indonesia ranks the 4th most populous country
in the world. Source: Central Intelligence Agency US, 2013 (Estimation)
Indonesia’s population covers more than 39% of
total population of 10 Southeast Asian countries. Source: ASEAN Community in Figures 2011
1,350 1,221
317 251 201
China India US Indonesia Brazil
World’s Top-5 Population by Country (million people)
In the period of 2020-2030, the
dependency index will
reach its lowest point.
More than 60% of the
population is in the working age, providing a dynamic workforce which is one of the highest in the region. Source: Coordinating Ministry For Economic Affairs RI, 2011
Indonesia’s Demography
Huge Population and Demographic Bonus: Big Market and Workforce
The Investment Coordinating Board of the Republic of Indonesia
18
The highest middle class growth & consumer confidence index
Nielsen Consumer Confidence Index
Source: AC Nielsen, 2013.
Indo- nesia
120
Middle Class Growth in ASEAN 2012-2020
Source: AC Nielsen, 2013.
Middle class growth in Southeast Asia
2012-2020
110.5% Middle class growth
in Indonesia 2012-2020
174%
The Investment Coordinating Board of the Republic of Indonesia
19
Indonesia: Consumer Economy All consumer segments is growing, no better place to invest in!
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
Jun
Sep
De
c
Mar
Jun
Sep
De
c
Mar
Jun
Sep
De
c
Mar
Jun
Sep
De
c
Mar
Jun
Sep
De
c
Mar
Jun
2008 2009 2010 2011 2012 2013
Ever Bought on the Internet
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Jun
Sep
De
c
Mar
Jun
Sep
De
c
Mar
Jun
Sep
De
c
Mar
Jun
Sep
De
c
Mar
Jun
Sep
De
c
Mar
Jun
2008 2009 2010 2011 2012 2013
Motorcycle Car
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Jun
Sep
De
c
Mar
Jun
Sep
De
c
Mar
Jun
Sep
De
c
Mar
Jun
Sep
De
c
Mar
Jun
Sep
De
c
Mar
Jun
2008 2009 2010 2011 2012 2013
Have a mobile phone Have a smart phone
Source: Roy Morgan, 2013
32%
85%
68%
1.7%
6.1%
3.8%
58%
82%
4% 10%
71%
4%
The Investment Coordinating Board of the Republic of Indonesia
20
Source: McKinsey Global Institute, September 2012.
McKinsey: Indonesia today and in 2030
The Investment Coordinating Board of the Republic of Indonesia
21
One of the world’s major producer of a broad range of commodities
Source: Coordinating Ministry For Economic Affairs RI, 2011
The Investment Coordinating Board of the Republic of Indonesia
22
Labor issues Skilled workforce
Infrastructure & logistics
Investment climate
Incentives & facilities
Ease of doing business
G l o b a l c o m p e t i t i v e n e s s
The Investment Coordinating Board of the Republic of Indonesia
23
Labor issues
Wage is no longer a single life support
Wage = Productivity • Minimum wage is also based on productivity, besides the criteria of decent living (KHL) and
economic growth (Presidential Instruction No.9/2013).
• Wage increase < KHL is directed to fulfill the criteria of decent living with clear plan and timeline.
• Wage increase ≥ KHL is designed to be in line with productivity and approved by employer and employees.
Improving certainty and transparency • BKPM recommends that wage increase refers to multiyear formula although the increase may
be implemented annually.
• BKPM urges measurement mechanisms to monitor and evaluate wage policies.
National Social Security Program (Law No.4/2011)
Health Insurance (BPJS Kesehatan) Workforce Insurance (BPJS Tenaga Kerja)
Universal health care Pension, old-age savings, death benefits and worker accidents
Applied in January 2014 Applied in July 2015
The Investment Coordinating Board of the Republic of Indonesia
24
From agrarian to industrialized
economy
1. Great number of employees
2. Higher level of skills
1. Higher enrollment
2. Relevance & quality
improvement
Skilled workforce
Top-5 Number of higher education graduates in 2020, covering 6% of world’s total.
(OECD, 2012)
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
18.5%
67.9%
10.8%
50.9%
3,800
28,600
1,900
13,000
Enrollment Ratio (Comparison between the number of students and people at the school age)
Education Facilities
High school
University
High school
University
Share of state budget dedicated to education since 2004.
20% 12years Compulsory schooling since 2013.
