Wisnu Wijaya Soedibjo

Deputy Chairman for Investment Cooperation,

Indonesia Investment Coordinating Board, BKPM

Indonesia Investment Updates& Japan Investment Overview

Jakarta, 15 February2019

Indonesia Investment Updates

Why Indonesia?

Indonesia’s economy is forecast to be the world’s 10th largest by 2025

trillion

GDP Only ASEAN

Member in the G20The largest

economy in ASEAN$1GDP of more

than $1 trillion

(PPP)

Indonesia is the fourth most populous country in the world

Population of

260 million

“Consuming class’

twice the size of the

population ofAustralia

Young and

dynamic people 44% of Indonesians

are aged under 25

Indonesia is a global leader in social media. It has:

More Facebook

and Twitter

users than the

population of

Australia

The world’s third

largest market for

Facebook

The most active

city for Twitter in

the world: Jakarta

Source: various sources, 2018

44%2x

Indonesia among the top 10 optimist and safest countries

TOP 10 SAFEST COUNTRIES

Country Index Score

Singapore 97

Norway 93

Iceland 93

Finland 93

Uzbekistan 91

Hong Kong 91

Switzerland 90

Canada 90

Indonesia 89

Denmark 88

Source: Gallup World Polls, 2018

TOP 10 OPTIMISTS

Country Net Score

Nigeria +59

Vietnam +55

Indonesia +53

India +46

Philippines +32

Albania +31

Bangladesh +30

Fiji +27

Kosovo +25

Pakistan +20

Source: GallupInternational,2017

TOP 10 HAPPY COUNTRIES

Country Net Score

Fiji +92

Colombia +87

Philippines +84

Mexico +82

Vietnam +77

Kazakhstan +74

Papua New +74 Guinea

Indonesia +68

India +64

Argentina, +64 Netherland

Source: Gallup International,2017

“Maybe we are not the most advanced one, but it turns out

that we are one of the happiest people in the world”President Jokowi at the IMF-WB 2018Annual Meeting

Indonesia in the future... 2030... 2050...

Emerging markets will dominate the world’s top 10

economies in 2050 (GDP at PPPs)

Indonesia is the 4th Most Prospective Investment Destination and its sovereign credit rating continues trending higher

3444

56

777

91111

2036

40USChina India

Indonesia Thailand

Brazil

UKGermany

Mexico Philippines

Spain Vietnam

Singapore Canada

Australia

Source: UNCTAD, 2017

Investment Realisation in Indonesia Reaches Rp721.3 Trillion in 2018 and rise by 4.1%.

2013 2014 2015 2016 2017 2018

DDI FDI

399.2

463.1

545.4

612.8

692.8721.3

↑16.0%

↑17.8%

↑12.4%

↑13.1%

Investment Realisation(IDR Trillion)

↑4.1%

38%

62%

In the last 6 years (2013-2018), FDI in Indonesia is dominated by Asian countries (including Japan)

Asia 73%

Europe12%

America 11%

Africa 2% Australia 2%

2018 (in USD Bil)2013-2018

(in USD Bil)

Rank Cty Invest. Cty Invest.

1 Singapore 9.19 Singapore 43.22

2 Japan 4.95 Japan 25.64

3 China 2.38 China 10.13

4 Hong Kong 2.01 Malaysia 9.67

5 Malaysia 1.77 South Korea 9.24

6 South Korea 1.60 US 9.00

7 US 1.22 Hong Kong 8.35

8 BVI 1.04 Netherlands 7.87

9 Netherlands 0.94 BVI 5.19

10 Australia 0.60 UK 4.52

Priority Sectors for Investment

MaritimeIncluding fisheries and cold storage

Agriculture

The newbig

deal

InfrastructureEnergy, transportation, road, railway, airport, seaport, etc

Manufacturing IndustryLabor intensive, export oriented, import

substitute, and value added industry

Tourism“10 New Bali”

Lifestyle Industrye.g: creative economy, digital

industry

Including

Special Economic

Zone (SEZ)

Industrial Estate (IE)

Investment Climate is one of the critical points that the government is actively trying to improve

The government today is focused on regulation and bureaucracy reform, as well as simplifying the permit and requirements to invest.

