Indonesia: Moving Forward -...

Thomas LembongChairman of Indonesia Investment Coordinating Board (BKPM)

Indonesia: Moving Forward

Jakarta, 26 November 2018

© 2018 by Indonesia Investment Coordinating Board. All rights reserved

1


DB 2015 DB 2016 DB 2017 DB 2018 DB 2019

Starting Business Getting electricity Paying Taxes

Starting Business Getting Credit Paying Taxes

Starting Business Getting Electricity Registering Property Getting Credit Paying Taxes Trading Across

Borders Enforcing Contracts

Starting Business Getting Electricity Registering Property Getting Credit Protectic Minority

Investors Paying Taxes Trading Across Borders

Starting a Business Registering Property Getting Credit

Improvement of Indonesia’s Ease of Doing Business Index with 23 reforms in 2015-2019

114

109

91

72 73

Source: Ministry of Economic Affairs, 2018

2

Source: IMF, October 2018

“Indonesia is a clear example on how a country can grapple with difficult economic circumstances and do that with success” (Christine Lagarde at AM IMF-WBG Bali 2018)

“The scorecard of Indonesia is excellent: Whether you look at the increase in per capita GDP, which has more than doubled.

If you look at poverty reduction, which is now down to 11 percent.

If you look at growth and If you look at inflation, which is kept under control......

If you look at reserves, massive improvement.

If you look at the structure and the solidity of the banking sector, massively restructured. Same thing.

And if you look at debt, a very respectable track record as well, with [public and private foreign debt each] of only 17 percent to GDP.

And if you look at the fiscal rules that are enforced in the country, again, a very good track record.”

What They Say About Indonesia’s Economy on AM- IMFWBG 2018


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The latest OECD economic survey of Indonesia was presented on Oct 10 by OECD secretary general Angel Gurría in Nusa Dua, Bali, on the sideline of the International Monetary Fund-World Bank (IMF-WB) Annual Meeting.

Key Points1) Living standards are rising steadilyThanks to a steady economic expansion and helpful government policies, poverty rates and inequality are falling, and access to public services is broadening.

2) Raising revenues is the key fiscal challengeStrengthening the tax administration is a government priority and is crucial for improving compliance.

3) The youthful population is an opportunityHalf of Indonesia’s population is under 30 years old. This favourable age structure will contribute to future prosperity, if policies are put in place.

4) Tourism can boost regional developmentGrowth in tourism has been remarkable. Annual visits have almost tripled over the past decade, with China becoming the largest source.

“Indonesian economy was growing at healthy rates, and a demographic dividend would further boost growth in the coming years.” (Angel Gurría – OECD Secretary General)


Source: OECD, 2018; Jakarta Post, 2018

What They Say About Indonesia’s Economy on AM- IMFWBG 2018

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Q1 Q2 Q3 Q4

2015 4.83% 4.74% 4.78% 5.15%

2016 4.94% 5.21% 5.03% 4.94%

2017 5.01% 5.01% 5.06% 5.09%

2018 5.06% 5.27% 5.17%

4.40%4.50%4.60%4.70%4.80%4.90%5.00%5.10%5.20%5.30%5.40%

2015

2016

2017

2018

Indonesia’s economy has been continuously Growing despite of global uncertainties

Source: National Statistic Bureau, 2018

Indonesia’s Macro-Economic ConditionMacro-economic Indicators are under control and improving.

Economic Growth by Quarter (%, y-o-y)


Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2016 4.14 4.42 4.45 3.6 3.33 3.45 3.21 2.79 3.07 3.31 3.58 3.02

2017 3.49 3.83 3.61 4.17 4.33 4.37 3.88 3.82 3.72 3.58 3.3 3.61

2018 3.25 3.18 3.4 3.41 3.23 3.12 3.18 3.2 2.88 3.16

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2016

2017

2018

Inflation is under control to maintain people’s buying power and businesses’ room for improvementInflation Growth Rate (%, y-o-y)

Source: Central Bank of Indonesia, 2018

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Country Index Score

Singapore 97

Norway 93

Iceland 93

Finland 93

Uzbekistan 91

Hong Kong 91

Switzerland 90

Canada 90

Indonesia 89

Denmark 88

Top Ten Safest Countries

Source: Gallup World Polls, 2018

Indonesia among the top 10 optimist and safest CountriesBeing nice, happy and optimistic are actually Indonesian Greatest Asset

