INDONESIA OUTLOOK. Striking The Right Balance Between Reform and Growth SRI MULYANI INDRAWATI MINISTER OF FINANCE OF THE REPUBLIC OF INDONESIA

Transcription

1 INDONESIA OUTLOOK Striking The Right Balance Between Reform and Growth SRI MULYANI INDRAWATI MINISTER OF FINANCE OF THE REPUBLIC OF INDONESIA MANDIRI INVESTOR FORUM 7 FEBRUARY 2018 photo by KemenESDM

2 ECONOMIC PERFORMANCE AND 2018 OUTLOOK utline 4 TAX REFORMS AS PARTS OF FISCAL REFORMS 2 FUTURE GLOBAL CHALLENGES 3 6 STRUCTURAL REFORMS TOWARD SUSTAINABLE ECONOMIC GROWTH 5 GOVERNMENT PRIORITIES SPENDING IN 2018 CONCLUSIONS 2

3 2017 ECONOMIC PERFORMANCE 1 AND 2018 OUTLOOK Slide # 3

4 INDONESIA ECONOMIC PERFOMANCE IN 2017 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Indonesia successfully maintaining the growth momentum in YoY: 4,88 YoY: 5, China India Indonesia S. Arabia Turkey Korea Australia Argentina Mexico S. Africa Brazil Russia Canada US Germany UK France Japan Italy YoY: 5,07 for a decade, Indonesia performs better than many other emerging economies G20 & BRICS (0,6) Italy -0.6

5 10 8 INDONESIA ECONOMIC OUTLOOK IN 2018 economic growth projected to rise higher in 2018, supported by the continuity of growth momentum across all sectors World Advanced economies Emerging market and developing economies Indonesia p 2018p 2018 macroeconomic indicators 2 0 GDP Growth (%) 5,4 Exc. Rate (IDR/USD) Oil Price US$/ barrel 4,8 Gas Lifting (thousand BOPD) Inflation (%) YoY 3,5 Int. Rate (%) 5,4 Oil Lifting (thousand BOPD)

6 2 FUTURE GLOBAL CHALLENGES Slide # 6

7 FUTURE GLOBAL CHALLENGES Geopolitics & Security Water Conflicts Climate Change Population Ageing Food and Energy Security

8 FUTURE GLOBAL ECEONOMIC TRENDS Protectionism in USA (Inward Looking Policies) Populism in EU (Brexit,Eurosceptics) STRUCTURAL REFORMS TOWARDS SUSTAINABLE ECONOMIC GROWTH Green Economy Rise of Asia as an Economic Powerhouse Rise of Millenials Rise of the machines

9 PAY AN ATTENTION TO THE TECHNOLOGY CHANGE... It will radically transforms our daily life DISRUPTION (JOB DISPLACEMENT) ARTIFICIAL INTELLIGENCE INTERNET OF (EVERY)THINGS INDUSTRIAL REVOLUTION 4.0 9

10 3 SUSTAINABLE ECONOMIC TOWARDS SUSTAINABLE ECONOMIC GROWTH Slide #10

11 NOW WE ARE LIVING IN THE AGE OF KNOWLEDGE DRIVEN ECONOMY (KDE) strengthening KDE is an imperative to sustain high growth rates in the future and to avoid middle income trap Old Industrial Economy Resource based Labour Intensive Mass Production Proximity is important Require Control Top Down Approach Rigid Knowledge Driven Economy Knowledge Intensive High Skill Talent Mass Colaboration Location less significant Require Collaboration Horisontal Collaboration Flexible Slide #11

12 HUMAN CAPITAL INVESTMENT IS A KEY Indonesia still needs to continuously and consistently improving its human capital Indonesia s HDI Comparison of HDI Indonesia s HDI ,72 7,95 Expected years Of Schooling 70, * Life Expectancy At Birth * In thousand Mean Years Of Schooling GNI per Capita Singapore Brunei Drslm Malaysia Turkey Mexico Brazil Thailand China Indonesia Viet Nam Philippines South Africa India Cambodia Myanmar

13 TO SUCCESSFULY COMPETE IN KNOWLEDGE DRIVEN ECONOMY Greater Emphasis Should Be Put On Science,Technology,Mathematics (STEM) subjects in Education Singapore Japan Chinese Taipei Vietnam Hong Kong (China) B-S-J-G (China) Korea United Kingdom Source : OECD United States OECD average Turkey Thailand Mexico Indonesia Brazil Science Reading Mathematics Singapore Japan Chinese 532 Taipei Vietnam 525 Hong Kong 523 (China) B-S-J-G 518 (China) 516Korea United 509 Kingdom United 496 States OECD 493 average Turkey Thailand Mexico Indonesia Brazil Singapore Japan Chinese 497 Taipei Vietnam Hong Kong 527 (China) B-S-J-G 494 (China) 517Korea United 498 Kingdom 428 United 497 States OECD 493average Turkey Thailand Mexico Indonesia Brazil Indonesia in PISA Score The performance of Indonesian students (girls and boys) in science, mathematics and reading is one of the lowest among PISAparticipating countries with an average ranking of 62 out of 69 countries

