Guidelines for German Investors

HOW TO DO BUSINESS IN INDONESIA

Facilities

Strategic Location

Cost of Doing Business

Open and Liberal Market Economy

Trend of German Investors in Indonesia

MESSAGE OF WELCOME

The Republic of Indonesia and the

Federal Republic of Germany have

been bound over the years by a

spirit of friendship, cooperation and

mutual respect. Upon this solid

foundation, the Government as well as the people

of the two countries nurtured and cultivated their

relations extending to all fields of interaction to

the benefit of all involved.

With this fortunate background, also business and

entrepreneurial relations between the two

countries flourished. For Indonesian businessmen,

Germany represents a source of technological and

other know-how besides being a major market in

particular with respect to their endeavors to

expand their activities in the European Union. In

turn, for German entrepreneurs and businessmen,

Indonesia represents not only a vast market for

their products. Indonesia moreover offers with its

abundant skilled labor force and raw materials as

well as its well developed infrastructure and

conducive economic climate an ideal location for

investment in many fields of business enterprise.

The strategic location of the country in the

crossroad in Southeast Asia also contributes to the

viability of establishing businesses there.

In this vein, it pleases me very much to present to

you the book “How to do Business in Indonesia”

published by the Embassy of the Republic of

Indonesia in Berlin in cooperation with the

Investment Coordinating Board of the Republic of

Indonesia. I sincerely hope that the compilation of

opportunities open for foreign investors described

in the book will be a guideline and at the same

time an incentive for you to consider Indonesia as

your favored location for investment undertakings.

I herewith invite you to invest in Indonesia and wish

you all the best and success.

Berlin, 12 October 2009

EDDY PRATOMO Ambassador of the Republic of Indonesia for the Federal Republic of Germany

FOREWORD

It is such a great pleasure that the Indonesian

Embassy in Berlin, Germany, has initiated the idea

to bring forward the book of ‘How to do Business in

Indonesia’ as quick and simple investment

guidelines for German investors. Despite the fact

that there is a number of investment-related

guidelines available, it is assured that this book is

useful in providing information about investment

regulations and facilities in Indonesia. This book

also contains a number of potential investment

opportunities and investment-related website links

that might interest German business community in

particular.

This book is not intended as a primary source of

Indonesian investment yet it provides data and

information revealing Indonesia as a promising and

potential investment destination. Germany has a

major role in Indonesian investment. It ranked 11th

in Indonesia investment realization as of February

2009. The fact has proven that both Indonesia and

Germany have been sharing close relations

especially in trading and investments. In closing,

this book is expected to be beneficial in enriching

points of view in regards to investing in Indonesia.

To get further information, investors may want to

contact the embassy or our available offices to

proceed with the whole investment procedures.

Thank you and welcome to the country where

business opportunities await you.

Jakarta, 12 October 2009

The Investment Coordinating Board of

the Republic of Indonesia

How to do Business in Indonesia

Table of Contents

Page I. Indonesia at a Glance 1 II. About Indonesia 3 1. Geography 4 2. The People 4 3. Government and Politics 4 4. Bilateral Relations between

Indonesia and Germany 4

5. Key Economic Indicators 5 III. Why Indonesia 7 1. Large Population 7 2. A Vast and fertile land rich in

natural resources 7

3. Large numbers of Small and Medium Enterprises

7

4. Strategic location: vital international transport routes

8

5. Open and liberal market economy

8

6. Free foreign currency exchange system

9

7. Competitive investment incentives

9

8. FDI Confidence Index 12 9. List of German Investors in

Indonesia 12

10. Testimonials 16 IV. Other Advantages 18 1. Trend of German Investment

in Indonesia 18

2. Investment Policies – Features of the New Investment Law Number 25/2007

21

3. Negative List on Investment 22

4. Immigration Service Facilities

24

5. Industrial Estates and Bonded Zones

27

6. Facilities 33 6. a. Infrastructure

Facilities 33

6. b. Business Facilities 35 7. Cost of Doing Business 37 8. Application of Foreign

Investment 42

9. List of Public-Private Partnerships Projects in Indonesia

46

9. a. Project Ready for Offer 46 9. b. Priority Projects 46 9. c. Potential Projects 46 10. Planning Document of Public

Private Partnerships 47

V. Contacts 48 A. List of Important Related

Websites 48

B. Related Regulations on Investment

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I. Indonesia at a Glance

Indonesia, with its population of almost 230 million people, more than 17,000 islands, hundreds of ethnic groups and languages, as well as its strategic geographic location, occupies a significant place in Southeast Asia. Increasingly, Indonesia plays a prominent role in global politics, highlighted most recently by its participation in the G-20 summit meeting in London. The contribution of Indonesia to the global efforts to address the current world financial crisis also testifies to the international recognition of its positive economic developments, which brings it in line with Brazil, Russia, India and China (BRIC) as a new economic power.

In line with the progressive economic policy, several measures were enacted in the past to facilitate foreign direct investment in Indonesia in a number of sectors. This policy was stressed most recently by the introduction of the New Law on Investment No. 25/2007 which further contributes to creating conducive atmosphere for investment.

In order to create a sound economic development, the government has also change the mindset to the new Indonesia which is pro business, pro growth, pro job creation and pro poor. Emphasis on transparency and accountability such as zero tolerance towards corruption, good governance and efficient economy has also become a stressing points of the government.

Moreover, Indonesia is a major regional player in the region which could be seen in its active role in some regional organizations like ASEAN, SWPD, APEC and ARF. In the context of ASEAN, the recent inclusion of Japan, China and South Korea (ASEAN + 3) in the regional political round adds added weight to the role of Indonesia.

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With the success of the ongoing reform efforts of its political structure, Indonesia is now the third largest democracy in the world. The national parliamentary and presidential elections conducted peacefully and orderly in April and July 2009 testified to the maturing democratic conscience among the population.

