Opportunities and Challenges across the Indonesia Investment Landscape

Transcription

1 Opportunities and Challenges across the Indonesia Investment Landscape Moekti P. Soejachmoen, PhD Head of Mandiri Institute PT. Bank Mandiri, Persero April 2018

2 Economic Performance and Outlook 2

3 Indonesia Economic Performance in 2017 Successfully maintain the growth performance and performs better than many other emerging economies 2015 YoY : YoY : YoY : Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q G20 & BRICS China India Indonesia S. Arabia Turkey Korea Australia Argentina Mexico S. Africa Brazil Russia Canada US Germany UK France Japan Italy Source : CEIC

4 Pick up in the global growth has been broad based, in advanced and emerging economies Stronger momentum in 2017 is expected to carry into 2018 & 2019 Advanced Economies F 2019F F 2019F US economy has been growing at a stronger pace than expected, the tax reform is anticipated to stimulate near term activity of US growth F F F F F F Emerging Economies F F F 2019F F 2019F F 2019F F 2019F Emerging economies in Asia are expected to grow broadly at the same pace as in 2017, while growth in China is expected to moderate gradually Source : CEIC 4

5 Future Global Economic Trends Populism in EU (Brexit, Euroceptics) Protectionism in USA (Inward Looking Policies) Rise of Asia as an Economic Powerhouse Rise of Millennial Rise of Machines 5

6 Total Investment continued to increase with higher growth in 2017 Foreign Direct Investment showed 11% increased in 2017 compared to ,240 28,618 28,530 29,276 28,964 24,565 USD Million 16,215 19,475 12,250 13,158 13,404 16,253 19,336 6,669 8,666 9, Foreign Direct Investment Domestic Direct Investment 6

7 Macro Indicators Forecasts F Real GDP (%) CPI inflation (%, eop) CAD to GDP (%) Rp/USD (eop) 9,670 12,189 12,440 13,795 13,436 13,568 13,598 7-day repo rate Source : CEIC, Mandiri Group Forecast 7

8 Opportunities across Investment Landscape 8

9 Indonesian Government is very committed to implement structural reforms Some of internationally recognized achievements in implementing it Source: Minister of Finance s Presentation at Mandiri Investment Forum

10 Ease of Doing Business Rank Competitiveness Index Rank

11 Fintech Outlook 2018 Peer to peer lending (P2PL) and payment fintechs will continue to grow in 2018 Fourth largest population and the economy continues to grow, expected to reach 5.3% next year, slightly higher than ASEAN-5 (5.2%) and also higher than global economic growth (3.7%). Fintechs will help to increase fin inclusion, encourage the reduction of costs in economic activities, job creation, understand behavior, and data optimization. Development of fintech is fully supported by the government Economic condition is favorable Financial access is still low 3 59% of SMEs have an account at a formal financial institution, 26% of SMEs have outstanding loan. 15% of adult population use digital payment, much lower than the Asia Pacific average (41%). Growing e- commerce drive an increase of P2PL and payment Funds channeled through P2PL platforms have reached IDR 1.9 trillion (about 15x higher than last year). 99% of fintech transaction value in 2017 comes from e- commerce transactions payment (Statista) In 2018, smartphone users are expected to reach 26.3% of the total population, up from this year's 23.7%. Affordable smartphone price drives usage of smartphone Regional head elections will encourage the growth of P2PL and payment MSMEs campaign materials providers will need more loans. It will also encourage e-commerce transactions, therefore will increase the payment activities.