• Partnership between vocational schools and companies operating in Indonesia to produce graduates with specific skills. There are
850,000 vocational school graduates a year.
• 273 learning centers (balai latihan kerja) managed by Ministry of Manpower are available across Indonesia.
• Establishment of “university of professions”, dedicated for the needs of various professions, by and for the professions.
• Tax incentive for companies who conduct R&D programs.
The Investment Coordinating Board of the Republic of Indonesia
25
Challenges and progress in infrastructure
Source: National Planning Agency, 2014.
2013/2014:
38th out of 148
2012/2013:
50th out of 144
Indonesia’s Global Competitiveness Rank 2013-2014 (Source: WEF, 2013) • Indonesia posts the
biggest progression among G-20 countries.
• Infrastructure leapfrogs 17 places (improved the most).
• Poor distribution systems: The price of commodities in eastern Indonesia (Nabire) are 3 times higher than in Java. (Basri and Rahardja, 2010)
• Inefficiencies at Indonesia’s numerous harbours make transport costs more expensive. (Patunru et.al, 2007)
• The combination of over-lapping regulations and high domestic transport costs reduce Indonesia’s trade competitiveness. (LPEM-AF, 2009)
IDR 755 trillion
Infrastructure budget in 2011-2014.
Share of logistic cost to product cost
14%
2013
10%
2014 (Target)
38%
19%
18%
14%
6% 2% 1% 2%
Power Road Railway Telecom Seaport Airport Water supply Others
Infrastructure Budget 2005-2013 (IDR trillion)
IDR190 trillion
The Investment Coordinating Board of the Republic of Indonesia
26
25 high priority infrastructure projects Ready for Ground Breaking Between 2015 and 2017 ( = Potential for PPP)
No. Sumatra USD Mio.
1 Toll Road: Medan–Binjai (15.8 km) 210
2 Toll Road: Palembang–Indralaya (22 km) 180
3 Toll Road: Pekanbaru–Kandis–Dumai (135 km) 1,530
4 Toll Road: Bakauheni–Terbanggi Besar (150 km) 2,372
5 Toll Road: Tebing Tinggi–Kisaran–Rantau Prapat (178 km) 1,396
6 Toll Road: Panimbang–Serang (83 km) 1,191
7 Toll Road: Lubuk Pakam–Tebing Tinggi (43.5 km) 708
8 Seaport: Hub Kuala Tanjung 2,795
9 Seaport: Tanjung Sauh, Batam N/A
Total Sumatra (9 projects) 10,382
No. Java USD Mio.
1 Access Road: Purwakarta Industrial Area (7.8 km) 71
2 Water Supply: Umbulan 211
3 Port and Access Road: Cilamaya (30 km) 4,176
4 Airport and Access Road: Karawang 3,747
5 Railway: Madiun–Surabaya (165 km, Double Track) 430
6 Coal-Fired Power Plant: Indramayu 4 (1x1000 MW) 2,116
Total Java (6 projects) 10,750
No. Kalimantan USD Mio.
1 Toll Road: Balikpapan-Samarinda (99.02 km) 1,261
2 Railway: Purukcahu–Bangkuang– Mangkatip (290 km) 2,277
3 Coal-Fired Power Plant: Asamasam 5-6 (2x100 MW) 331
Total Kalimantan (3 projects) 3,869
No. Bali-Nusa Tenggara USD Mio.
1 Water Supply: South Bali 282.2
Total Bali-NT (1 project) 282
No. Sulawesi USD Mio.
1 Road: Palu–Parigi (37.4 km) 104
2 Toll Road: Manado–Bitung (46 km) 353
3 International Hub: Bitung 3,208
4 Railway: Makassar–Pare-Pare (136.3 km) 621
5 Hydro Electric Power Plant: Karama (4x112.5 MW) 1,376
Total Sulawesi (5 projects) 5,662
No. Maluku-Papua USD Mio.
1 Road: Enarotali–Tiom (240 km) 174
Total Maluku-Papua (1 project) 174
Source: Coordinating Ministry for Economic Affairs, 2013
The Investment Coordinating Board of the Republic of Indonesia
27
Indonesia Ease of Doing Business Improvement
Ease of Doing Business Improvement has achieved:
8 Area of Improvement in
Ease of Doing Business consist of…
• Starting a Business
• Getting Electricity
• Paying Taxes and Premium Insurance
• Enforcing Contract
• Resolving Insolvency
• Registering Property
• Dealing with Construction Permits
• Getting Credit
1. Business entity (Limited Liability/PT) establishment by online system.
2. Simplification on the issuance of Permanent Business Trading License (SIUP) and Company Registration Certificate (TDP).