Also in terms of culture, Indonesia is destined to become a magnet of world attention. Indonesia is the largest Muslim country in the world with Muslims accounting to almost 86% percent of the population, of whom the vast majority are moderate both in practice and outlook. As a multi-religious, multi-ethnic and a multi-cultural country, Indonesia attaches great importance to a harmonious coexistence of different religious faiths as well as ethnic and cultural groups. The Obama administration has designated Indonesia — the world’s largest Muslim-populated country and third largest democracy — as a key partner in the administration’s Muslim outreach. US State Secretary Hillary Clinton during her visit to Indonesia in February 2009 said that Indonesia could be seen as an example of success in combining Islam, democracy, modernity and progress of the role of women.

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II. About Indonesia

Map of Indonesia

Source : BKPM

3

1. Geography a. Land area: 2 million sq. km (736,000 sq.mi.)

(16th largest country) b. The world’s largest archipelago with more

than 17,000 islands: 6,000 are inhabited: 1,000 of which are permanently settled.

c. Climate: tropical; cooler in the highlands 16-350C (77-900F)

d. Humidity: 80-900%

2. The People a. Population: 230 million (fourth-most

populous country) b. Ethnic: 300 ethnic groups with 700 languages

and dialects c. National language: Bahasa Indonesia d. Religion: 87% Islam (world’s most populous

Muslim-majority), 6% Protestant, 3% Catholic, 2% Hindu, 1% Buddhist

3. Government and Politics

a. Form: unitary republic with a presidential system

b. Since 2004, president (as head of government and head of state) and vice president are directly elected.

c. General election on April and July 2009 has re-elected Dr. Susilo Bambang Yudhoyono as President with new Vice President Prof.Boediono.

d. Multi-party system 4. Bilateral Relations between Indonesia and

Germany a. Political Relations

Ever since the opening of diplomatic relations in 1952, the Indonesian-German bilateral relations have proceeded on positive and friendly terms. Indonesia sees Germany as an important partner both on a bilateral level and with regard to its relations with the European Union.

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This has been indicated among others by the exchange of visits at the levels of the Head of State/Government, ministerial and of senior officials as well as exchange of visits among members of parliaments of both countries.

b. Economic Relations

Currently, some 250 German companies do business in Indonesia, many with their own production facilities. In 2007, the volume of trade between the countries increased by 9.3%, to EUR 4.737 billion, compared with EUR 4.333 billion in 2006, with a larger surplus of EUR 1.565 billion in Indonesia’s favour (2006: EUR 1.28 billion). In 1999, the German Industry and Trade Centre (German Centre Indonesia) was opened in the satellite city Bumi Serpong Damai (approx. 35 km west of Jakarta). The Centre provides production and office space complete with the necessary infrastructure and state-of-the-art communications.

5. Key Economics Indicators

Items 2008 2009 GDP growth 6.1% 3.5 – 4.5%

(target)

Per Capita Income

Rp.21,7 million (US$ 2.271,2)

Reserve US$ 51,6 Billion (Dec)

US$ 57.87 Billion(May)

Interest Rate 8.75% 7. 50 %

Foreign Debt Ratio

30.7 %

Inflation Rate Inflation Target

11.06 % 6.04% (May 09 : May 08) 0.10% (Jan-May) 4,5% (±1%)

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Investment Realization (Jan – Dec)

US$. 17.13 Billion (up 20.5 %)

Unemployment (growth)

9.53 million (8.46%)

7.8 million (7%) - target

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III. Why Indonesia 1. Large population

Indonesia is literally a giant. Its market alone exceeds some 230 million people, making it the fourth largest country in the world in terms of its population after China, India, and the United States. Business should cater the needs of 65 million households. About 138 million or about 60 percent live on the island of Java, the most densely populated island in the country. Those numbers also translate into a vibrant labor force of skilled and educated workers.

2. A vast and fertile land rich in natural resources

The second reason why Indonesia is a perfect place for business is its vast and fertile land that enriches its natural resorces. Ranked as the 16th largest country in the world, Indonesia, with its tropical climate and humidity, is rich in natural resources. Indonesia’s crude palm oil is ranked as the best in the world, while its tin, cocoa and copper occupy the 2nd position. Other natural resources such as nickel, gold and coopper are ranked 5th, 7th and 8th,respectively, as well as numerous marine resources.

3. Large numbers of Small and Medium Enterprises

With the abundance of its natural resources and the quality of its fertile land at hand, the business people in Indonesia have remarkably utilized those advantages by establishing small and medium enterprises within various sectors.

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The staggering number of 42 million people, of which mostly are dominated by local private business entrepreneurs, have built their small and medium enterprises while managing to make millions of profit. This fact shows that the economy in Indonesia is not solely run by giant business companies, but also by simple local businessmen who have started with few pennies and turned them into businesses worth thousands of dollars.

4. Strategic location: vital international transport routes

Indonesia is located between 2 continents (Asia and Australia) and 2 oceans (Pacific and Indian) which puts it in a strategic location for international transport routes. One of the most important transport routes vital for international transport and used by international shipping for business purposes is the Malacca strait. Malacca strait lies between Malaysia and Indonesia (Sumatera island). Many ships navigagte through the Malacca strait en route to Australia and other Asia countries.

5. Open and liberal market economy

The Free Trade Area regulation will be applied within six years in the ASEAN region which will also include Indonesia. The Free Trade Area will usher in the market economy in Indonesia with its open and liberal policies. Every sector in Indonesia is open for investment. With the simplification of rules and regulations, Indonesia’s market economy will be openly accessible for foreign investors.

8

6. Free foreign currency exchange system

In the case of business profits in particular, a foreign investor will be able to transfer the profit of his business in Indonesia straight to his homeland and convert into the currency of his homeland without any involvement by the central government. This is one of the advantages for foreign investors as there will be no complicated procedures in receiving their profits in the currency of their country. With respect to the foreign exchange systems, the central government of Indonesia does not restrict investments with regulations with the view to ease the process.