Country Net Score

Nigeria +59

Vietnam +55

Indonesia +53

India +46

Philippines +32

Albania +31

Bangladesh +30

Fiji +27

Kosovo +25

Pakistan +20

TOP 10 OPTIMISTS

Source: Gallup International,2017

Top Ten Happy Countries

Country Net Score

Fiji +92

Colombia +87

Philippines +84

Mexico +82

Vietnam +77

Kazakhstan +74

Papua New Guinea

+74

Indonesia +68

India +64

Argentina, Netherland

+64

Source: Gallup International,2017 6

Over the next 3 years (2017-2019), it is estimated that $75 trillion global economy will expand by another $6.5 trillion in size.

Source: World Economic Forum (WEF), 2017.Percent of estimated global growth

United States

Japan

France

Germany

Italy

United Kingdom

China

Spain

Countries with GDP of more than USD 1 trillion per year,

and the year they joined

TRILLION DOLLAR CLUB

Canada

Brazil

India

Russia

Mexico

South Korea

Australia

Indonesia

The top-5 economies that will generate that growth (%):

1970

Source: SEASIA

1979

2005

1988

1990

1990

1990

1998

2004

2006

2007

2007

2007

2007

2008

2017


Indonesia is the 5th biggest contributor to the world economic growth

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PPP Rank

2016 2030 2050

CountryGDP at PPP

(2016 US$bn)Country

Projected GDP at PPP(US$bn)

CountryProjected GDP at

PPP(US$bn)

1 China 21,269 China 38,008 China 58,499

2 United States 18,562 United States 23,475 India 44,128

3 India 8,721 India 19,511 United States 34,102

4 Japan 4,932 Japan 5,606 Indonesia 10,502

5 Germany 3,979 Indonesia 5,424 Brazil 7.540

6 Russia 3,745 Russia 4,736 Russia 7,131

7 Brazil 3,135 Germany 4,707 Mexico 6,863

8 Indonesia 3,028 Brazil 4,439 Japan 6,779

9 United Kingdom 2,788 Mexico 3,661 Germany 6,138

10 France 2,737 United Kingdom 3,638 United Kingdom 5,369


Indonesia is widely seen to be the 5th largest economy by 2030 and the 4th largest by 2050

Source: How will the global economic order change by 2050, PwC, 2017

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No Business Field 2017 Contribution

1 Agriculture. Forestry and Fishing 118.1 13%2 Mining and Quarrying 20.4 2%

3 Manufacturing 308.8 35%4 Electricity and Gas 1.0 0%5 Water Supply. Sewerage. Waste Management and Remediation Activities 0.6 0%6 Construction 92.8 10%

7 Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles 129.3 14%

8 Transportation and Storage 29.9 3%9 Accommodation and Food Service Activities 28.4 3%

10 Information and Communication 40.5 5%11 Financial and Insurance Activities 24.9 3%

12 Real Estate Activities 16.9 2%13 Business Activities 3.3 0%

14 Public Administration and Defence; Compulsory Social Security 23.3 3%

15 Education 33.8 4%16 Human Health and Social Work Activities 7.5 1%

17 Other Services Activities 14.6 2%Regional GDP 894.1 100%


Manufacturing is the biggest contributor to Central Java’s EconomyRegional Gross Domestic Product based on business field

Source:Statistics Indonesia, 2018

(in trillion IDR)

9

34.03

20.69

7.89

7.78

7.75

7.64

6.93

6.34

4.25

4.14

Singapore

Japan

Malaysia

USA

China

South Korea

Netherlands

Hong Kong, PRC

United Kingdom

British Virgin Islands

(in billion US$)

Foreign Direct Investment (FDI) Performance during 2013 – 2017

FDI still concentrated in Java Island

Singapore is Indonesia’s largest source of investment

Source: BKPM, 2018


Mining is the largest business sectors during 2013 – 2017,

however secondary sectors still dominated the FDI realization in

Indonesia

Sumatera, 15.30%

Kalimantan, 11.90%

Java, 54.70%

Sulawesi, 7.60%

Bali & Nusa Tenggara,

3.70%

Maluku, 1.20%

Papua, 5.70%

21

13

13

12

11

11

67

Mining

Chemical &Pharmaceutical Industry

Electricity, Gas & Water

Metal Industry

Automotive Industry &Transportation Equipment

Food Industry

Others

(in billion US$)