IndikatorDB 2017

Ranking

DB 2018 DB 2019

Indonesia’s Doing Business Rank

91 72 73

Starting a Business 151 144 134

Dealing with Construction Permits

116 108 112

Getting Electricity 49 38 33

Registering Property 118 106 100

Getting Credit 62 55 44

Protecting Minority Investors

70 43 51

Paying Taxes 104 114 112

Tradingacross Borders

108 112 116

EnforcingContract 166 145 146

Resolving Insolvency 76 38 36

"Improvement of every indicator must become the priority of ministries and state institutions, so that efforts will be more focused, while concrete targets must be set.” (President Joko Widodo)

Fiscal Incentives Facility

IMPORT DUTY FACILITYMoF Regulation

No.176/PMK.011/2009 jo. MoFRegulation No. 76/PMK.011/2012 jo. MoF Regulation 188/PMK.010/2015

TAX ALLOWANCEGovernment Regulation No.9/2016

• 30% reduction of Corporate Income Tax (for 6 years, 5%each year)

• 145 Eligible business fields

• Exemption of import duty on machineries and equipment• 2 years exemption of import duty on raw materials• Additional 2 years import duty exemption for raw materials

if using locally-produced machineries and equipment (min 30%)

GREEN LANE FACILITY

• Facility for custom clearance at ports in Indonesia for capital goods, machinery or raw material

• For new companies under construction phase• Require BKPM recommendation and LKPM obligation fulfilled

Tax Allowance

Government Regulation No 9/2016

Agriculture • Livestock • Corn Plantation • Soybean Plantation • Rice farming • Tropical fruits plantation

Power Generation • Geothermal • Alternative energy

Oil and Gas Industry • Oil refineries • Liquefied Natural & Petroleum Gas • Lubricants

Manufacturing Industry• Iron and Steel • Clothing • Semi conductors • Electronic components • Computer • Communication devices • Television • Wheel • Pharmaceutical • Cosmetics • Fish and Shrimp processing

Tax HolidayPrimary Amendments of PMK 150/2018

Pioneer Industries

1. integrated upstream basic metals (which covers general smelting activities); 2. integrated oil and gas refining; 3. integrated petrochemicals arising from oil, gas or coal; 4. integrated inorganic basic chemicals; 5. integrated organic base chemicals derived from agricultural, plantation or forestry activities; 6. integrated pharmaceutical raw materials; 7. manufacturing of semi-conductors and other components integral to computers; 8. manufacturing of the main components of communication equipment integral to smartphones; 9. manufacturing of the main components of health equipment integral to irradiation, electro medical, or

electrotherapy equipment; 10. manufacturing of the main components of industrial to electrical motors or internal combustion engines; 11. manufacturing of the main components used in motor vehicle production; 12. manufacturing of the main components integrated with robotics; 13. manufacturing of the main components of vessel production; 14. manufacturing of the main components of aircraft production; 15. manufacturing of the main components of locomotive production; 16. power plant machinery (including waste to power); and 17. economic infrastructure

18. Digital economy

The 16th Economic Package is issued to support the development of digital economy in Indonesia

Expansion of Tax HolidayAdjustment to the Negative

List (DNI)Incentives for Export Earnings

(DHE)

Will expand the categories, duration and amout of investment

Investment worth IDR 100 billion – IDR 500 billion can benefit from a 50% income tax reduction for 5 years

New sectors are introduced to get tax holiday facility:a. processing industry based

on agriculture;b. plantations or forestry;c. the digital economy

New additional sectors will be fully opened for foreign investments, including digital economy, such as:a. Internet cafes;b. Fixed, data and content

services telecommunication network organization;

c. Network access point services and other multimedia services;

d. Information center andother additional phoneservices;

e. Financial technology.