14 STRUCTURAL REFORMS IS CRITICAL FOR INDONESIA TO MAINTAIN HIGH SUSTAINABLE GROWTH IN KDE ERA The key is to focus on three sets of reforms INSTITUTIONAL REFORM REGULATORY REFORM FISCAL REFORM Creating Institutions That Apply Good Governance and adaptive to change Designs Regulations That Foster Innovation, Competition and Growth More Effective And Efficient Management of Fiscal Policies

15 INDONESIAN GOVERNMENT VERY COMMITED TO CREATE STABLE AND GOOD INVESTMENT CLIMATE While Ease Of Doing Bussiness (EODB) Score Consistently Improve, More Efforts Needs To Be Done Innovation Institutions Infrastructure Some Government Efforts To Improve Investment Climate Business Sophistication Market Size Technological Readiness Macroeconomic Environmen Health and Primary Higher Education and Training 1. Easing Import and Export Restrictions 2. Reducing Dwelling Time 3. Revising and Perfecting Tax Financial Market Development Labour Market Efficiency Goods Market Efficiency Incentive Schemes (Tax Allowance and Tax Holiday)

16 INDONESIAN GOVERNMENT IS VERY COMMITTED TO IMPLEMENT STRUCTURAL REFORMS Some of Internationally Recognised Achievements In Implementing it Ease of Doing Business 2018 Indonesia position improve from 91 to 72. Indonesia also recognised as one of the Top Improvers. Currently Indonesia position is above India, Brazil, dan Philippines Investment Grade dari Standard and Poor s Indonesia gains investment grade from all reputable international rattings agency: S&P, Moody s, Fitch, JCRA, & R&I. 19 positions 5 positions BBB #1 Galup World Poll Indonesia & Swiss are considered as the countries with highest level of trust to the Government Global Competitiveness Index Indonesia position improve from 91 to of 12 pillars of measurement is getting better score such as: Institution, Infrastructure, macroeconomic, health and primary education, technological readiness, business sophistication

17 4 TAX REFORMS AS PARTS OF FISCAL REFORMS Slide #17

18 CHALLENGES OF INDONESIA S TAXATION tax revenue consistently increases every year, but tax ratio is still low 13.3% Tax Revenue % of GDP 11.8% 11.9% 11.9% 11.1% 11.2% 11.4% 10.7% 11.0% 10.3% ,4 10,8 10,9 11,5 11,8 15,6 16,0 25,0 23,3 22, Even Among ASEAN Peers % 11% 7% 4% 0% RRC Indonesia USA Germany Canada Malaysia Thailand Australia France UK

19 CHALLENGES OF INDONESIA S TAXATION The Number of Registered Taxpayers is so small, those who pay taxes even smaller 40 mil Registered Taxpayers (RTP) Tax Return Submitted RTP with Obligation To submit Tax Return Tax Compliance 80% 30 mil 20 mil 10 mil % % % % mil %

20 DG TAX REFORMS DIRECTIONS Rigid and Unflexible Regulations & Bussiness Process Low Quality Database Unreliable IT System Lacks of Coordination Among Units and Institutions. GOVERNMENTS PRIORITIES SPENDING IN 2018 Low Tax Compliance. TAX RATIO = 11% TAX REFORMS IS URGENTLY NEEDED EXISTING CONDITIONS PILLARS OF TAX REFORMS GOALS Organisation Human Resources Tech. Information &Database Bussiness Process Regulatory Good Database Sophisticated IT System Adaptive and Flexible Regulations& Bussiness Process Optimal Coordinations Among Units and Institutions High Tax Compliance TAX RATIO = 14% External Assistance Observers Teams (International Organisations, Private Sectors, Mass Media, Society Advisor Teams (Profesional Tax Practitioners) Tax Reforms Sequences 1 st Priority 2 nd Priority Tax Administrations Reforms Tax Policy Reforms

21 TAX AMNESTY & AEOI AS PARTS OF DG TAX REFORMS Tax Amnesty Main Purpose Is To Strengthen Tax Database, While AEOI Aims To Avoid Base Erosion and Profit Shifting Achievement of Tax Amnesty Program Domestic Declaration trilion (IDR) Foreign Declaration Repatriation 101 Countries In The World Agree to Share & Exchange Data For Taxation Purpose

22 5 GOVERNMENTS PRIORITIES SPENDING IN 2018 Slide #22

23 STATE BUDGET AS FISCAL INSTRUMENTS Allocation Distribution Stabilisation

24 GOVERNMENT BUDGET 2018 AT A GLANCE 1,2 GRANT TRILLION RUPIAH Non Tax Revenue 275,4 Tax Revenue REVENUE BUDGET 2018 SPENDING 1.894, ,7 CENTRAL GOVT SPENDING 1.618, ,5 TRANSFER FUND DEFICIT 2,19% of GDP 325,9 FINANCING 766,2

