Investing in

INDONESIA

Trade, Tourism and Investment Forum, Montreal, May 25, 2016 INDONESIA INVESTMENT COORDINATING BOARD

Franky Sibarani Chairman

© 2016 by Indonesia Investment Coordinating Board. All rights reserved

Investment Progress

Canada’s Presence in Indonesia

550

million US dollars

391 million US dollars

FDI realization in 2010-2015

FDI commitment registered in 2010-2015

Main sectors

Main sectors

Mining Service Trade

Property Mining

Hotel & Restaurant The Investment Coordinating Board of the Republic of Indonesia

Source: BKPM, 2016.

2

Growing

INDONESIA Economic growth accelerates, the third highest among G20 countries in 2015 Sustainable direct investment realization growth Politically stable and maturing democracy

WHERE

ON EARTH

The biggest economy in Souteast Asia The Investment Coordinating Board of the Republic of Indonesia

3

5.3%

Government’s target 2016

5.2%

2016 economic growth prediction

5.2%

2016 economic growth prediction

5.3%

2016 economic growth prediction

Indonesian Economy

Economic growth accelerated 4.71% (Q1), 4.67% (Q2), 4.73% (Q3), 5.04% (Q4, 2015)

The Investment Coordinating Board of the Republic of Indonesia

4

(in Million) Growth

Digital in Indonesia

Active internet users

88.1 +15%

Active Socmed users

79.1 +10%

Mobile connections

326.3

+2%

Source: wearesocial.com, January 2016

Natural Resources in Indonesia

In the heart of global market concentration

World Rank

Geothermal, Palm Oil

1st

Cocoa, Rubber

2nd

Tin, Nickel, Bauxite, Copper

Indonesia

Main Producer

Source: wearesocial.com, January 2016

Population (million) GDP (USD billion)

ASEAN*

Indonesia

618

255 (41%)

2,158 896 (42%)

Middle Class (million)

190

64 (34%)

FDI inflow (USD billion)

107

37 (34%)

*) Associaton of Southeast Asian Nations: Brunei, Cambodia, Laos, Malaysia, Myanmar, Indonesia, Phillippines, Singapore, Thailand, Vietnam. Source: OECD, BCG & FT, 2015 The Investment Coordinating Board of the Republic of Indonesia

Southeast Asia (10 countries)

Global Market Concentration

Half of world’s population are in this area 5

43.6

billion US dollars (IDR 545.4 trillion) Investment realization 2015

17.8%

+

Investment realization growth (y/y)

148.2

billion US dollars (IDR 1,852 trillion) Investment commitment 2015

+45%

Investment commitment growth (y/y)

Investment Progress

Growing Investment Realization

The Investment Coordinating Board of the Republic of Indonesia

Construction of Nickel Smelter to produce stainless steel in Morowali, Central Sulawesi

6

Developing

INDONESIA Solid national development plan 2015-2019 Massive energy and infrastructure development Strong vision as a global maritime power

WHERE

ON EARTH

The world’s largest archipelagic nation The Investment Coordinating Board of the Republic of Indonesia

7

Infrastructure Development

35GW

New Power Generation Development

100 MW gas power plant in Gorontalo, South Sulawesi is finished in February 2016 (in picture).

WHERE

ON EARTH

Gorontalo, South Sulawesi The Investment Coordinating Board of the Republic of Indonesia

8

Infrastructure Development

163

New seaports to be finished by 2019

New Seaport in Wasior, Papua Province is finished in April 2016 (in picture).

WHERE

ON EARTH

Wasior, Papua The Investment Coordinating Board of the Republic of Indonesia

9

Infrastructure Development

15

New airports to be finished by 2019

New Mopah Airport in Merauke, Papua Province is finished in 2015 (in picture).

WHERE

ON EARTH

Merauke, Papua The Investment Coordinating Board of the Republic of Indonesia

10

Infrastructure Development WHERE

ON EARTH

Sulawesi, the fourth most populous island

2,024 miles

New railways to be finished by 2019

Progress of Trans Sulawesi railway (in picture). Trans Sulawesi (145 km - Phase I) Makassar to Pare-pare (145 km) will be finished in 2016. The Investment Coordinating Board of the Republic of Indonesia

11

Infrastructure Development

2,024 miles

New railways to be finished by 2019

Jakarta MRT (21.5 km – North/South) will be finished in 2017 (in picture). Progress 38% per January 2016.