3. Expedite workers registration.
4. On line registration for Workers Social Security Program.
5. Simplification on procedures, reducing cost and time for electricity connection.
6. Tax report by online.
7. Online system for payment of social insurance provided (BPJS) by e-payment mechanism.
8. Accelerate the settlement of commercial disputes in enforcing contract.
9. Accelerate the judicial procedure in resolving insolvency.
10. Time reduction for land certificate examination and transfer of land rights.
11.Building construction permit (IMB) by online.
12. Accelerate water connection services (PDAM).
13. Accelerate telephone connection services (PLN).
14. Regulation for Private Credit Bureau (LPIP) establishment.
15.Collateral Registry Administration System by online.
The Investment Coordinating Board of the Republic of Indonesia
28
The New Negative Investment List (DNI) (Presidential Regulation No.39 of 2010)
CLOSED
OPEN with
conditions
OPEN
Certain business fields may conduct investment activities
under certain requirements, such as: • Partnership with local partner, • Capital ownership, • Location and • Special permits.
Any investment activities are
closed for certain business fields producing goods/services that: • Prohibited by Indonesian law, • Dangerous, • Polluting, • Strategic for national security
and/or heritage.
More open business fields • Port facility (pier, building, container
delay terminal, liquid bulk terminal, dry bulk terminal and Ro-Ro terminal), max 95% foreign investment under PPP Scheme.
• Power plant > 10MW, electric power transmission and electricity distribution, 100% open under PPP Scheme.
• Pharmaceutical industry, max 85% foreign investment.
• Advertising, max 51% shares for ASEAN investors
More restrictive business fields • Telecommunication services, max 49%
foreign investment.
• Small-scale power plant (1-10 MW), max 49% of foreign invetment.
Increasing national competitiveness as well as maintaining economic growth
The Investment Coordinating Board of the Republic of Indonesia
29
Sustainable Development Goals and middle-income trap
Source: Ministry of Finance, 2013 and Bappenas, 2014
GDP per Capita
Year
Entering “Middle-Income”
Entering“High-Income” (target)
USD1.036
USD12.616
1996 2025
Mid-Term Development II
(2010-2014)
Mid-Term Development III
(2015-2019)
Mid-Term Development IV
(2020-2025)
GDP Growth 6-7% p.a.
GDP per capita 2014: USD5.000 2019: USD8.000 2025: >USD12.000
Poverty Rate 6-8%
Demographic Bonus: 2010-2030
The Investment Coordinating Board of the Republic of Indonesia
30
Quality Investments: Creating added value, increasing productivity and improving competitiveness
Downstream industries of
mining, agriculture, fisheries and forestry:
smelter, CPO and cocoa industries, paper,
furniture.
Import substitution of
capital goods and
raw materials: machinery, iron and
steel, automotive and spare parts, and basic
chemical.
Import substitution of
consumer goods: food and beverages,
home appliances, and oil refinery industries.
Export-oriented sectors: downstream industry of palm and
rubber, electrical equipment, metal,
paper, textile.
Tourism and
creative industries.
Infrastructure sector encouraged
through PPP: energy, air and sea ports, roads, water supply, waste management and
railways.
INDONESIA INVESTMENT COORDINATING BOARD
Establishing an Investor Relation Unit at
BKPM for information, facilitation and inqueries handling from existing and potential investors.
Rolling-out the Electronic Information Services and Investment Licensing (SPIPISE) in 105 regions throughout Indonesia.
Helping contain various obstacles and giving
consultation.
Facilitating foreign workers permit.
Launching the online investment tracking system.
We provide “one-stop shop” (PTSP) licensing provision and our
services for investors include…
PLAY
Badan Koordinasi Penanaman Modal (BKPM) Indonesia Investment Coordinating Board Jln. Jend. Gatot Subroto No. 44 Jakarta 12190 - Indonesia
t . +62 21 5292 1334
f . +62 21 5264 211
www.bkpm.go.id
Thank You
Terima Kasih
Indonesia Investment Promotion Centre (IIPC)