12 E-Commerce Outlook 2018 Promising Demand Size 1 Growing digital buyers in Indonesia (million people) s Growth: 21.8% 2 82 %1 Relatively current low internet user penetration in Indonesia 58% 71% 3 SEA avg: 53% 67% 51% GLOBAL avg: 50% F 2019F 3 More middle-end smartphones available Indonesia Smartphone Market Share Smartphone Class Q Q Q Ultra High End (>USD 600) 2% 3% 1% 4 Retail e-commerce sales in Indonesia still thrives (USD Bn) 2018 s Growth: 21.8% High End (USD USD 600) 1% 1% 3% Mid Range (USD USD 400) 9% 13% 28% Low End (USD USD 200) 33% 40% 43% Ultra Low End (< USD 100) 56% 43% 26% F 2019F 1.4 % 2.2 % 3.1 % 3.9 % 4.4 % Share of total retail sales Source: Statista, IDC, We Are Social, Hootsuite 12

13 E-Commerce Outlook 2018 Fierce competition New comer must offer different strategy and have unique features to obtain niche market The diversification of retail channel through digital platform has become strategy of conventional retail to sustain their business Niche market Brick and mortar goes digital Battle of big players such as Bukalapak and Tokopedia still continues Clash of the Titans Race in digital payment for obtaining larger consumer database Consumer database is valuable resource for product development P2P Lending goes to finance E-Commerce merchants More collaboration in digital ecosystem Suitable tax policy is critical in fostering E-Commerce business Tax policy should guarantee level of playing field in E-Commerce business and will not limit the development of E-commerce

14 Digital Economy Outlook 2018 Optimize benefit and mitigate risks SMEs should benefit from Fintech competition Impact on job creation Domestic industry promotion Consumers protection and supportive regulatory framework Fintech (P2P lending) helps SMEs which are unbanked and underbanked to get financed and runs their business. In 2018, we expect to see more entrants in P2P lending business as several companies are waiting for their permit to be approved by regulator. Given this point, SMEs should have more financing source to develop their business. SMEs absorb more than 90% of national labor force as this sector has more labor intensive nature. The role of Fintech in reaching out SMEs will also affect job creation generated by SMEs business expansion. New Fintech establishment also creates employment in digital business such as data scientist, digital marketing and software programming Creative industry such as fashion and handy crafts has very good opportunity to promote their products through E-Commerce platform. The upcoming package of regulation should guarantee consumer protection particularly in fraud anticipation. Correspondingly, regulator need to be precise and careful in designing regulation in order to maintain the pace of digital business as well as mitigate its business risks. Source: Mandiri Institute 14

15 Industrial Revolution 4.0 is a game changer for Indonesia economy Implication of Indonesian economy/industry environment for the 4IR 15

16 Indonesia falls behind global peers in technology investment Source: AT Kerney,

17 Productivity per cost in Indonesia is flattening; weakening Indonesia s position in the global competition Source: AT Kerney,

18 Indonesia is showing the lowest trade flow in ASEAN while shrinking net export Source: AT Kerney,

19 Sector prioritization of 4IR focuses on growth driven by net export, with positive impact on jobs Source: AT Kerney,

20 5 sectors were selected for 4 th Industrial Revolution implementation priority sectors Source: AT Kerney,

21 Challenges across Investment Landscape 21

22 Indonesia will have simultaneous local elections in 2018 and legislative and presidential elections in Local Elections 2019 Legislative and Presidential Elections 171 elections: 17 provinces 39 cities/municipals 115 regencies/districts 574 pairs of candidates Office to be filled: 1 presidency 575 HR members 132 DPD members > 190,000 local HR members (for 548 local HR) > 160 million voters > 195 million voters > 480,000 polling stations across 17,000 islands 4 million polling station officials 700 million ballots, 2,450 ballot designs June 27, 2018 April 2019 (the preparation process has started since November 2017 Source: Djayadi Hanan s Presentation at Mandiri Investment Forum

23 Indonesia Political Calendar in

24 Indonesia lacks key digital infrastructure to implement 4IR Fiber Optic Data Center /Cloud 5G 24

25 Indonesia still needs to simplify industrial policy and regulations Need tighter coordination 25

26 Conclusion 26

27 Conclusion: v To improve economic growth in Indonesia, industrialization especially 4IR is needed, which in turn needs lots of investment both domestic and foreign direct investment v Government is committed to continuously and consistently improve its investment climate to create a good and stable environment for business to thrive and prosper v Indonesia offers a promising future for business. Do not wait too long. Invest in Indonesia as soon as possible 27

28 Thank You 28