WHERE

ON EARTH

Jakarta, The capital city The Investment Coordinating Board of the Republic of Indonesia

12

Infrastructure Development

621 miles

New toll-roads to be finished by 2019

Progress of Trans Sumatra toll road (in picture). Until 2019, 119 miles of toll-road will be built in Sumatra.

WHERE

ON EARTH

Sumatra, the second most populous island The Investment Coordinating Board of the Republic of Indonesia

13

Infrastructure Development

49

New dams to be finished by 2019

Jatigede Dams which irrigates 90,000 farmlands in West Java is finished in 2016 (in picture).

WHERE

ON EARTH

West Java The Investment Coordinating Board of the Republic of Indonesia

14

Connectivity Improvement

Marine toll operates Marine toll serves 6 routes (5 routes to Eastern & 1 route to Western Indonesia). 5 Hub ports 19 Feeder ports

The Investment Coordinating Board of the Republic of Indonesia

15

Improving

INDONESIA One-stop service for investment 3-hour service and direct construction Simplification of licensing Pro-investment policy reforms Bonded logistics centers

WHERE

ON EARTH

34 provinces & 514 regions, decentralized The Investment Coordinating Board of the Republic of Indonesia

16

Indonesia Investment Promotion Centre (IIPC)

One-stop Shop for Investment MO

Marketing Officers Dedicated to each country/region. Consultation & facilitation services.

OSS One-Stop Service

3-hour Service

22 ministries & agencies. Licencing at one place: industry, power, oil & gas, tourism, etc.

Permits to start business, to work & to import capital goods. Land-booking letter.

IRO

Investors Relation Officers Dedicated to each region in Indonesia. Monitoring & facilitation to realize investment.

The Investment Coordinating Board of the Republic of Indonesia

17

Investment Service Reforms

One place

All

22 ministries integrated

3-hour

sectors 162 permits are delegated to BKPM

One-Stop

Service

Service Industry,

power,

(PTSP) at BKPM

Direct

oil & gas,

tourism at one place

Construction

91%

Regional PTSP formed. 61% regional PTSP implement e-licensing.

One-Stop Services

Investment Service Reforms

8 documents obtained

Certainty to start a business

3-hour Service Available for investors with minimum investment of IDR 100 billion (USD 8 million) and/or employing 1,000 local workers.

• Investment license • Certificate of incorporation • NPWP / Tax registration • TDP / Company registration

Certainty to work

• RPTKA / Employment plan • IMTA / Working permit

Certainty to import capital goods

• APIP / Import identification • NIK / Customs registration

Accurate land Information

• Letter of land availability

BKPM

• Arrive at One-stop Service at BKPM directly from the airport. • Consult with Director of Investment Service. • Submit the required documents & data.

Wait at the lounge while

documents are processed by BKPM, in-house notary, ministries, & other government institutions.

Obtain eight documents & letter of land availability within three hours to start your business.

The Investment Coordinating Board of the Republic of Indonesia

19

Investment Service Reforms

Direct Construction Investors can directly start their project construction before obtaining construction permits. This service is supported by both Central and Regional Governments.

Obtain investment licence

at One-stop Integrated Service (PTSP) at national or regional level.

No Requirements • No minimum investments or workers is required. • Available for selected industrial parks. • Construction permits can be obtained in parallel with construction process.

• Survey a land within

selected industrial parks. • Acquire the land for your industry.

• Start the construction of your

project. No other permits are required. • Apply for building construction permit & environmental permit, in parallel with construction process.