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No ProvinceInvestment

(in Trillion IDR)

1 East Java 200

2 West Java 123

3 Jakarta 99

4 Central Java 86

5 East Kalimantan 56

6 Banten 50

7 Riau 40

8 South Sumatera 38

9 West Kalimantan 34

10 North Sumatera 30

Total 942

No ProvinceInvestment Value

(in Billion US$)

1 West Java 30

2 Jakarta 19

3 Banten 14

4 East Java 11

5 East Kalimantan 8

6 Papua 8

7 Central Sulawesi 7

8 South Sumatera 6

9 Riau 5

10 North Sumatera 5

11 Central Java 5

Total 148

Central Java is the 4th largest destination of DDI

Central Java is the 11 largest destination of FDI

Top 10 FDI and DDI Investment Destinations in Indonesia during 2013-2017

No ProvinceInvestment

(in Trillion IDR)

1Special Territory of Jakarta

38

2 West Java 28

3 East Java 24

4 Central Java 20

5 East Kalimantan 20

6 Banten 15

7Central Kalimantan

12

8South Kalimantan

9

9 North Sumatera 7

10 South Sumatera 6

Total 241.7

No ProvinceInvestment Value

(in Billion US$)

1 West Java4.5

2Special Territory of Jakarta 3.5

3 Banten2.3

4 Central Java1.6

5 South Sumatera0.9

6 Riau0.9

7 East Java0.9

8 Papua0.9

9 North Sumatera0.8

10 Bali0.8

Total 21.9

Central Java is the 4th largest destination of DDI & FDI

Top 10 FDI and DDI Investment Destinations in Indonesia during Jan-Sep 2018

Source: BKPM, 2018

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Housing, Industrial Estate, Office buildings;

16%

Mining; 14%

Transp., warehouse

& Telco; 10%

Electricity, Gas & water supply; 9%

Metal, machinary

& electronic;

8%

Others; 43%

11.6%

1.6%

3.5%

3.6%

4.6%

5.4%

6.3%

7.5%

8.3%

17.1%

30.6%

Others

Australia

Netherlands

BVI

US

Malaysia

Korea

Hong Kong

China

Japan

Singapore 6.7

3.8

1.8

1.6

1.4

1.2

1.0

0.8

0.8

0.3

2.5

FDI by country of origin

Jan-Sep 2018

FDI by Sectors

Jan-Sep 2018

USD billion

Investment Realization in the first three quarters of 2018 reached IDR 535.4 trillion or grew at 4.3% (yoy) DDI grew quite well, which is 24.1% FDI realization growth contracted by 7.8% Factors of exchange rate instability and the

domestic political climate ahead of the general elections made investors take await and see attitude.

Factors of global instability such as the trade war between America and China also helped global investors tend to hold their investments.

Asian countries were still the biggestcontributor to FDI in Indonesia One third of FDI realization comes from

Singapore. China placed as the 3rd largest investors in

Indonesia

Source: BKPM, 2018

Q1-2018 Q2-2018 Q3-2018 Jan-Sep 2018

Nominal (IDR tn)

Growth (% yoy)

Nominal (IDR tn)

Growth (% yoy)

Nominal (IDR tn)

Growth (% yoy)

Nominal (IDR tn)

Growth (% yoy)

DDI 76.4 11.0 80.6 32.1 84.7 30.5 241.7 24.1

FDI 108.9 12.4 95.7 (12.9) 89.1 (20.2) 293.7 (7.8)

Total 185.3 11.8 176.3 3.1 173.8 (1.6) 535.4 4.3

Direct Investment Grew by 4.3% in the first three quarters of 2018

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Predictable Minimum Regional

Wages

Tax incentives for

labor intensive industry

Shorter dwelling time

Easier Visa Application and Working Permits

Negative List of

Investment Reform

Incentives for Transport Industry

Acceleration on infrastructure and electricity

3 hours licensing

Lower

electricity rate for industry

Incentive for

property

Land aquisition

acceleration

EODBEase of Doing

Business Improvement

Affordable housing

e-commerce

Incentive for e-commerce Industry

Logistic

INSW and lower logistic

cost

OSS

Online Single Submission


16 Economic Policy Packages to attract more investment have been issued since 2015

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


OSSObtaining Licenses/Permit Related to Investment Activity in Indonesia

Single Business Number (Nomor Induk Berusaha)

Business License

Commercial/Operational License

Etc.

