INDONESIA I N V E S T I N. Indonesia Investment Climate and How to Approach the Indonesian Market. invest in

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1 invest in Indonesia-Australia Business Conference Yogyakarta, 17 November 2015 I N V E S T I N INDONESIA Indonesia Investment Climate and How to Approach the Indonesian Market INDONESIA INVESTMENT COORDINATING BOARD HIMAWAN HARIYOGA Deputy Chairman of Investment Promotion 201 by Indonesia Investment Coordinating Board. All rights reserved

2 Strategic Plan of Investment Investment Target FDI DDI Total Growth 12.2% 14.5% 14.1% 16.8% 17.7% (IDR trillion) Excl. Financial Sectors and Upstream Oil and Gas 2 Summary Period (Completed) Investment realisation: IDR 1,633 trillion Investment plan (Principal license stock April 2015): IDR 3 4,125 trillion Period (Plan) Investment realisation: IDR 3,519 trillion By using assumption that 50% of investment plan will be realized, Indonesia investment plan needs is IDR 7,000 trillion, therefore we still need principal license stock for IDR 3,000 trillion. IDR 3,519 trillion total investment targeted in % increase from period (IDR 1,632.8 trillion) 15.1 % average growth targeted in period FDI DDI % average share of total investment target in % average share of total investment target In Source: BKPM,

3 Investment Realization (Trillion Rupiah) Investment Realization (Trillion Rupiah) Strategic Plan of Investment Investment Target by Sector 1000,0 900,0 800,0 700,0 600,0 500,0 400,0 300,0 200,0 100,0 0,0 54,0% 26,3% 36,3% 39,7% 26,7% 49,7% Average Share Primary : 15,7% Secondary: 53,5% Tertiary : 30,8% 27,8% 50,4% 37,3% 42,9% 19,7% 24,1% 23,5% 21,8% 19,8% by Region 1000,0 900,0 800,0 700,0 600,0 500,0 400,0 300,0 200,0 100,0 0,0 32,9% 41,1% Average Share Java : 46,5% Outside Java : 53,5% 43,9% 42,2% 43,1% 67,1% 58,9% 56,1% 57,8% 56,9%

4 InvestmentOpportunities in Indonesia Investment Priority Sectors Infrastructure 35 GW power generation 24 Sea ports Agriculture Food estate Corn Plantation Cattle Industry Labor-intensive industry Import-substitution industry Export-oriented industry Downstream industry of natural resources Textile Food & Beverages Furniture Toys Chemical & Pharmaceutical Electronics Machinery Iron & Steel CPO & derivative products Rubber products Wood products, pulp & paper Fish & derivative products Cacao Sugar Smelter Automotive Shrimp Maritime Ship building Fishery Industry Cold storage Tourism,SEZ & Industrial Park Strategic tourism areas MICE 8+11 SEZs 15 New Ind. Parks 4

5 +18% FDI growth (y-o-y) in 2015(Jan-Sep) in Asia-Pacific Foreign Direct Investment Inflow Global Investment Trend 2015(Jan-Sep) FDI Inflow (USD billion) 44% Portion of global FDI flowed into Asia-Pacific, 2015(Jan-Sep) (S1) (S2) 2015(S1) Africa America Asia-Pacific Europe Middle East World Total Source: fdimarkets.com dari Financial Times,

6 36% Portion of FDI in Asia- Pacific flowed into Southeast Asia Country Portion 2015 (Jan-Sep) Growth (Y-o-Y) Indonesia 28% 98% Vietnam 20% 31% Myanmar 13% 194% Malaysia 11% -43% Singapore 8% -29% Thailand 8% 51% Philippines 6% -21% Cambodia 4% 144% Laos 2% 104% Brunei 0% -49% Total ASEAN 100% 24% Source: fdimarkets.com dari Financial Times, Myanmar 13% portion, 194% Thailand 8% portion, 51% Foreign Direct Investment Inflow Investment in Southeast Asia 2015(Jan-Sep) Vietnam 20% portion, 31% Singapore 8% portion, 29% Malaysia 11% portion, 43% Indonesia 28% portion, 98% Phillippines 6% portion, 21% 6