7. Competitive investment incentives

A. Indonesia offers investment incentives to any investors that expand its business or effect new investments in Indonesia. Investors receiving facilities must meet at least one of the following criteria:

a. employment of local labor force

b. involvement of high priority scale

c. involvement of infrastructure development

d. technology transfer

e. pioneering of new energy

f. domiciling in remote, deserted, border or any other areas deemed necessary

g. preservation of the environment

h. conducting research, development and introducing innovation

i. entering into partnership with micro, small and medium businesses or cooperatives

j. using capital goods or machinery or equipment produced domestically

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B. Incentives for investors may be given in the

form of:

a. Net income tax deduction up to a certain level of investment made within a certain period.

b. Import duty holiday or reduction for imported capital goods, machinery or equipment domestically unavailable for production.

c. Import duty holiday or reduction for raw materials or support materials for production within a certain period and with certain conditions.

d. Value added tax holiday or postponement for imported capital goods or machinery or equipment domestically unavailable for production within a certain period

e. Accelerated depreciation or amortization; and

f. Property tax reduction especially for certain business sectors in certain region, area or zone.

Apart from the facilities mentioned earlier, investors are given facilities in obtaining:

a. Land rights b. Immigration service facilities c. Import approval facilities

These three facilities will be elaborated in the later sections.

C. Land rights In land ownership, following facilities are given to investors:

a. Right to Cultivate (HGU) for 25 years and it can be extended for another 25 years and renewed for another 35 years.

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b. Right to Build (HGB) for 30 years and it can be extended for another 35 years and renewed for another 20 years.

c. Right to Use (HP) up to 25 years and it can be extended for another 20 years and renewed for another 25 years.

D. Imports Permit Facilities Imports permit facilities are given for goods with several conditions as stated below:

a. Goods which are allowed to be imported as stated in the trading goods regulations.

b. Goods which do not have negative impacts to health, safety, security, environment, and the moral of the nation.

c. Goods destined to be relocated to Indonesia from companies in foreign countries.

d. Capital goods or materials for the purpose of one’s own productions.

Import Duty (Minister of Finance Decree No. 135/KMK.05/2000 and its Amendments)

a. The final tariff maximum 5% for equipments and raw materials imported in the framework of development of investment projects

b. Import duty tariff of 5% or lower listed in the Indonesian Custom Tariff Book; the effective tariff shall be those in BTBMI.

c. Import duty is levied on import for a period of 2 years starting from the date of stipulation of the decision on relief of import duty.

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8. FDI Confidence Index Foreign Direct Investment (FDI) Confidence Index 2007 (ATKEARNEY Survey 2007)

The Top 25 Most Attractive FDI Destination

1. China 14. Canada 2. India 15. Japan 3. U.S.A 16. Malaysia 4. U.K 17. Gulf Countries 5. Hong Kong 18. South Africa 6. Brazil 19. Mexico 7. Singapore 20. Turki 8. United Arab

Emirates 21. Indonesia

9. Russia 22. Polandia 10. Germany 23. Middle Asia 11. Australia 24. South Korea 12. Vietnam 25. Czech Republic 13. France

9. List of German Investors in Indonesia

Logo Company's Name

Address Business Line

Adidas Indonesia

Plaza DM, 14th floor Jl.

Jend. Sudirman Kav.25

Jakarta 12920

Footwear, apparel, sourcing

PT. Asuransi Allianz Utama

Indonesia

Summitmas II, 20st floor Jl.

Jend. Sudirman Kav. 61-62 Jakarta

12190

General insurance

12

PT. Bayer Indonesia

MidPlaza I, 12th-15th

floor Jl. Jend. Sudirman Kav. 10-11 Jakarta

10002

Production of pharmaceutical and Over the

Counter Medicine

(OTC), crop science

PT. BMW Indonesia

Wisma GKBI, 21st floor Jl.

Jend. Sudirman 28

Jakarta 10210

Distributor of BMW group

products (cars, spare parts, accessories)

PT. Boehringer Ingelheim

Wisma Standard

Chartered, 11th floor Jl.

Jend. Sudirman Kav. 33 A Jakarta

10220

Manufacturer of

pharmaceutical

PT. Daimler Chrysler

Distribution Indonesia

Deutsche Bank Bldg,

18th floor Jl. Imam Bonjol

No. 80 Jakarta 10001

Automotive with brands

Mercedes-Benz, Chrysler, and

Jeep

PT. DHL Danzas Air & Ocean Indonesia

Soewarna Business Park Blok A Lot 8

Soekarno Hatta Int'l

Airport Jakarta 19110

Logistics worldwide,

freight forwarding and

logistics solutions,

supply chain management, warehousing

and distribution

PT. Fuschs Indonesia

Jl. Jababeka VI SFB Blok J 6 KL Cikarang

Industrial Estate Bekasi

17530

Manufacturing and trading of

lubricants

13

Lufthansa Bank Panin Pusat, 2nd

floor Jl. Jend. Sudirman

No.1 Jakarta 10270

Flights

PT. Merck Tbk

Jl. T.B. Simatupang No.8 Pasar

Rebo Jakarta 13760

Manufacturing pharmaceutical

products, pharmaceutical raw materials and marketing pharmaceutical

s. Food supplements,

chemicals, cosmetics

PT. Siemens Indonesia

Siemens Business Park

Jl. M.T. Haryono Kav. 58-60 Jakarta

12780

Cellphone manufacturer

PT. Osram Indonesia

Jl. Siliwangi, Pasar Kemis, Km 1 Desa Keroncong Kecamatan Jatiuwung Tangerang

15000

Electronics/electric parts supplier

PT. Car And Cars Indonesia

(Volkswagen AG)

VW Centre Jl. Raya Pluit

Selatan No. 8A Jakarta

14440

Volkswagen cars

PT. Kosmindo (Wella AG)