The Investment Coordinating Board of the Republic of Indonesia

20

Investment Service Reforms

14 Selected Industrial Estates for Direct Construction North Sumatra KI Medan

Banten

Modern Cikande Industrial Estate KI Terpadu Wilmar Krakatau Industrial Estate Cilegon

West Java

Bekasi Fajar Industrial Estate KI Delta Silicon 8 Karawang Internasional Industrial City Suryacipta City of Industry GT Tech Park

Central Java

KI Kendal KI Bukit Semarang Baru KI Wijayakusuma

South Sulawesi KI Bantaeng

East Java

Java Integrated Industrial & Port Estate

WHERE

ON EARTH

Java, Sumatra, Sulawesi are Indonesia’s most populous islands The Investment Coordinating Board of the Republic of Indonesia

21

Policy Reforms POWER GENERATION

49 permits 923 days

25 permits 256 days

AGRARIA

Land use permit (HGU) 3,000-6,000 ha 123 days

90 days

FORESTRY

Forest land use permit 111 days

47 days

TRANSPORTS

Special terminal permit, 30 days

5 days

AGRICULTURE

Plantation permit 751 days

182 days

INDUSTRY

Industrial business permit, 672 days

152 days

TOURISM AREA

Tourism area permit (TDK), 661 days

188 days

Not specified, unclear

28 days

( 4 improvements)

( 13 Improvements)

Simplification

of Licensing

( 4 improvements)

(9 improvements)

( 8 improvements)

(6 improvements)

TAX ALLOWANCE APPLICATION

The Investment Coordinating Board of the Republic of Indonesia

22

Policy Reforms

Pro Investment Policy Projectable Wage System

Acceleration of Land Licensing

Setting Provincial Minimum Wage regulation. Formula to ensure stable and projectable wage adjustments.

Simplifying spatial license & land accomodation. Speeding up land registration. Electronic system.

Lower Fuel & Electricity Prices Lower retail fuel costs, gas & electricity prices for factories & qualified industries.

Tax Incentives Free VAT for transport industries, including spare parts. Income tax (PPh21) incesntive for labor intensive industry.

Improved

Ease of Doing Business More certain, simpler, faster, and cheaper

The Investment Coordinating Board of the Republic of Indonesia

23

Policy Reforms TAX HOLIDAY

IMPORT DUTY FACILITY

(MoF Regulation No.159/PMK.010/2015)

5-15 25

(MoF Regulation No.176/PMK.011/2009)

years tax exemption

With potential 20 years exemption for project that considered strategic for Indonesia economy.

Up to

years tax exemption

For Special Economic Zones

9 eligible pioneer industries: 1. Basic metal industries; 2. Oil refinery industries and/or basic organic chemicals; 3. Machinery industries; 4. Industries of renewable resources; 5. Communication devices industries. 6. Agricultural processing 7. Marine transportation 8. Manufacturing industry in SEZ 9. Economic infrastructures

IDR

1

trillion

Minimum investment plan (USD 80 million).

Machines, goods, materials for production 2 years import duty exemption or 4 years for companies using

locally-produced machines (min.30%).

Industries

Which produces goods and/or services, including: 1. Tourism and culture 2. Public transportation 3. Public health services 4. Mining 5. Construction 6. Telecommunication 7. Port

The Investment Coordinating Board of the Republic of Indonesia

24

Policy Reforms TAX ALLOWANCE (Government Regulation No.18/2015)

Agriculture • • • • •

Cattle breeding & farming Corn plantation Soya plantation Rice farming Tropical fruits

Power Generation

• Geothermal • Alternative/renewable energy

Oil & gas industry

• Oil refinery • Liquefied Natural & Petroleum Gas • Lubricant

30

% of investment value Reduction of corporate

net income tax for 6 years, 5% each year.

143

business segments Eligible for tax

allowance, expanded from 129 segments in the previous regulation.

Under certain requirements among others: investment value or export orientation, manpower absorption, local content, and project location (especially outside Java island).

Manufacturing Industry • • • • • • • • • • •

Iron & steel Semi conductors Electronic components Computer Communication devices Television Tires Pharmaceutical Cosmetics Fish & shrimp processing Etc.