Provide final income tax cuts for exporters who deposit their earnings (DHE) in designated bank accounts.

18 Categories of Pioneer Industry

Online Single Submission (OSS) as integrated online system with data sharing

15

OSSObtaining Licenses/Permit Related to Investment Activity in Indonesia

Single Business Number (Nomor Induk Berusaha)

Business License

Commercial/Operational License

Etc.

A.NEW USER (New Registration)

B.EXISTING INVESTOR (Re-registration)

www.oss.go.id

Provincial/

Municipality TASK

FORCE

Ministry

TASK FORCE

National

TASK FORCE

Monitoring

Japan Investment Overview

The Investment Coordinating Board of the Republic of Indonesia

21

Japan Investment Performance (2001-2015)after IJEPA >>><<< before IJEPA

Japan Investment

Contribution to FDI

Japan Investment

Performance Compared to

Total FDI

Japan Investment

Growth (YoY)

after IJEPA >>><<< before IJEPA

15

Ye

ars

(20

01

-20

15

)

IJEPA (2008)

2001 2015

No. RANK OF SECTOR BEFORE IJEPA (2001-2007)

1 Industri Alat Angkutan dan Transportasi Lainnya

2 Industri Logam Dasar, Barang Logam, Mesin dan Elektronik3 Industri Kimia Dasar, Barang Kimia, dan Farmasi4 Industri Karet, Barang dari Karet dan Plastik5 Industri Tekstil

6 Industri Lainnya

7 Perdagangan dan Reparasi8 Jasa Lainnya9 Industri Makanan

10 Konstruksi

No. RANK OF SECTORAFTER IJEPA (2008-2015)

1 Industri Alat Angkutan dan Transportasi Lainnya

2 Industri Logam Dasar, Barang Logam, Mesin dan Elektronik3 Industri Kimia Dasar, Barang Kimia, dan Farmasi4 Perumahan, Kawasan Industri, dan Perkantoran5 Industri Makanan6 Industri Tekstil7 Perdagangan dan Reparasi8 Industri Karet, Barang dari Karet dan Plastik9 Industri Kertas, Barang dari Kertas, dan Percetakan

10 Listrik, Gas dan Air

11 Perumahan, Kawasan Industri dan Perkantoran12 Industri Kertas, Barang dari Kertas, dan Percetakan13 Kehutanan14 Industri Mineral Non Logam15 Hotel dan Restoran16 Industri Kayu17 Transportasi, Gudang dan Telekomunikasi18 Perikanan19 Industri Instrumen Kedokteran, Presisi, Optik, dan Jam

11 Pertambangan12 Jasa Lainnya13 Transportasi, Gudang, dan Telekomunikasi14 Konstruksi

15 Industri Mineral Non Logam16 Industri Lainnya17 Hotel dan Restoran

20 Pertambangan

18 Industri Kayu19 Industri Kulit, Barang dari Kulit dan Sepatu20 Perikanan

Almost no difference in sectors interest before and after IJEPA

Only 4 sectors which are difference (2 sectors in each periods)

3,2 4,2

0,1 0,52,4

6,53,4

0,6

18,3

0,1

45,7

1,7

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

45,0

50,0

2001-2015

Secondary Sector 2001-2015

Percentage (%)

The Investment Coordinating Board of the Republic of Indonesia

25

Japan Investment to the world2014 – 2018

Investment RealisationBased on Capital Expenditure (USD Million) Excl. financial sectors