Plaza Mutiara, Lt. II, Suite

1101 Jl. Lingkar Mega Kuningan Kav. E 1.2 No. 1 &

2 Jakarta 12950

Hair cosmetics

14

PT. BASF Indonesia

Plaza GRI 10th and 11th

floor Jl. Rasuna Said

Blok X-2 No.1 Kuningan

Jakarta 12950

Producer and distributor for

chemical product

PT. Beiersdorf Indonesia

Bina Mulia 2 Bldg. 3th

floor Jl. H.R. Rasuna Said

Kav. 11 Jakarta 12950

Production and sales of branded

consumer goods

(HANSAPLAST & NIVEA)

Deutsche Bank AG

Deutsche Bank Bldg, Jl. Imam

Bonjol No. 80 Jakarta 10310

Banking

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10. Testimonials

“The relationship between the Federal Republic of Germany and the Republic of Indonesia is sealed by friendship, honour and trust. We share great values of the principles of democracy,” Angela Merkel (Chancellor of Germany, congratulations for President Susilo Bambang Yudhoyono on his second election, July 28th 2009-Republika Newsroom)

“We believed that any crisis in Indonesia will recover rapidly. That's why Indonesia is a potential market for Asia Pacific,” Peter Landsiedel (CEO DHL Danzas Air & Ocean Asia Pacific on DHL Asia Pasific Media Tour 2004-Bisnis Indonesia) “Indonesia has always been our important market. We have production facilities in Indonesia because the local market is growing,” Matthias Luehrs (Director of Marketing and Sales Mercedes Benz for Middle and Eastern Europe, Africa, and Asia, February 7th 2009-www.tempointeraktif.com) “We are sure that this year, sales in Indonesia would surpass last year’s sales by net EUR 144 million” Helman Trisakti (Head of Energy Automation Tower Transmission Distribution Division, PT Siemens Indonesia, May 27th 2009-www.kapanlagi.com)

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“Indonesia is my second country. I love Indonesian mountains very much. We have mountains in Germany, but its different in Indonesia,” Jens Reisch (President Director PT Allianz Group Indonesia also a mountain hiker, February 1st 2007-www.detikfinance.com)

“We urge the Indonesian Government to see Germany as one of the most potential European countries because now, Germany sees Indonesia as one of the attractive countries in Asia beside India,” Chris Kanter (President of Econid, November 2nd 2007-www.detikfinance.com) “For the objective to offering a meeting-point and information-pool, the German Centre Indonesia is an innovative way of supporting business between Indonesia and Germany. Its purpose is to provide tailor-made support, especially to small and medium-sized companies from Germany and to cut back financial risks during the start-up period,” Günther H. Öttinger (Minister President of the State of Baden-Württemberg-www.germancenter.co.id)

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IV. Other Advantages

1. Trend of German Investment in Indonesia

a. Investment Realization 2005 – 2008 (US$ Billion)

18

b. Balance of Trade between Indonesia and

Germany 2004 – 2008 (US$ Thousand) Source : Statistic Central Board

19

German Exports and Imports

Indonesia largely exports textiles, vegetable oil and fat, furnitures, shoes, radio devices, television and hi-fi, and telecommunication devices to Germany. While Germany mainly exports machineries, vehicles, chemicals, metals, foodstuffs, and textiles, particularly various kinds of machineries, such as telecommunication devices, mining and construction machines to Indonesia. www.bkpm.org/ekonomi.htm

c. Rank of Investment Realization by

Countries (Period of 1 January 1990 – 31 January 2009)

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German Investment Realization by Sector (Period of 1 January 1990 – 31 January 2009)

No Sector Projects Value

(in thousand US$)

1 Metal and Machinery Industry

43 379.627

2 Chemical and Pharmaceutical Industry

32 318.103

3 Transport, Storage & Communication Industry

6 195.363

4 Non-Metal Mineral Industry

2 158.054

5 Trade and Reparation

68 89.653

6 Construction 5 57.478

7 Real Estate, Industrial Estate & Office Building

1 36.250

8 Textile Industry 6 31.638

9 Other Services 29 30.244

10 Logistic Services

6 27.264

2. Investment Policies – Features of New Investment Law Number 25/2007

• Equal Treatment • No Minimum Capital Requirement • Free Repatriation of Investment & Profit • Legal Guarantee • Dispute Settlement • Investment Services

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3. Negative List on Investment

Based on Presidential Regulation No: 111/2007 dated 27 December 207 concerning the Amendment to Presidential Regulation No: 77 / 2007 on Business Fields Closed and Open with Conditions to Investment, it can be mentioned among others as follows:

Business Fields Absolutely Closed to Investment are among others:

Gambling/casino, chemical industry potentially damaging to the environment and alcoholic beverage industry.

List of Business fields open to investment with conditions, among others:

a. Reserved for micro, small and medium-

sized enterprises, and cooperatives

Public transportation (route and non route), public shipping, Tobacco drying and processing industry.

b. Partnership

Industry of nails, nuts and screws, industry of component and spare parts for motor driver, industry of pumps and compressors, industry of component and equipment of two and three wheeled motor vehicles, industry of bicycle and pedicab component and spare parts.

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c. Capital Ownership

Pharmaceutical industry (max 75%), clinic specialized medical services (max 65%) and foreign exchange bank (max 99%).

d. Certain location

Breeding and cultivation of more than 125 pigs must be in line with regional regulation.

e. Special permit

Radio active mineral mining – equipped with recommendation from BATAN (National Atom Agency), narcotic pharmaceutical wholesaler and pulp industry.

f. 100% domestic capital

Pharmaceutical wholesales, raw material pharmaceutical and public drugstore.

g. Capital ownership and location

Private hospital (max 65%) in Medan & Surabaya, Nursing services (Max 49%) and supporting health services (rental medical equipment) (max 49%) in all locations (no conflict with regional regulation).

h. Special permit and capital ownership

Raw material industry for explosives (ammonium nitrate) (max 49%), explosives industry and component for industry demands (max 49%) and plantation and/or processing industry of palm products above 25 ha and/or above certain capacity in accordance with

23

ministerial regulation of agriculture No.26 of 2007 and/or its amendment (max 95%).

i. 100% Domestic capital and special permit

Weapons, ammunition, detonator and war equipment.

