By Darmawan Djajusman Deputy Chairman of Investment Promotion INVESTMENT COORDINATING BOARD

Transcription

1 Investment Climate and Opportunities in Indonesia By Darmawan Djajusman Deputy Chairman of Investment Promotion INVESTMENT COORDINATING BOARD

2 INDONESIA Biggest archipelago country in the world - Island : > Lands : ± 2 million km 2 - Sea : ± 5.8 million km 2 - Coastal line : ± km Population people Hundreds of ethnics More than 750 languages & dialects One of biggest democratic country Km

3 Indonesia Situation Today Macroeconomic Indicators GDP (2008) 6.1% GDP Q y on y 4.4 % Reserve (Apr 09) US$ Billion Interest Rate % Foreign Debt Ratio (08) 30.7 % Inflation yoy (Apr 09 : Apr 08) Apr 09 Inflation Jan 09 Apr 09 Investment Realization 2008 (Jan Dec) 7. 31% -0.31% 0.05% US$ Billion (up 20.5 %)

4 INVESTMENT GROWTH AND ASSUMPTION Target of Growth : 6.6 % (Average) Investment Required: USD 426 Billion Gov t Contribution : USD Billion (17%) Private Contribution: USD 358 Billion Target of Unemployment 2009 : 5.5 % Target of Poverty Line : 17 Million People

5 CHANGE OF MINDSET Indonesia is pro business Indonesia is pro growth Indonesia is pro job creation

6 Emphasis on Transparency and Accountability Zero tolerance towards corruption Anti Corruption Team has recovered over US$ 400 M Good governance Efficient economy

7 Investment Law Features Law No. 25 of 2007 Equal Treatment No Minimum Capital Requirement Divestment not required Free to Repatriate Investment & Profit Legal Guarantee Dispute Settlement Investment Services

8 Investment Facilities Land rights 95 years of cultivation rights: 35 years + 25 years extension + 35 year renewable 80 years of building rights 30 years + 20 years extension + 30 year renewable 70 years of land usage rights 25 years + 20 years extension + 25 year renewable Immigration For investors and foreign workers Fiscal incentives Exemption or deduction of income tax

9 INVESTMENT ALLOWANCE (IA) (Govt. Regulation No. 1/2007 & No. 62/2008) In form of 30% Corporate Income Tax Deduction given in 6 years 5% deduction p.a. Illustration: Company X Investment Realization : US$ 1billion IA p.a. : 5% X US$ 1 billion = US$ 50 million IA is constantly given for 6 years : 6 X US$ 50 million = US$ 300 million 10 years Losses carry forward Expedite depreciation On process of improvement

10 CERTAIN BUSINESS FIELDS Development of Live Stock Business Utilization of Forest Plants IUPHHK-tions (HTI) Mining Utilization of Low Quality Coal Geothermal Energy Milk Industry Group and Food from Milk Based Oil Refinery Construction of Natural Gas Refinery Artificial Fiber Industry Group Other Food Industrial Groups Spices and Seasoning Industries Textile Industry and Apparel Industry Groups Pulp Industry Group, Paper and Paper Board

11 Continued. Industrially Chemical Materials Industry Group Other Chemical Materials Industry Group Rubber and Rubber Products Industry Group Porcelain Products Industry Group Iron and Steel Making Industry Group Non-Iron Basic Metal Industry Group Engine and Engine Parts Industry Electrical Motor, Generator and Transformer Industry Group Electronics and Telematics Industry Group Land Transportation Industry Group Ship and Boat Production and Maintenance Industry Group Non-Iron Metal Making Industry

12 CERTAIN BUSINESS FIELDS AND CERTAIN AREAS The Development of Food Crop Development of Horticulture Cultivation Leather Industry Group and Leather Footwear Group Plastic Goods Industry Group Battery Ship and Boat Industry Group Food Processing Industry Group Agro-based Natural Resources Industry Group Packaging and Box Made of Paper and Board Paper Industry Group Plastic Ware Industry Group Cement, Lime and Gypsum Industry Group Furniture Industry Group Sea Fishing and Processing (Integrated Business) Sea Crustacea Catching and Processing (Integrated Business) Sea Mollusk Catching and Processing (Integrated Business)

