INVESTING IN INDONESIA Investment Policy & Opportunity

Transcription

1 invest in Taipei, 30 May 2014 INVESTING IN INDONESIA Investment Policy & Opportunity Mohamad Faizal Director of Investment Dept., IETO 2014 by Indonesian Investment Coordinating Board. All rights reserved

2 4 th World s Most Populous Country 248 million Population (in 2013) 17,508islands Biggest Archipelagic Nation IND N E S I A 10 th World s Largest Economy 1 trillion USD GDP (PPP) 4 Member State G20,876 USD GDP per capita (PPP) Investment Grade (Moody s, Fitch and R&I) 2

3 ,000 2,500 1,500 2,000 1, Indonesia s GDP In the last 10 years at 2000 Constant Market Prices by Expenditure (IDR Trillion) 5.8 % GDP Growth in nd fastest Growing Economy Among G-20 Countries (After China, in 2013) 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) 3

4 China India Indonesia Malaysia Thailand Vietnam Singapore South Korea Philippines Australia Japan Hong Kong Taiwan The 3 rd Investment Destination in Asia (The Economist, 2013) Investors Plan in Asia (%) Increase their level of investment Still in the market, but will not invest more Reduce their investment Have no plans to invest Growing Investment s Shareto Total GDP Total Investment (% GDP) (Bloomberg, 2013) Brazil China India Indonesia Korea Russia 32% 4

5 Sustainable Investment Growth DDI FDI billion USD total investment realization in 2013 (IDR398.6 trillion), 2.1% above the 2013 target, IDR390.3 trillion % increase from 2012 (IDR313.2 trillion) FDI % increase from % share of total investment realization 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 DDI % increase from % share of total investment realization Source: BKPM,

6 Taiwan is the 10 th biggest investor in Indonesia in 2013 Japan, Singapore & US are on the Top-3 Biggest Investors 6,000 5,000 4,000 3,000 2,000 1, % 47% 4% 4% 16% 16% 8% 8% 16% 9% 16% 9% FDI Realization in Indonesia by Origin Country Top-10 Countries Based on Capital Expenditure (USD million) in 2013 Excl. oil, gas, and financial sectors Rank Country Japan ,516 2,457 4,713 2 Singapore 1,429 5,565 5,123 4,856 4,671 3 US ,488 1,238 2,436 4 South Korea ,219 1,950 2,205 5 UK ,076 6 Netherlands 1, , British Virgin Islands 293 1, Mauritius , Malaysia Taiwan Total (Top-10 Countries) 4,914 10,580 12,570 15,493 18,708 Total (97 Countries) 10,817 16,215 19,475 24,565 28,616 Source: BKPM,

7 55% of FDI flowed to secondary sectors, mining got the biggest share 6,000 5,000 4,000 3,000 Component of FDI Realization Based on Group of Sectors in 2013 FDI Realization in Indonesia by Sector Top-10 Sectors Based on Capital Expenditure (USD million) in 2013 Excl. oil, gas, and financial sectors 2,000 1, Rank Sector Mining 333 2,201 3,619 4,255 4,816 60% 61% 35% 4% 21% 40% 35% 28% 22% 48% 55% 19% 25% 24% 23% Primary Sectors Secondary Sectors Tertiary Sectors 2 Transport Equipment Industry ,840 3,732 3 Metal, Machinery & Electronic Ind ,773 2,453 3,327 4 Chemical & Pharmaceutical Ind. 1, ,467 2,770 3,142 5 Electricity, Gas & Water Supply 349 1,429 1,865 1,515 2,222 6 Food Industry 534 1,026 1,105 1,783 2,118 7 Food Crops & Plantation ,222 1,602 1,605 8 Transport., Storage & Telecom. 4,152 5,072 3,799 2,808 1,450 9 Paper & Printing Industry ,307 1, Non Metalic Mineral Industry Total (All Sectors) 10,817 16,215 19,475 24,565 28,616 Source: BKPM,