*For more information on open and/or closed business fields, please refer to the book of Criteria and Requirements for the Determination and List of Business Fields Closed and Open with Conditions to Investment, which are available in BKPM office or can be requested through the Indonesian Embassy.

4. Immigration Service Facilities

Foreign investors are granted facilities in terms of immigration services, such as:

a. Two-year-limited stay for foreign investors.

b. Facilitating foreign investors (who have lived in Indonesia for two years continuously and who had been given two-year-limited stay) by granting them a permanent stay permit in Indonesia.

c. Multiple re-entry facilities for investors with limited-stay permit with the expiry of one year, and are granted maximal 12 months as of the limited-stay-permit is given.

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d. Multiple re-entry facilities for investors with limited-stay permit with the expiry of two years, and are granted maximum 24 months as of the limited-stay permit is given.

e. Multiple re-entrance facilities for investors with permanent-stay permit, and are granted maximum 24 months the longest as of the limited-stay permit is given.

f. The facilities for a limited stay permit given to foreign investors as stated in point a and b are effected by the Directorate General of Immigration in accordance with the recommendation of the Indonesian Investment Coordinating Board.

Visa on Arrival

Visa on Arrival available at following airports of entry

NO

PROVINCE

NAME OF AIRPORT

1 DKI Jakarta Soekarno-Hatta – CGK

2 East Java Juanda – SUB

3 Bali Ngurah Rai – DPS

4 Yogyakarta Adi Sucipto – JOG

5 Central Java Achmad Yani – SRG

6 West Java Husein Sastranegara – BDO

7 North Sumatera

Polonia – MES

8 Riau Island Raja Haji Fisabilillah and Kijang Airport – TNJ

9 West Sumatera Minangkabau – PDG

25

10 South Sumatera

Sultan Mahmud Badaruddin II – PLM

11 South Sulawesi Sultan Hasanuddin – UPG

12 East Kalimantan

Sepinggan, Balikpapan - BPN

Source: PT Angkasa Pura 2, Indonesia www.angkasapura2.co.id

Visa on Arrival available at the following sea port of entry*

CITY PROVINCE SEA PORT

Batam Riau Sekupang, Batu, Ampar, Nongsa, Marina,Teluk Senimba, and Batam Center

Tanjung Uban

Riau Bandar Bintang Telani Lagoi and Bandar Sri Udana Lobam

Belawan North Sumatra

Belawan

Sibolga North Sumatra

Sibolga

Dumai Riau Yos Sudarso

- Riau Tanjung Balai Karimun

Tanjung Pinang

Riau Tanjung Pinang

Padang West Sumatra

Teluk Bayur

Jakarta DKI Jakarta

Tanjung Priok

Semarang Central Java

Tanjung Mas

- Bali Padang Bai and Benoa

Kupang East Nusa Tenggara

Tenau

Maumere

East Nusa Tenggara

Maumere

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CITY PROVINCE SEA PORT

Bitung North Sulawesi

Bitung

Makasar South Sulawesi

Soekarno-Hatta

Pare-pare South Sulawesi

Pare-pare

Jayapura Papua Jayapura

5. Industrial Estates and Bonded Zones

Industrial Estates

Industrial estates are available in almost all provinces of Indonesia. The large scale industrial estates can be found among others in Jakarta, West Java (Bekasi), Banten (Tangerang, Serang), Central Java (Semarang), East Java (Surabaya, Gresik, Sidoarjo, Pasuruan, Probolinggo), and Riau (Batam Island).

5.1 Industrial Estate in Jakarta

a. Pulogadung Industrial Estate Pulogadung Industrial Estate is owned by the Government of the Republic of Indonesia and the Provincial Government of DKI Jakarta. It has a total area of approximately 500 Ha. It

is the first industrial estate in Indonesia providing major products and services where Land

Parcel can be sold as well as Standard Factory Building (SFB), Small Scale

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Source : BKPM

Industry Facilities (SSIF), including Warehouse and Office Buildings, can be leased. German Companies, such as K.D. Feddersen & Co Uberseegesellschaft mbH and PT. Dian Graha Elektrika (Siemens Distributor) are located in this industrial estate.

5.2 Industrial Estate in West Java

a. Jababeka Industrial Estate The Jababeka Industrial Estate, located in Cikarang, Bekasi, is the first modern Indonesian eco-industrial estate under a technical cooperation program collaboratively established by Indonesia's Ministry of Environment and the Federal Republic of Germany. It spans 1,570 hectares and contains more than 1000 local and multinational

corporations from 23 countries, including German companies such as PT. Burgmann Indonesia, PT.

Festo, and PT. Fuchs Indonesia.

b. MM 2100 Industrial Estate Located at Cibitung, Bekasi, MM2100 Industrial Estate is a fully integrated industrial estate developed by PT. Megalopolis Manunggal Industrial Development (MMID) established in 1990 by two well regarded corporations : Marubeni Corporation of Japan and Manunggal Group of

Source : BKPM

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Source : BKPM

Indonesia. With 805 ha land and more than 170 manufacturing and supporting companies, MM2100 Industrial Town is one of the best value industrial estate in Indonesia.

5.3 Industrial Estate in Banten

a. Krakatau Industrial Estate Krakatau Industrial Estate is located in the Industrial Land, surrounded by hills and ocean.

Located in + 571 hectares of plain, more than 300 hectares have been occupied by 70 national and multinational companies, including one of the big German Companies, Siemens.

b. Modern Cikande Industrial Estate The Modern Cikande Industrial Estate (MCIE) was established in 1991.It has been occupied by more than 100

Source : BKPM

29

Source : BKPM

Source : BKPM

tenants of both local and foreign companies. The total area of MCIE is 900 ha, of which approximately 400 ha has been developed. A good qualityinfrastructure with complete facilities and greenery landscape are the right place for the factory.