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10 FDI Realization in Indonesia by Country Australia ranked 11 th in 2010 Q FDI Realization in Indonesia by Origin Country Top-10 Countries Based on Total Capital Expenditure (USD million) 2010 Q Excl. oil, gas, and financial sectors Rank Country Jan- Sep 2015 Total 1 Singapore 5,565 5,123 4,856 4,671 5,832 3,551 29,599 2 Japan 713 1,516 2,457 4,713 2,705 2,495 14,599 3 USA 931 1,488 1,238 2,436 1, ,246 4 South Korea 329 1,219 1,950 2,205 1,127 1,003 7,832 5 Malaysia ,776 2,917 7,025 6 Netherland 608 1, , ,492 7 British Virgin Islands 1, ,069 8 United Kingdom ,076 1, ,738 9 Mauritius , , Hong Kong ,461 Total 10 Countries 11,099 12,462 15,156 18,682 17,876 13,294 88, Australia , China ,946 Total (113 Countries) 16,215 19,475 24,565 28,618 28,530 21, ,738 Source: BKPM,

11 Investment Performance Australia s FDI Realization by Sector Based on Capex (USD million) in 2010 Q3 2015, not including financial, oil & gas sectors Compared to Jan-Sep 2014, total FDI realization from Australia is declining from USD million to USD 105 million Total 2010-Q Plan: USD 7,651 million Realization: USD 2,026 million Workforce: 51,458 people Rank Business Field Jan - Sep 2015 Total 1 Mining Basic Chemical, Chemicals and Pharmacy Basic Metals, Metals, Machinery & Electronics Tertiary 11% Secondary 47% Primary 42% Group of sectors Electricity, Gas and Water Other Services Other Sectors TOTAL , Q Plan Realization 11

12 Jakarta Investment Performance Australia s FDI Realization by Location Based on Capex (USD million) in 2010 Q3 2015, not including financial, oil & gas sectors Rank Economic Corridor Jan- Sep 2015 Total 1 Kalimantan ,418 2 Java Sulawesi Bali & Nusa Tenggara Maluku Sumatera Papua TOTAL ,026 Source: BKPM,

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15 Investment Interest Progress: Australia NO. Priority Sector #of company (Period : October 22, November 13, 2015) Serious Interest Prospective Total USD Mil P USD Mil P USD Mil P USD Mil 1 Infrastructure Agriculture Labor Intensive Industry Import Substitution Industry Export Orientation Industry Downstream Mineral Resources Maritime Tourism & Economic Zones Others TOTAL

16 ANZ Survey: Attractive as an Investment Destination AmCham & USCC: 75% US companies plan to expand Indonesia s Economic Performance Reviews AmCham & USCC: 84% US companies expect profit increase in 2016 The Economist: 2 nd Investment Priority in Asia Indonesia JBIC: 2nd Most Promising Country for Overseas Business UNCTAD: The Highest FDI Growth in Southeast Asia, 2014 Moody s, Fitch, Japan Credit Rating: Investment Grade 16

17 Doing Business in the New Administration Era BKPM s End to End Services 1 Establishing OSS at BKPM & Simplification of Licensing: Providing Faster, Simpler, Transparent & Integrated licensing 2 Formation of Marketing Team Adoption of a new marketing and facilitation approach 3 Improvements of investment regulatory framework & climate Including provide more attractive incentives & facilities for investors 17

18 Doing Business in the New Administration Era One Stop Services Investors submit and obtain permits exclusively at BKPM with time certainty & online monitoring. 18

19 BKPM Priorities: Improvements of Licensing Progress of Investment One-Stop Service Progress of Licensing Simplification *) Period of January September

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21 Sydney Indonesia Investment Promotion Centre (IIPC) Investment Service End-to-End Service for Investors Investment Interest Investment Permit Investment Realization IIPC Sydney Investment Marketing Team Investment One Stop Service Investment Debottlenecking Investment Controlling 21

22 BKPM Priorities: Debottlenecking of Investment Realization Progress of Debottlenecking Obstacles faced by 24 out of 88 companies are solved as of 16 Oct 2015, with investment valued at USD 8.4 billion out of USD 35.6 billion. Main Issues land acquisitions, misuse of permits, supply of raw materials, cooperation contracts, tax regulation. Debottlenecking Australian Companies Sector Value Problems Mining - Undergorund Coal Gasification regulation is not clear Basic Chemicals IDR Billion Building permit has not released yet. Source: BKPM, 16 Oct

23 TAX HOLIDAY TAX ALLOWANCE IMPORT DUTY FACILITY (MoF Regulation No.159/PMK.010/2015) (Government Regulation No.18/2015) (MoF Regulation No.176/PMK.011/2009) 5-15years tax exemption With potential 20 years exemption for project that considered strategic for Indonesia economy. 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 IDR1trillion Minimum investment plan (USD80 million). 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). Machines, goods, materials for production 2 years import duty exemption or 4 years for companies using locallyproduced 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 23