Source: fdiMarkets. 2019

Rank Destination Capex %

1 United States 49,949.8 16.5

2 China 26,788.9 8.8

3 Vietnam 23, 563.6 7.8

4 India 17,625.9 5.8

5 Indonesia 17,067.2 5.6

6 Thailand 16,944.9 5.6

7 Malaysia 15,111.2 5.0

8 Myanmar 14,954.3 4.9

9 Mexico 11,906.2 3.9

10 United Kingdom 9,620.2 3.2

Total Top-10 Countries 203,541.2 67.2

Total (110 countries) 303,046.4 100.0%

Rank Company Capex %

1 Mitsui & Co. 29,032.1 9.6

2 Mitsubishi Corporation 27,528.7 9.1

3 Toyota Motor 21,273.0 7.0

4 Marubeni 12,193.8 4.0

5 Sumitomo Group 10,702.4 3.5

6 Nissan 8,814.2 2.9

7 Honda 7,473.8 2.5

8 Aeon Co. Ltd. 6,417.9 2.1

9 Nippon Telegraph & Telephone (NTT) 6,208.9 2.0

10 Shin-Etsu Chemical 4,786.0 1.6

Total Top-10 Companies 134,430.8 44.4

Total (1,084 Companies) 303,046.4 100.0%

Real Estate17%

Coal, Oil and Natural Gas

15%

Automotive OEM12%

Automotive Components

8%

Metals6%

Others42%

The Investment Coordinating Board of the Republic of Indonesia

26

FDI Realisation in Indonesia by CountryJapan ranked 2nd in 2014 – 2018

FDI Realisation in Indonesia by Origin CountryTop-10 Countries Based on Total Capital Expenditure (USD million) 2014 – 2018Excl. oil. gas. and financial sectors

Rank Country 2014 2015 2016 2017 2018 Total

1 Singapore 5.832,1 5.901,2 9.178,7 8.441,6 9.193,2 38.546,8

2 Japan 2.705,1 2.877,0 5.400,9 4.996,2 4.952,8 20.932,0 3 China 800,0 628,3 2.665,3 3.361,2 2.376,6 9.831,4

4 Malaysia 1.776,3 3.077,0 1.115,6 1.213,6 1.774,9 8.957,4

5 Hong Kong, PRC 657,3 937,2 2.248,3 2.116,5 2.011,4 7.970,7

6 South Korea 1.126,6 1.213,5 1.065,8 2.024,6 1.604,7 7.035,2

7 Netherland 1.726,3 1.307,8 1.475,2 1.489,4 943,1 6.941,9

8 USA 1.299,5 893,2 1.161,9 1.992,8 1.217,6 6.565,1

9 British Virgin Islands 624,0 730,5 1.157,3 844,8 1.043,3 4.399,9

10 United Kingdom 1.588,0 503,2 307,3 774,8 271,1 3.444,4

Total (Top 10 Countries) 18.135,3 18.068,8 25.776,3 27.255,6 25.388,7 114.624,7

TOTAL (144 countries) 28.529,7 29.275,9 28.964,1 32.239,8 29.307,9 130.963,9

Source: BKPM, January 2019

Investment Performance of Japan (2014 – 2018)

Transportation Equipment and Other

Transportation (29%)

Electricity, Gas, and Water (18%)

House, Industrial Estate, and Office (10%)

Machinery, Electronic, Medical Instrument, &

Optic, and Watch Industries(8%)

Basic Metal, Metal Goods, Machinery, and

Electronic Industry (7%)

Others (28%)

20,9billion US dollarsTotal FDI realization

in 2014 – 2018

Rank

2ndAmong total FDI

in 2014 – 2018

By sector

Source: BKPM, January 2019 Total Project : 12.265 Projects Local Workers : 578.316 People

By location

Java (93%)

Sumatra(6%)

Kalimantan (1%)

Sulawesi, Papua, Maluku, Bali, and Nusa Tenggara (0%)

4,95billion USD

in 2018

4,99billion USD

in 2017

93%

7%

Java

Outside Java

21%Y-o-Y

FDI realization2014-2018

Primary2%

Secondary64%

Tertiary34%

4,043.5

8,099.1

1,438.3

2,045.7

1,359.2 2,709.1

2,877.0

5,400.5 4,996.2 4,952.8

2014 2015 2016 2017 2018

Commitment

Realization

Now ...