5.4 Industrial Estate in Central Java

a. Terboyo Industrial Estate Terboyo Industrial Estate is located in Semarang with a total industrial area of 300 ha. It has been occupied by more than 150 local and foreign companies. It is also strategically located near Tanjung Mas harbour which supports export and import activities.

5.5 Industrial Esatates in East Java

a. Rungkut Industrial Estate Rungkut industrial estate has a total area of 245 ha. It has been occupied by more than 300 local and foreign companies.

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Source : BKPM

Source : BKPM

Its facilities located strategically in Surabaya near the Tanjung Perak harbour and the Juanda airport makes Rungkut Industrial Estate the biggest and the most famous industrial estate in East Java.

b. Pasuruan Industrial Estate Rembang Pasuruan Industrial Estate Rembang has 500 ha of industrial estate designed and partially implemented to offer fully developed plots to large, medium and small scale manufacturing enterprises. There are also SME workshop facilities, an Industrial Service and Engineering Centre, including Export Processing Zone (EPZ) to render business support services, technological advice and assistance in fostering supply and service linkages between large/medium and medium/small industrial enterprises.

Source : BKPM

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Source : BKPM

5.6 Industrial Estate in Riau

a. Batamindo Industrial Estate Batamindo Industrial Estate, which has a total area of 320 ha, is the pioneer industrial park in Batam and its success single-handedly transformed the economy of the island. It attracts global manufacturers, creating employment for more than 60,000 workers and contributes significantly to the country’s non-oil and gas exports.

Bonded Zones

Foreign Investment (PMA) as well as Domestic Investment (PMDN) Companies, Limited Companies of Non PMA/PMDN and Cooperatives with legal status are able to obtain approval as an Operator of Bonded Zones and Companies Operating in Bonded Zones. Operator of a Bonded Zone (Penyelenggara Kawasan Berikat/PKB) shall be a limited company, a cooperative with legal status or a foundation which owns, controls, manages and provides facilities and infrastructure in the interest of other parties in the Bonded Zone he operates on the basis of an agreement. Meanwhile, Companies Operating in the Bonded Zone (Pengusaha Didalam Kawasan Berikat/PDKB) shall be limited companies or Cooperatives engaged in the processing of goods and materials in a Bonded Zone. Operators of Bonded Zone (PKBs) are located in Jakarta (Cakung, Marunda and Tanjung Priok operated by government), Bogor, Purwakarta, Karawang, Semarang, Pasuruan, Medan, Mojokerto,

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Bintan Island, Aceh, and Batam Island and 426 Companies Operating in Bonded Zone (PDKBs).

6. Facilities

6. a. Infrastructure Facilities 6.a.1. Electricity Installed capacity

In 2005, installed capacity and the generating units of the state-owned electricity enterprise/PLN as Holding and sister companies totaled 29,147.06 MW. Total installed capacity comprised of Steam power plants 10,865 MW, Combined cycle power plants 6,655.97 MW, Diesel power plants 3,338.04 MW, Hydropower plants 4,405 MW, Gas turbine power plants 2,783.63 MW, and Geothermal power plants 1,087 MW. PLN total production (includes purchasing from outhouse sourcing) in 2005 obtained 101,282 GWh. Electric power purchased from outhouse is 26,087 GWh.

6.a.2. Electric Power Selling

Total electric power selling is 6,93% of the total with electric power selling to industrial group increased 5,27%, while from commercial selling registered the most growth with 11,57%. Meanwhile, household, street lighting, social & government has respectively increased 6, 73%, 8, 64%, 8,58%, and 4,92%. (Source: www.esdm.go.id)

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6.a.3. Telecommunication

Telecommunication services are provided by state-owned enterprises, consisting of PT.Telkom, which provides domestic telephone and telegraph services, and PT. Indosat which provides international telecommunication services. Further information could be accessed at: www.telkom.co.id

6.a.4. Transportation

Road Total of Indonesian road network is 268,030 km including 103,430 km of roads in Sumatera, 54,301 km in Java, and 5,653 km in Bali. Most cities in Java, Sumatera, Sulawesi and Bali are connected by highways or secondary roads. Nearly 90% of passenger transport and 50% of cargo transport are conducted by road. Trunk roads are well developed and new toll highways are being developed by private-sector investments.

Railway

Indonesia has a total length of railway track of 6,482 km in Java and Sumatera. Railways are used for freight transportation and long-distance passenger services. In the Jakarta-Bogor-Tangerang-Bekasi (Jabotabek) region, railway is used for commuter services.

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Seaport Please refer to page 15 for Visa on Arrival information.

Airport

Please refer to page 15 for Visa on Arrival information.

6. b. Business Facilities

6.b.1. Banking, Insurance and Leasing

Bank Indonesia (BI) as an independent state institution is fully autonomous in formulating and implementing each of its task and authority as stipulated in the new Central Bank Act, Law No. 23/1999. With regard to foreign investment, Bank Indonesia plays the following roles:

a. Issuing a letter of clearance for final draft loan agreement of Foreign Direct Investment (FDI) companies.

b. Monitoring the FDI accounts.

c. Ensuring that the capital for FDI projects originates mostly from offshore.

d. Registering all offshore loans received by FDI companies.

To support business activities in Indonesia, there are several foreign banks operating in Indonesia, among them ABN AMRO Bank, American Express Bank, Bank of America NA, Citibank NA, Deutsche Bank AG, JP.Morgan Chase Bank, Standard Chartered Bank, The Bangkok Bank Comp.

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Ltd., the Bank of Tokyo-Mitsubishi Ltd., the Hong Kong and Shanghai Banking Corp.

There are 5 (five) state-owned banks, namely PT. Bank Ekspor Indonesia (Persero), PT.Bank Mandiri (Persero), PT.Bank Negara Indonesia (Persero),Tbk., PT. Bank Rakyat Indonesia (Persero), and PT.Bank Tabungan Negara (Persero). In addition, there are 36 National Currency Private Banks, 40 Non National Currency Private Banks, 26 Regional Development Banks, and 24 Joint Ventures Banks.