The Investment Coordinating Board of the Republic of Indonesia

25

Policy Reforms

More open to foreign investments 100% FDI

Distributor

100% FDI

affiliated with production

Raw material for

67% FDI for distributor not affiliated with production

From previously open to 85% FDI

Pharmacy

100% FDI

Film Industry Production, postproduction, distribution, projection

100% FDI

100% FDI

E-Commerce in partnership with SMEs From previously closed to FDI

67% FDI

Transport

infrastructure & support services Including cargo handling, air transport, renting & leasing

Marketplace For min. Investment of IDR 100 billion (USD 8 million). Open 49% FDI for investment < IDR 100 billion

100% FDI

Tourism

Sports center, restaurant, bar, cafe

The Investment Coordinating Board of the Republic of Indonesia

26

Policy Reforms

Bonded Logistics Centers Ease export & import

Companies can store their export/import products and obtain customs, tax, and other facilities

Improving logistics distribution

• For domestic & regional market • Cheaper storage, freight and port handling costs • Bring the products closer to consumers

11 locations

In Java, Bali & Kalimantan

WHERE

ON EARTH

Java, Bali & Kalimantan are three of main islands. The Investment Coordinating Board of the Republic of Indonesia

27

Promising

INDONESIA Transform into a production-based economy with a large and growing market Special Economic Zones and national strategic tourism areas Integration to the global market

WHERE

ON EARTH

The world’s 4th most populous country The Investment Coordinating Board of the Republic of Indonesia

28

Investment Opportunities

Priority Sectors for Investment

Manufacturing Industry

Export-oriented Industry, Labor-intensive Industry, Import-substitute industry, Downstreaming industry

Infrastructure

35 GW Power Generation, 24 Ports, 15 Airports

Agriculture

Food Estates & Cattle Production

Maritime Industry

Shipyards, Fishing Industry & Cold Storage. Until 2019, Indonesia will build 1,574 ships (USD 13.4 billion) to support marine toll.

Tourism, SEZs & Industrial Estates The Investment Coordinating Board of the Republic of Indonesia

29

Investment Opportunities

Special Economic Zones & Strategic Tourism Areas

Existing SEZs Planned SEZs Strategic Tourism Areas

Lhoksemawe Shipyard, Manufacture

Toba Lake

Sei Mangkei

Tarakan

Palm Oil, Rubber, Fertilizer Industries, Logistics, Tourism

Manufacture

Fishery & Agro Industries, Logistics

Padang Pariaman

Agro Industry (Cacao, Rubber, Palm Oli)

Maloy Batuta

Palm Oil, Rubber, Petrochemical Industries

Refinery, Metal Industry Garombong Refinery, Logistic, Petrochemical

Tanjung Lesung West Java Tourism

Manufacture

Tourism, Manufacturing Industry, Logistics

Smelters, Agro Industry, Logistics

Batu Licin

Thousand Islands

Morotai

Palu

Palm Oil, Coal, Kelayang Mineral Industries

Tanjung Api-api

Bitung

Wakatobi Taka Bonerate Tourism (Maritime)

Raja Ampat

Tourism (Maritime)

Sorong

Fish industry

Teluk Bintuni Fertilizer, Petrochemical

Merauke

Food, Energy

Komodo

Borobudur Mandalika Bromo Tengger Semeru Tourism

The Investment Coordinating Board of the Republic of Indonesia

30

Investment Opportunities

10 National Strategic Tourism Areas

Toba Lake

A. SEZ Tanjung Lesung

Tanjung Kelayang

Bromo Tengger Semeru

B. SEZ Mandalika

Kepulauan Seribu

Komodo

C. SEZ Morotai

Borobudur

Wakatobi

The Investment Coordinating Board of the Republic of Indonesia

31

Thank You Terima Kasih

Deputy in Charge for Canada Mr. Azhar Lubis, [email protected] Investment Marketing Officer for Canada Mr. Haryo Sedewo, [email protected] Indonesia Investment Promotion Center in New York Mrs. Elsa Noviliyanti, [email protected]

Badan Koordinasi Penanaman Modal (BKPM) Indonesia Investment Coordinating Board

Jln. Jend. Gatot Subroto No. 44 Jakarta 12190 - Indonesia

t. f. e.

+62 21 525 2008 +62 21 525 4945 [email protected]

www.bkpm.go.id

The Investment Coordinating Board of the Republic of Indonesia

32