25 PRODUCTIVE SPENDING CONTINUES Infrastructure Development, Reducing Inequality and Improving Human Capital Are The Government Focus, While Energy Subsidies Decrease Significantly Productive Spending & Energy Subsidies ( ) Education Infrastructure Health Energy Subsidies

26 SOCIAL SPENDINGS TO REDUCE POVERTY AND INEQUALITY Poverty Alleviation and Supports Towards Poor Segments Of The Society Continously Being Strengthened Through Well Designed Social Programs and Targeted Subsidies 2018 Allocation: 283,7* *Trillion Rupiah* CONCLUSIONS TARGETS 2018 PKH FOOD SUPPORT IND.SMART PROGRAM 10 million houshold 19,7 million Student 15,6 million houshold JKN FOR POORS 92,4 million People SUBSIDIES FOR SMALL BUSSINESS 117,7 thousand HouseHold VILLAGE FUND Villages

27 SPENDING FOR HUMAN CAPITAL DEVELOPMENT 20% BUDGET % 444,1 % 5% BUDGET 419, ,1 65,9 370,4 353,4 59, ,3 10,4 (5,1) 13,3 5,8 29,6 10,3 40,1 13,7 5,8 IND.SMART PROGRAM SCHOOL OPERATIONAL FUND 19,7 Mil. Student 56 Mil. Student IND.HEALTHY PROGRAM 92,4 Mil. People BIDIK MISI SCHOLARSHIPS SCHOOL REHABILITATION 401,5 Thousand Student 61,2 Thousand FAMILY PLANNING FACILITY HEALTH FACILITY DEV. 1,8 Mil. People 49 Hospital/ Health Facility TEACHER ALLOWANCE 1.8 Mil. Teacher BABY IMMUNISATION PROGRAM FOOD & DRUG CERTIFICATION 92,5% 74 Thousand

28 INFRASTRUCTURE DEVELOPMENT REMAINS FOCAL FOCUS OF THE GOVERNMENT SOME GOVT PRIORITIES FOR 2018 Road Building Targeted: 865 km Irigation Development Targeted: 781 km Electrification Ratio Targeted: 95,15 % % Development of Subsidised Apartments Targeted: unit

29 WHILE INFRASTRUCTURE BUDGET HAS BEEN INCREASE SIGNIFICANTLY FOR THE PAST FEW YEARS... Not All Infrastructure Development Can Be Financed By The Governement Budget, Therefore Private Sector Participation Through PPP is Encouraged Infrastructure Index India Vietnam Indonesia Philippines Thailand Infrastructure Gap China Brazil Rusia Malaysia , , , , ,000 GDP Per Capita Governement Facilitates Investors Who Eager To Participate In Indonesia Infrastructure Development PT Sarana Multi Infrastruktur Specialised in Infrastructure Financing with 3 main Focus: Financing and Investment, Consultation, and Project Development PT Penjaminan Infrastruktur Indonesia Specialised in Infrastructure Guarantee To Increase Credit Worthiness from Infrastructure Projects Either With PPP or Without PPP

30 6 CONCLUSIONS Slide #30

31 CONCLUSIONS Indonesian Economy in 2018 Will Continue To Experience Robust, Stable, and Increasing Growth, Supported By Recovery Momentums Gained During Previous Years Indonesian Government Commited to Continue Structural Reforms (Institutional Reform, Regulatory Reform, and Fiscal Reforms) to achieve High and Sustainable Growth In The Era Of Knowledge Driven Economy Indonesian Governement Will Continuously and Consistently Improve its Investment Climate In Order To Create A Good And Stable Environment For Bussiness To Thrive and Prosper Indonesian Government Welcoming Any Constructive Suggestions and Advices From The Private Sectors Regarding its Efforts To Create A Good Investment Climate Indonesian Government Strongly Encouraged And Will Facilitates Private Sectors To Take A Part In The Infrastructure Development In Indonesia Indonesia Offers A Promising Future For Business, Dont Wait To Long!!!, Invest In Indonesia As Soon As Possible

32 THANK YOU SRI MULYANI INDRAWATI MINISTER OF FINANCE OF THE REPUBLIC OF INDONESIA MANDIRI INVESTOR FORUM 7 FEBRUARY 2018 photo by KemenESDM

33 10 MINISTRIES AND GOVERNMENT INSTITUTIONS WITH THE LARGEST BUDGET IN 2018 Ministries 107,7 114,2 107,4 62,2,7 59,1 48,2 41,3 40,1 32,9 45,7 23,8 102,7 60,9 54,2 17,2 36,9 37,8 27,8 40,3 23,7 APBN 2018 OUTLOOK 2017 Government Institutions 96,3 95,5 12,5 8,3 6,4 5,7 5,6 5,6 5,5 4,8,7 2,8 3,3 8,2 5,2 3,8 9,8 1,9 2,2 4,0 2,7