Other financial institutions include 176 national and international insurance companies and 145 leasing companies.

6.b.2. Stock-markets

According to the Law concerning the Capital Market, guidance, regulation, and day-to-day supervision of capital market is provided by the Capital Market Supervisory Agency (Badan Pengawas Pasar Modal/Bapepam). Also, it implements an orderly, fair, and efficient capital market activity and protects the interest of investor and public.

6.b.3. Representative Office

A foreign company is allowed to establish a representative office in Indonesia in one of its province capitals. Its activity is limited to supervising and coordinating the business of its principal and branches. This office is not allowed to make any business

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transactions with companies or persons in Indonesia either for export or import or domestic trading. The representative office could obtain work permits for expatriate managers and multiple entry visas for its expatriate personnel as well as exemption from exit-tax (SKFLN).

7. Cost of Doing Business

Standard cost of investment in Indonesia including visa on arrival, corporate administration tariff, tax rates, regional minimum wage rates, work overtime and overtime wage rate, water tariff, electricity base tariff, telephone service tariff, internet tariff.

a. Corporate Administration Tariff

Corporate Administration Tariff

Name Tariff

1. Ordering Corporate Name Rp. 350,000,-

2. Corporate Bodies Establishment and Changing

Rp. 1,000,000,-

Source: The Ministry of Justice and Human

Rights

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b. Tax Identification Number (NPWP)

The tax office requires all individual residents in Indonesia to have their own personal tax numbers (Nomor Pokok Wajib Pajak/NPWP). This regulation includes expatriates, with the exception for minors who are too young to work. In 2000, the tax office stepped up the drive to require all expatriates in Indonesia to register with the tax office and obtain their separate individual/personal tax number (NPWP) and make monthly taxes payment.

Source: The Directorate of Tax, The Ministry of Finance.

c. Tax Rates

Tax rate applicable to entities as resident Taxpayers and permanent establishment:

Taxable Income Brackets Tax rate

Rp 50.000.000 (fifty million rupiahs) or less 10%

Rp 50. 000.001 (fifty million and one rupiahs)–100.000.000 (one hundred million rupiahs)

15%

Over Rp 100.000.000 (one hundred million rupiahs) 30%

Profit after income tax of a

permanent establishment in Indonesia shall be subject to additional tax of 20 % (twenty percent or based on tax treaty), except if the profit is re-

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invested in Indonesia, it will be governed by the decree of the Minister of Finance.

Tax rate applicable to a non-resident

Taxpayer other than a permanent establishment in Indonesia : (or based on tax treaty)

Income Tax Rates

Dividends 20%

Interest, including premiums, discounts, swap premiums and compensation in accordance with a loan guarantee

20%

d. Provincial Minimum Wage Rate 2009

No Province Euro/Month 1 North Sumatera 84.9 2 DKI Jakarta 75.7

3 East Kalimantan 67.6 4 Banten 65.0 5 South Sulawesi 64.1 6 Riau Islands 63.2

7 West Sumatera 62.3 8 West Nusa Tenggara 58.9 9 South Sumatera 58.4 10 Bali 53.8 11 Yogyakarta 49.6 12 West Java 44.5 13 Central Java 40.7 14 East Java 40.4 15 North Sumatera 84.9

Source: Ministry of Manpower and

Transmigration Republic of Indonesia www.nakertrans.go.id

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e. Water Tariff

Water Tariff/m3 From January 2007

No Customer Classification Tariff (In Euro)

1 Classification IV A 0.68 2 Classification IV B 0.88

Classification IV A: Embassies, Foreign Representative Offices, Commercial Private Institutions, Non-Star Hotels, Medium Enterprises, Home Medium Enterprises, etc.

Classification IV B: Star Hotels, Banks, Service Stations, Trading Companies, Food and Drink Factories, Textiles Factories, Storages, etc.

Source: PT PAM Indonesia

www.pamjaya.co.id

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f. Electricity Base Tariff

ELECTRICITY BASE TARIFF User

Categories Power Block Loading

Cost (Rp/kVA)

Usage Cost

(Rp/kVA)

2200 VA I : 0-196 kWh

II : > 196 kWh

32.000 455

460

2200 VA s/d 14 kVA

I : 0-80JN

32.200 455

460

I-2 > 14 kVA s/d 200 kVA

II : >80 JN

WBP LWBP

32.500 Kx 440

I-3 > 200 kVA

0 -350JN Block WBP

> 350JN

Block WBP

Block WBP

29.500

Kx439

439

439

14 > 30.00 kVA

27.000 434

Sources: State Electricity Company /PLN (2008)

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8. Application of Foreign Investment

Investment Approval Stage

1. All types of business fields are open to investment, except the business fields closed or open with conditions to investment.

2. An investor should first look at the list of business fields as stated in Presidential Regulation Number. 77/2007 and 111/2007.

3. Foreign investment approval should be issued in Indonesia by the Investment Coordinating Board (BKPM) in Jakarta. However, for foreign investment projects located in Bonded Zones, investors should submit the application to BKPM through the respective Bonded Zone Authority.

4. Foreign investment application documents are to be submitted to the BKPM and it will be evaluated in terms of their compliance with various aspects such as sectors policies and finance. If further clarifications are still required, a letter will be sent to the investor concerned to request the necessary additional data and information.

5. Following the evaluation process, the Chairman of BKPM will issue the investment approval.

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6. The entire process would take a maximum of 10 (ten) working days.

7. Upon the issuance of the investment approval, a foreign investment company can be legally established through the execution of the articles of incorporation in notary deed form.

8.a. Application and Approval Procedures at BKPM

Flow of New Direct Investment Application Approval

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*MODEL I forms are available in BKPM office and can be downloaded from BKPM website: www.bkpm.go.id

The Investment Coordinating Board (BKPM) is a Non Department Government Agency serving under and responsible directly to the President of the Republic of Indonesia and led by a Chairman. Its office is located in Jakarta, the capital city of the Republic of Indonesia, at Jalan Gatot Subroto No: 44, Jakarta Selatan, Indonesia 12910.