24 7business sectors Opened for FDI in 2014 revision. More open business fields Provision of port facility (pier, building, container delay terminal, liquid bulk terminal, dry bulk terminal and Ro-Ro terminal). Terminals construction. Power plant > 10MW, electric power transmission and electricity distribution. Pharmaceutical industry. Advertising. Negative Investment List (Presidential Regulation No.39 /2014) 58 business sectors More opened for FDI in 2014 revision. 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. 24

25 Investment Climate Economic Policy Packages Wage Formulation More certain formula for business. Annual increase based on inflation rate & economic growth. Tax Incentives Free VAT for shipbuilding, railway & airplane industries. No double taxation for property & infrastructure. Cost Reduction Gas and electricity price reduction for industry. Deregulation Review on 134 regulation in 16 areas with a spirit of proinvestment. 25

26 Investment Climate Economic Stimulus for Special Economic Zones Tax Incentives % tax discounts for period up to 25 years. Free VAT for importation of raw materials. Facilities Property ownership & residence permit for foreigners. Ease of investment, land, immigration & working permits integrated at SEZs. Sei Mangkei Palm Oil, Rubber, Fertilizer Industries, Logistics, Tourism Tanjung Api-api Palm Oil, Rubber, Petrochemical Industries Maloy Batuta Palm Oil, Coal, Mineral Industries Bitung Fishery & Agro Industries, Logistics Palu Smelters, Agro Industry, Logistics Morotai Tourism, Manufacturing Industry, Logistics Tanjung Lesung Tourism Mandalika Tourism 26

27 Contact Us Contact US Embassy of the Republic of Indonesia in Canberra 8 Darwin Avenue, Yarralumla. ACT 2600 Phone : Indonesia Investment Promotion Centre (IIPC) Sydney Gold Field House 1 Alfred Street Suite 903 Sydney NSW 2000 Tel Fax Director : Ms. Sri Moertiningroem nunu@bkpm.go.id Investment Marketing Executive for Australia BKPM Jln. Jend. Gatot Subroto No. 44, Jakarta Selatan Phone : Mr. Ikmal Lukman (ikmal@bkpm.go.id / ikmal.lukman@yahoo.com) Mr. Heldy Satrya Putera (heldy_sp@bkpm.go.id / heldy_sp@yahoo.com) Consulate General of the Republic of Indonesia in Sydney Maroubra Road, Maroubra, Sydney NSW 2035, Australia Phone : (61-2) E: info@kjri-sydney.org Consulate General of the Republic of Indonesia in Melbourne 72 Queens Road, Melbourne, Vic 3004 Australia (Entrance from 72 Queens Lane) Phone : E: consular@kjri-melbourne.org Consulate General of the Republic of Indonesia in Perth 134 Adelaide Terrace PO Box 6683, East Perth, WA, 6892, Australia Phone : (61-8) E: contact@kjri-perth.org.au Consulate General of the Republic of Indonesia in Darwin 20 Harry Chan Avenue - Darwin N.T. 0800, GPO BOX 1953, Darwin N.T Phone : +61 (08) E: kridrw@indoconsdarwin.org.au 27

28 Thank You Terima Kasih Badan Koordinasi Penanaman Modal (BKPM) Indonesia Investment Coordinating Board Jln. Jend. Gatot Subroto No. 44 Jakarta Indonesia t f e. info@bkpm.go.id The Investment Coordinating Board of the Republic of Indonesia 28

29 Australia s Investment to the world (Jan-Sep) Investment Realization Based on Capital Expenditure (USD Million) Excl. financial sectors Rank Destination Capex % World ASEAN (Jan - Sep) United States 6, China 5, UK 3, Malaysia 3, Brazil 2, Chile 2, Papua New Guinea 2, South Africa 1, Peru 1, Singapore 1, Total Top-10 Countries 31, Poland 1, Indonesia 1, Rank Company Capex % 1 Goodman Group 12, BHP Billiton 5, Lend Lease 2, InterOil 2, Intra Energy (Atomic Resources) 1, Servcorp Incitec Pivot Telstra Gold One International Admiralty Resources Chemicals 5% Business Services 8% Others 23% Coal, Oil, & Natural Gas 16% Metals 16% Real Estate 32% 14 Colombia 1, Total Top-10 Companies 26, Total (77 countries) 52, % Total (535 Companies) 52, % Source: Financial Times,