13 Negative Lists on Investment Criteria (Comparison) President Regulation No. 77/2007 President Regulation No. 111/ Absolutely Closed Opened with requirements : - Reserved for SMEs Partnership required Foreign Equity Limitation Certain Location Restrictive/Special Licensing % Domestic Equity Foreign Equity & Location Limitation Restrictive/Special Licensing & Foreign Equity Limitation - 100% Domestic Equity & restrictive/special Licensing Total

14 Foreign Direct Investment (FDI) Confidence Index 2007 (ATKEARNEY 1) Survey 2007) The Top 25 Most Attractive FDI Destination 1. China 14. Kanada 2. India 15. Japan 3. U.S.A 16. Malaysia 4. U.K 17. Gulf Countries 5. Hong Kong 18. South Africa 6. Brazil 19. Meksiko 7. Singapore 20. Turki 8. Uni Arab Emirates 21. Indonesia 9. Rusia 22. Polandia 10. Germany 23. Middle Asia 11. Australia 24. South Korea 12. Vietnam 25. Czech Republic 13. France 1) ATKearney. established in is a global strategic management consulting firm known for helping clients gain lasting results through a unique combination of strategic insight and collaborative working style. The firm was to provide management advice concerning issues on the CEO s agenda. Today. ATKearneyserves the largest global clients in all major industries. ATKearney s offices are located in major business centers in 33 countries.

15 GDP Growth of Most Prospective Countries Country Stimulus of GDP GDP Growth Q China 15% 6.1% India 1.3% 7.9% * Vietnam 4.0% 3.1% * Russia 1.1% - 7.0% Thailand 1.8% - 7.1% Brazil 0.2% 2.6% * USA 5.8% - 6.1% Indonesia 1.4% 4.4 % *: forecast

16 Improving Investment Climate One Stop Service: Options Speeding Up Process Fiscal Incentives: Regional Government Incentives Duty & Excise Exemption Pioneer Industry Amendment of Investment Negative Lists More Transparency on Business Fields and Shares Ownership Open More Business Fields Amendment of Government Regulation No. 1 of 2007 on Investment Allowances Law on Special Economic Zones Zones enacted by Government Regulations Business Fields Open with Conditions except for those which reserved for SMEs not applied at SEZ The Amendment of Tax Law : corporate income tax rate will be reduced from 30% to 28% in 2009 and to 25% in 2010.

17 INVESTMENT APPROVAL PROCEDURE Check : Negative List Requirement Joint venture FILL MODEL I/PMA 1.Article of Passport 2. Deed of Establishment 3. Tax Payer Registration Number 4. Production Flow Chart 5. Description of Activities 6. etc Adm. Office If the application or attachment is not complete, will be returned to investors Self Assessment (Check List) Approval by Chairman or In Charge Deputy Chairman for Investment Services Processing Application Front Office : Official Checking by Dutied Officer

18 Batam Bintan Karimun Exclusive zone in term of Free Trade Zones (Government Regulation No. 46, 47, 48 year 2007) Free Trade Zones mandated by Law No. 44/2007 Exclusive land right, especially in Bintan No VAT on raw materials No import duties on machineries and equipment The longest airstrip in Indonesia, fits for global logistic hub and aircraft s maintenances and manufacturings

19 2. MAP OF BINTAN FTZ Total Area Population (2006) : 64,650.6 ha : 286,315 persons

20 1. MAP OF BATAM FTZ Total Area Population (2007) : 71,286 ha : 724,315 persons

21 3. MAP OF KARIMUN FTZ Total Area : 9.666,012 ha Population (2006) : 205,310 persons

22 Minimum Wage (2009) West Sumatra: 108 North Sumatra: 147 Riau Islands: 110 Riau: 111 West Kalimanta East Kalimanta n: 117 n: 87 Maluku: 95 West Papua: 145 Banten: 113 West Java: 77 Jakarta: 132 East Java: 70 Central Java: 71 Bali: 70 South Sulawesi: 111 Papua: 149 Currency in thousand KRW

23 Electricity Interconnection (Java-Madura-Bali). others still isolated Capacity Q ( MW) : Providers: PLN : MW (83.4%) Private (IPP) : MW (13.5%) Integrated (PPU) : 916 MW (3.1%) Locations/Systems: Java-Madura-Bali : MW Sumatra : MW Others : MW Electricity demand growth rate up to 2026 : 7.1% per year Only 64% of total household installed electricity Current fuel mix in electricity: Coal 41%; Oil 34% Gas 14%; Hydro 9% and Geothermal 3%. Fuel cost mix showed portion of fuel oil increases drastically. from 25 % in year 2000 to 78 % in 2008 due to sudden raise on oil & price since Oct and recently.

