Opportunities for Growth - ASEAN · 2015-05-26 · Source: ASEAN Community in Figures 2011 1,221 317 251 201 China India US Indonesia Brazil World’s Top-5 Population by Country

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| Tokyo, 22 August 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%


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


4 Source: BKPM, 2014.

FDI Realization in Indonesia by Origin Country Top-10 Countries in 1st Semester of 2014 (USD million) Excl. oil, gas, and financial sectors

Rank Country 2009 2010 2011 2012 2013 S1-2014

1 Singapore 1,429 5,565 5,123 4,856 4,671 3,394

2 Japan 685 713 1,516 2,457 4,713 1,542

3 Malaysia 123 472 618 530 711 717

4 US 100 931 1,488 1,238 2,436 663

5 South Korea 613 329 1,219 1,950 2,205 655

6 Inggris 288 276 418 934 1,075 646

7 Netherlands 1,195 608 1,354 967 928 605

8 Australia 80 214 90 744 226 450

9 Mauritius 159 23 73 1,059 780 431

10 British Virgin Island 293 1,616 517 856 786 368

Total (Top-10 Countries) 4,914 10,580 12,570 15,493 18,708 9,470

Total (103 Countries) 10,817 16,215 19,474 24,565 28,616 14,287

Japan The biggest investor in 2013, but the number is

declining in 1st Semester of 2014

49%

22%

10%

10%

9%

0

1000

2000

3000

4000

5000

6000

2009 2010 2011 2012 2013 S1-2014


5

Japan’s Investment in Indonesia by Sector Top-10 Sectors in 1st semester of 2014 (USD million)

Excl. oil, gas, and financial sectors

Rank Sector 2009 2010 2011 2012 2013 S1 2014

1 Transport Equipment Industry 370 133 465 1,510 3,001 642

2 Metal, Machinery & Electronic Ind. 83 158 306 459 580 292

3 Food Industry 56 85 39 46 136 116

4 Chemical & Pharmaceutical Ind. 38 5 430 65 172 100

5 Rubber and Plastic 28 45 85 34 83 89

6 Housing, Industrial Park and Office 0.2 - 0.4 38 71 69

7 Trade and Repair 38 177 34 44 86 39

8 Construction - - 2 0.04 0.97 36

9 Transport, warehouse and telecommunication

- 0.09 4 15 17 34

10 Mining - 1.8 44 - 6 33

Total (All Sectors) 685 713 1,516 2,457 4,713 1,542

Source: BKPM, 2014.

Component of Japan’s Investment Based on Group of Sectors in S1 2014

>90% of Japan’s investment

flowed to secondary sectors, Transport equip. industry covered 64% of investment in 2013

-

500

1,000

1,500

2,000

2,500

3,000

3,500

2009 2010 2011 2012 2013 2014

0.6% 1.7% 3.1% 0.1% 0.1% 2.1%

92.7% 70.5%

94.1% 93.4% 92.9% 83.2%

6.7% 27.7%

2.8% 6.5% 7.0% 14.7%

2009 2010 2011 2012 2013 S-1 2014

Primer Sekunder Tersier


6

Japan’s Investment in Indonesia by Location in 1st Semester 2014 (USD million) Excl. oil, gas, and financial sectors

Rank Economic Corridor 2009 2010 2011 2012 2013 S1

2014

1 Java 675 689 1,450 2,205 4,643 1,503

2 Kalimantan - 2 0.05 153 45 32

3 Sumatra 0.4 14 17 95 11 3

4 Bali & Nusa Tenggara

5 8 45 4 8 0.7

5 Sulawesi 4 - 1 1 5 1

6 Maluku & Papua - - 3 - - -

Total (All Locations) 685 713 1,516 2,457 4,713 1,542

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

.5%

2009 2010 2011 2012 2013 Q1 2014


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)


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


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.


10

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


11 Source: PwC

APEC CEO Survey, 2013

APEC CEOs: Indonesia has capacity to surprise with greater business opportunities than expected...


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


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


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


16

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


17

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%


18

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%


19

Source: McKinsey Global Institute, September 2012.

McKinsey: Indonesia today and in 2030


20

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


21

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


22

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.


23

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


24

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


25

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.


26

The New Negative Investment List (DNI) (Presidential Regulation No.39 of 2014)

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


27

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

TVC BKPM 2014.mp4

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

e . [email protected]

www.bkpm.go.id

Thank You

Terima Kasih

Indonesia Investment Promotion Centre (IIPC)

Documents

Opportunities for Growth - ASEAN · 2015-05-26 · Source: ASEAN Community in Figures 2011 1,221 317 251 201 China India US Indonesia Brazil World’s Top-5 Population by Country