8 FDIis still concentrated in Java Island, incentives are offered to improve investment distribution 3% 7% 87% 3% 5% 5% 3% 5% 4% 4% 6% 5% 8% 5% 10% 12% 5% 71% 10% 13% 10% 11% 15% 12% 63% 56% 61% FDI Realization in Indonesia by Location Based on Capital Expenditure (USD million) in 2013 Excl. oil, gas, and financial sectors Rank Economic Corridor Java Sumatra Kalimantan Maluku & Papua Sulawesi Bali & Nusa Tenggara Total (All Locations) Source: BKPM,

9 3 rd World s biggest democracy (after India and US) The third National Elections will be held in 2014 after peaceful elections in 2004 and 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) Direct Election 9

10 Remarkable progress over the past 15 years - economically, socially, and politically... (UNDP, 2013) Vision 2025 MP3EI as the master plan ( ) to transform Indonesia into one of the world s top 10 economies. Decentralization In 2001, transformed from an authoritarian state to a regional role model. 34 provinces 500 districts Provinces and districts provided with greater autonomy. 10

11 APEC CEOs: Indonesia has capacity to surprise with greater business opportunities than expected... Source: PwC APEC CEO Survey,

12 Taiwan Research 2013 on FDI Destination Countries for Taiwan Investors 12

13 The most promising country for overseas business (Japan Bank for International Cooperation Survey 2013) Rank 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 6 Russia Russia US Brazil Brazil Indonesia - Brazil Brazil Vietnam 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 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 Source: JBIC, November

14 Top-4 Most Prospective Host Economies for United Nations Conference on Trade and Development 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) 14

15 ASEAN s Most Attractive Investment Destination The ASEAN Business Advisory Council Survey on ASEAN Competitiveness 2012 Half of 405 businesses surveyed intended to invest in Indonesia over the next years ( ). Source: ASEAN-BAC, 2012 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. 15

16 million Population in Middle Income with per capita expenditure per day USD 2-20 Source: Bank Indonesia and Indonesia Statistics Agency, 2012 (Projection) 4 th 70 % World s Most Populous Country More than 60 % Population in working age Covering 39 more % than total population of South East Asia 2015 Population (projected) in Middle Income with per capita expenditure per day USD

17 Beyond Indonesia: In the heart of the world s economic growth Global Economic Growth for Each Decades (Average percent per year) Source: World Bank, 2011 Asia and World Population Source: Coordinating Ministry For Economic Affairs RI,

18 110.5 % 174 % Middle class growth Middle class growth in Southeast Asia in Indonesia The highestmiddle class growth & consumer confidence index Middle Class Growth in ASEAN Source: AC Nielsen, Nielsen Consumer Confidence Index Source: AC Nielsen, Indonesia 18

19 McKinsey: Indonesia today and in 2030 Source: McKinsey Global Institute, September

20 Abundant opportunity from growing consuming class 71 % Population in cities, producing 86% of GDP in million Consumer Additional consumers by % p.a. USD1.1 trillion spend growth in urban areas Market opportunity in consumer services by 2030 Estimated annual revenue in 2030 (USD billion, price) Urban Households Expenditure in 2011 and 2030 (USD billion, 2010 price) 20

21 One of the world s major producer of a broad range of commodities Source: Coordinating Ministry For Economic Affairs RI,

22 Roadmapof Indonesia Investment 1-2 years Quick wins and low hanging fruits Encouraging and facilitating readyto-invest investors 5 years Acceleration of Infrastructure Development Developing soft infrastucture (education and health facilities) and hard infrastructure (bridge, port, etc) through Private- Public Partnership Scheme years Development of Big-Scale Industry Developing big-scale industrials through industry cluster (e.g. Petrochemical, transportation means, and national defense) More than 15 years Knowledge-Based Economy Developing economy by innovation and high-technology Source: BKPM 22

23 Labor issues Skilled workforce Infrastructure & logistics Ease of doing business Investment climate G l o b a l c o m p e t i t i v e n e s s Incentives & facilities 23