24 Current Electricity Capacity Island Population Total W/Capita Indonesia 232,000,000 29,885 MW Java 132,800,000 22,482 MW Sumatra 42,800,000 4,634 MW 95.0 Eastern 46,600,000 2,769 MW 59.4

25 INDONESIA 42 M 95 Watt/capita 46 M 59 Watt/capita 132 M 169 Watt/capita

26 Comparative Advantages (Natural Resources) No Commodity Production Location 1 Crude Palm Oil 19 million ton (2008) Sumatera, Kalimantan, Sulawesi, Papua. Rank in the World 1 st 2 Tin 65 Thousand ton (2007) Sumatera 2 nd 3 Cocoa 770 thousand ton (2007) Sulawesi, Sumatera, Java, Kalimantan, East Nusa Tenggara 4 Copper 818 thousand ton (2006) Papua, Maluku, Nusa Tenggara 5 Nickel 4.35 million ton (2006) Sulawesi, Sumatera, Maluku, Papua 6 Gold 89 thousand kg (2007) Kalimantan, Sumatera, Maluku, Papua 2 nd 2 nd 5 th 7 nd 7 Coal 178 million ton (2006) Kalimantan, Sumatera, 8 th

27 Value Chain of Several Industries in Indonesia 1. Forestry Industry Potency Development Virgin Forest 140 million ha Land use 20 million ha Plantation Industry 3 million ha 23 million ha Pulp Industry Capacity 6.7 million ton/year 18 million year Production 5.7 million ton/year 16 million ton/year Employment 1.2 ha/person Total Employment 2.5 million persons 16.6 million persons Value Chain US$ billion US$. 9.6 billion

28 2. Agro Industry (Palm Oil) Potency Development Land Area (ha) 5.15 million million CPO Production (ton) 17 million 35 million Employment 5.15 million persons 10.6 million persons (1 person/ha) Value Chain (US$.800/ton) US$ billion US$. 28 billion

29 LAW NO 4/2009 ON MINERAL AND COAL MINING Simplification of Licensing, permit scheme for new players: Mining Business License (Izin Usaha Pertambangan/IUP) IUP exploration and IUP production-operation Mining Traditional License (Izin Pertambangan Rakyat) Special Mining Business License (IUPK) for the area of ex State Reserves Zone IUP and IUPK are open for domestic and foreign investor through the bidding scheme Clarification by Central Government, Provincial and District Authority Processing and refinery producing metal must be establish in Indonesia For the sake of national interest, the GOI can determine Domestic Market Obligation (DMO) of mineral and coal The mining company with IUPK scheme has an obligation to share its net profit after production: 4% to government and 6% to local government There is a punishment mechanism for any infringe to the Law

30 RANK OF INVESTMENT REALIZATION BY COUNTRY PERIOD OF 1990 APRIL 2009 No. COUNTRY VALUE OF INVESTMENT (US$. Million) NUMBER OF PROJECT 1 Japan , Singapore , Mauritius , United Kingdom 8.420, United States of America 7.363, South Korea 5.133,

31 RANK OF INVESTMENT REALIZATION FROM SOUTH KOREA BY SECTOR PERIOD OF APRIL 2009 No. SECTOR VALUE OF INVESTMENT (US$. Million) NUMBER OF PROJECT 1 Metal, Machinery & Electronic Industry 2 Chemical & Pharmaceutical Industry 1.897, , Textile Industry 509, Leather Goods & Footwear Industry 440, Food Industry 389,9 24

32 RANK OF INVESTMENT REALIZATION FROM SOUTH KOREA BY LOCATION PERIOD OF 1990 APRIL 2009 No. PROVINCE VALUE OF INVESTMENT (US$. Million) NUMBER OF PROJECT 1 West Java 2.233, Banten 1.428, East Java 691, Jakarta Capital Territory 426, Papua 86,8 1

33 Employment Opportunity from The Investment Realization of South Korea Period of 1990 April 2009 TOTAL people

34 INVEST INDONESIA