8. b. Application and Approval Procedures in Bonded Zones

1. To apply for a new investment approval for projects located in Bonded Zones, foreign investment applicants must complete and submit 2 (two) copies of form Model 1/PMA to BKPM through the corresponding Bonded Zone Authority where the project will be located.

2. The required documents attached to the applicant's form as enclosures are similar to those required in the procedures above mentioned.

3. To implement the approved investment projects that are located in Bonded Zones, investors are not required to apply for any further implementation licenses such as location permit, building construction permit, nuisance act permit, land title, etc.

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8. c. Application and Approval in Integrated Economic Development Zones

1. The application for investment located in Integrated Economic Development Zones also referred to as Kawasan Pengembangan Ekonomi Terpadu (KAPET), shall be submitted to the Managing Board of KAPET concerned either for Domestic or Foreign Investment. The Managing Board of KAPET shall evaluate applications for new Foreign Investment located in the KAPET and the resulting application will be submitted to the Chairman of BKPM.

2. The Managing Board of KAPET will evaluate new investment applications, applications for expansion and modification the context of Foreign Investment located in the Integrated Economic Zone.

3. After that, the Managing Board of KAPET submits result of the evaluation to the Chairman of BKPM who will then issue an approval of the application and notify the applicant through the Managing Board of KAPET.

4. The Managing Board of KAPET will evaluate applications for investment implementation permits and issue the approval of the applications.

Source : BKPM

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9. List of Public-Private Partnerships (PPP) Projects in Indonesia

9. a. Projects Ready for offer are among

others:

No. Sector/Sub-sector

Quantity Project Cost (US$

000)

1 Power 2 2,000,000

2 Railways 2 1,440,000 3 Toll Road 3 1,000,000

9. b. Priority Projects are among others:

No. Sector/Sub-sector

Quantity Project Cost (US$

000) 1 Toll Road 8 2,474,000

2 Water Supply 8 500,000 3 Solid Waste

and Sanitation

2 120,000

9. c. Potential Projects are among others:

No. Sector/Sub-sector

Quantity Project Cost (US$ 000)

1 Toll Road 21 11,774,000

2 Railways 13 10,520,000

3 Power 7 1,695,000

The complete list of projects is available at www.bkpm.go.id

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10. Planning Document of Public-Private Partnerships in Infrastructure Provision

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V. Contacts A. List of important related websites

1. Indonesian Representative in Germany

Indonesian Embassy in Berlin www.indonesian-embassy.de

Indonesian Consulate General in Frankfurt www.indonesia-frankfurt.de

Indonesian Consulate General in Hamburg www.kjrihamburg.de

2. Investment Coordinating Board

A-Z information and business details about administration and procedures to invest in Indonesia. www.bkpm.go.id

Investment opportunities in regional areas in Indonesia, supported by the list of important phone number, facsimile and address of Governors’ offices and Regional Investment and Promotion Boards. www.regionalinvestment.com

3. Bank of Indonesia

Information about currency and monetary policy. www.bi.go.id

4. Department of Foreign Affairs

Site information about Indonesia’s relations with other countries, bilateral and multilateral. www.deplu.go.id

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5. Department of Trade

Important site for investors to consult current statistics of Indonesian trade and main commodities. www.depdag.go.id

6. Directorate General for Immigration,

Department of Law and Human Rights : Site containing regulations and procedures for investor to submit immigration paper. www.depkumham.go.id

7. Directorate General of Tax

Government site for information about tax rates. www.pajak.go.id

8. Indonesian Chamber of Commerce

Indonesian businesses association list which will enable investors to contact and correspond. www.kadin-indonesia.or.id

9. German Indonesia Center

The objective of the German Centre is to provide comprehensive support to small and medium-sized German companies establishing their own bases in promising markets. Through the combination of office space, services and rapid access to networks, companies can quickly and cost-efficiently enter the new markets. Furthermore, the German Business community becomes more visible in the respective host country and synergy effects can be achieved. www.germancenter.co.id

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10. German Embassy in Jakarta

Information about representative of German government in Indonesia. www.jakarta.diplo.de

11. EKONID, the German-Indonesian Chamber

of Commerce and Industry

Officially recognized agency to promote bilateral business relations between Germany and Indonesia. EKONID is a non-profit membership organization. Members of EKONID are German, Indonesian and international companies, economic associations, organizations and private individuals. In more than 30 years, EKONID has developed itself into a provider of a wide range of services, far surpassing its original trade promotion objectives. www.ekonid.com

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B. Related Regulations on Investment

1. Law No.25/2007 : Investment Law

2. Regulation Head of Investment Coordinating Board No.1/P/2008 on Second Amendment to the Decree of the Head of Investment Coordinating Board Number 57/SK/2004 on Guideline

3. Income Tax Facility For Investment In Certain Business Fields And/Or Certain Regions (Alteration GR No. 1 Year 2007)

4. The Presidential Regulation of the Republic of Indonesia No.76/2007 regarding the Criteria and Establishment of Closed Business Line and Open Business

5. Decree of Director General for Custom No.Kep-02/BC/1999 on procedures of granting exemption for importing machines, goods and material by industry/ industry services.

6. Government regulation No. 24/2009 regarding the Industrial Zone.

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layout and design - atni

EMBASSY OF THE REPUBLIC OF INDONESIA Lehrter Str. 16-17, 10557 Berlin, Germany

Phone : +49-30-478070 Fax : +49-30-44737142 eMail : info@indonesian-embassy.de

www.indonesian-embassy.de

in coordination with

INVESTMENT COORDINATING BOARD REPUBLIC OF INDONESIA

Jl. Gatot Subroto No. 44 Jakarta 12190, Indonesia

www.bkpm.go.id