24 Challenges and progress in infrastructure 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) 14 % 2013 Share of logistic cost to product cost 10 % 2014 (Target) 2013/2014: 38 th out of /2013: 50 th out of 144 Indonesia s Global Competitiveness Rank (Source: WEF, 2013) Indonesia posts the biggest progression among G-20 countries. Infrastructure leapfrogs 17 places (improved the most). Infrastructure Budget (IDR trillion) IDR190 trillion IDR755 trillion Infrastructure budget in % 2% 1% 2% 14% 38% 18% 19% Power Road Railway Telecom Seaport Airport Water supply Others Source: National Planning Agency,

25 TAX ALLOWANCE (Government Regulation No.52/2011) 30 % of investment value Reduction of corporate net income tax for 6 years, 5% each year. 129 business segments TAX HOLIDAY IMPORT DUTY FACILITY (MoF Regulation No.130/PMK.011/2011) (MoF Regulation No.176/PMK.011/2009) years Under certain requirements among others: minimum amount of investment value and workforce, and certain project location (especially outside Java island). Reduction of income tax after the expiration of the tax holiday and can be extended by MoF. Pioneer industry 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. IDR 1 Machines, from the commencement of commercial production. % for a further 2 years Eligible for tax allowance, expanded from 38 segments in the previous regulation. Tax relief facility, starting Goods, materials for production 2 years import duty exemption or 4 years for companies using locallyproduced machines (min.30%). Which produces goods and/or services, including: 1. Tourism and culture 2. Public transportation 3. Public oh, rv(t)5son trillion Minimum investment plan Mining 5.

26 Economic policies for improving investment climate Streamlining investment licensing BKPM simplifies business start up and licensing procedures, including 60% reduction of application forms. 17 action plans package to improve the ease of doing business includes Starting a business Getting electricity Paying taxes and insurance premium Enforcing contract Resolving insolvency Registering property Dealing with construction permits Getting credits Revising the negative investment list National Interest Priority: Increasing national competitiveness Maintaining Economic Growth More open, friendly, and simple and give certainty to Investors More tax deduction (MoF Regulation No.124/PMK.011/2013) Tax dispensation to labor-intensive industries: textile, apparel, footwear, furniture, and toys industries. Additional tax deduction to firms with at least 30% export-oriented products. Tax incentive for reinvestment (to be implemented soon) Aimed at encouraging investors to reinvest their profits. Tax would be reduced to approximately zero percent (MoF in Antara, 4/2/2014). 26

27 More and more business fields are openfor FDI (Presidential Regulation No.39 of 2014) 63 business sectors More opened for FDI in 2014revision. Revision More open business fields Port facility (pier, building, container delay terminal, liquid bulk terminal, dry bulk terminal and Ro-Ro terminal) passenger terminal, and airport services. Drinking water and toll road. Power plant > 10MW, electric power transmission and electricity distribution. Pharmaceutical industry. Advertising. More restrictive business fields Trade services (distributor, warehouse, and/or cold storage). All business field related to horticulture. Alternative trade. OPEN OPEN with conditions CLOSED 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. 27

28 Quality Investments Sectors Focused in BKPM s Plan Export-oriented sectors: downstream industry of palm and rubber, electrical equipment, metal, paper, textile. 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. Downstream industries of mining, agriculture, fisheries and forestry: smelter, CPO and cocoa industries, paper, furniture. Industrial sectors with increasing domestic consumption trend: cement and building material industries. Infrastructure sector encouraged through PPP: energy, air and sea ports, roads, water supply, waste management and railways. Tourism and creative industries. 28

29 We provide one-stop shop (PTSP) licensing provision and our services for investors include 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. PLAY Launching the online investment tracking system.

30 Thank You Terima Kasih Indonesia Investment Promotion Centre (IIPC) Badan Koordinasi Penanaman Modal (BKPM) Indonesia Investment Coordinating Board Jln. Jend. Gatot Subroto No. 44 Jakarta Indonesia t f e. info@bkpm.go.id