The Investment Coordinating Board of the Republic of Indonesia

28

Investment Realisation from Japan(2014–2018)

by SectorsExcl. Upstream oil, gas, and financial sectors

Source: BKPM, January 2019

(In Million US$)

Rank Business Field 2014 2015 2016 2017 2018 Total

1Transportation Equipment & Other Transportation Mode Industry

1.260,8 1.180,7 1.876,4 1.007,4 812,0 6.137,2

2 Electricity, Gas and Water 13,7 134,4 604,2 1.175,2 1.865,5 3.793,03 House, Industrial Estate and Office 71,2 519,9 330,1 470,5 607,3 1.998,9

4Machine, Electronic, Medical Instrument, Elect. Equipment, Optic, and Watch Industry

354,8 250,2 403,8 306,6 245,0 1.560,5

5Basic Metal, Metal Goods, Non-Machinery and Its Equipment Industry

158,0 176,1 436,2 507,0 281,6 1.558,9

6Basic Chemical, Chemical and Pharmaceutical Industry

126,3 72,8 733,5 129,5 199,3 1.261,4

7 Food Industry 137,6 88,1 206,5 67,4 87,8 587,38 Mining 49,9 117,6 94,5 244,1 62,9 569,09 Paper Industry 88,7 65,7 27,9 288,8 49,1 520,110 Non-Metal Mineral Industry 8,1 6,1 118,9 210,1 174,7 517,9

Other sectors 436,2 265,5 568,9 589,5 567,7 2.427,8Total (24 sectors) 2.705,1 2.877,0 5.400,9 4.996,2 4.952,8 20.932,0

Primary2%

Secondary64%

Tertiary34%

The Investment Coordinating Board of the Republic of Indonesia

29

Rank Company Business Fields Capex (USD Mn) %

1 Bhimasena Power Indonesia Power Plant and Transmission 1.827,9 8,7

2 Bhumi Jati Power Power Plant 1.582,8 7,6

3 Suzuki Indomobil Motor Spare Parts and Automotive Accessories 878,6 4,2

4 Asahimas Chemical Basic Inorganic Chemical Industry 651,4 3,1

5 Medco Geopower Sarulla Power Plant 575,9 2,8

6 Astra Honda MotorMotorbikes and Motorcycle Components

Industry539,7 2,6

7 Krakatau Nippon Steel Sumikin Steel Rolling Industry 503,3 2,4

8Mitsubishi Motors Krama YudhaIndonesia

Spareparts and Motorcycle Components Industry

442,2 2,1

9 Aeon Mall Indonesia Wholesaler 372,6 1,8

10 Asahimas Flat Glass Tbk. Flat Glass Industry 327,7 1,6

Total Top-10 Companies 7.702,0 36.8

Total (2,352 Companies) 20.932,0 100.0%

Top 10 Japanese Investors in Indonesia (2014 - 2018)Excl. Upstream oil, gas, and financial sectors

Source: BKPM, January 2019

The Japanese Investment both before and after the entry into forced of the IJEPA Agreement is FOCUSED ON SECONDARY SECTORS, especially Automotive Industry

IJEPA Agreement is not only to guarantee the certainty of investing in Indonesia, but also to be POSITIONED JAPANESE TO MAINTAIN ITS DOMINATION IN Certain Sectors in Indonesia

Electricity, Gas And Water as well as Property sectors became THE NEW PRIMA DONNA for Japanese investors in the recent 4 years in Indonesia

the New Scheme of Tax Holiday and other Investment facilities are expected to make Japanese Investors are MORE AGGRESSIVE TO INVEST IN MANY SECTORSin Indonesia

CONCLUSIONS

Indonesia Investment Coordinating Board

Badan Koordinasi Penanaman Modal (BKPM)

THANK YOULET’S INVEST IN INDONESIA

Jl. Jenderal Gatot Subroto No. 44Jakarta 12190 - Indonesia

Tel: (+6221) 525 2008 Fax : (+6221) 525 4945Contact Center : 0807 100 2576E-mail : info@bkpm.go.idwww.bkpm.go.id

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