B. EXISTING INVESTOR

www.oss.go.id

A. NEW INVESTOR(New Registration)

(Re-registration)

Provincial/

Municipality

TASK FORCE

Ministry

TASK FORCE

National

TASK FORCE

Monitoring

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Tourism“10 New Bali”

Lifestyle Industrye.g: creative economy, digital industry

MaritimeIncluding fisheries and cold storage

Agriculture

The new big

deal

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

Manufacturing IndustryLabor intensive, export oriented, import substitute, and value added industry

Special Economic Zone(SEZ)

Industrial Estate (IE)

Including

The Government is promoting 5 priority sectors, while tourism, creative economy, and digital industry become the new big deal


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NO Description 2013 2014 2015 2016 2017Jan-Aug Growth.(%)

2018/2017Share.(%) 2018

2017 2018

1 Machineries 27,291 25,835 22,377 21,071 21,768 13,531 17,537 29.6 16.8

2 Electrical Equipment 18,201 17,227 15,518 15,431 17,932 11,114 14,161 27.4 13.6

3 Plastic & Plastic Goods 7,643 7,794 6,832 7,000 7,729 5,025 5,965 18.7 5.7

4 Iron & Steel 9,554 8,354 6,317 6,180 7,985 4,811 6,383 32.7 6.1

5 Organic Chemical 7,012 7,079 5,716 4,791 5,897 3,904 4,579 17.3 4.4

6 Automotive 7,915 6,254 5,343 5,298 6,693 4,389 5,442 24.0 5.2

7 Iron & Steel Products 4,748 4,293 3,717 2,932 2,627 1,569 2,644 68.5 2.5

8 Wheat 3,621 3,606 3,156 3,192 2,927 1,849 2,498 35.1 2.4

9 Food industry pulp 3,042 3,274 2,735 2,480 2,652 1,756 2,016 14.8 1.9

10 Cotton 2,555 2,500 2,124 2,096 2,262 1,499 1,648 9.9 1.6

11 Fertilizer 1,748 1,822 2,012 1,556 1,703 1,136 1,298 14.3 1.2

12 Optical Equipment 2,353 2,070 1,923 2,354 2,589 1,524 1,939 27.3 1.9

13 Chemical Products 2,103 2,075 1,887 1,911 2,197 1,469 1,677 14.2 1.6

14 Rubber and Rubber Goods 2,213 2,005 1,686 1,704 2,082 1,330 1,583 19.0 1.5

15 Inorganic Chemical 1,915 1,817 1,606 1,501 1,618 1,055 1,396 32.3 1.3

16 Confectionery 1,983 1,568 1,499 2,368 2,361 1,542 1,332 -13.6 1.3

17 Aluminium 1,778 1,656 1,469 1,420 1,875 1,216 1,451 19.3 1.4

18 Woven Textile 1,337 1,352 1,366 1,330 1,337 899 983 9.3 0.9

19 Pulp and Paper 1,382 1,368 1,312 1,277 1,369 906 997 10.1 1.0

20 Oily Grains 1,482 1,504 1,292 1,203 1,504 1,077 1,051 -2.5 1.0


Top 20 Imported Commodities in Indonesia (Import Substitutions Investment Opportunities) In Million US$

Source: Ministry of Trade, 2018 16

100% FDIDistributoraffiliated with

production

67% FDI for distributor not affiliated with production

100% FDIRaw material for

PharmacyFrom previously open to 85%

FDI

100% FDIE-Commerce

in partnership with SMEs

From previously closed to FDI

100% FDIMarketplace

For min. Investment of IDR 100 billion (USD 8 million).

Open 49% FDI for investment < IDR 100 billion

100% FDIFilm Industry

Production, post-production, distribution,

projection

100% FDITourismSports center,

restaurant, bar, cafe

67% FDITransport

infrastructure & support services

Including cargo handling andair transport


Tourism, Creative Economy and Digital Economy are more open to Investment

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Tj. KelayangDanau Toba

Morotai

Wakatobi

Labuan Bajo

Bromo – Tengger - Semeru

Borobudur

Kep. Seribu

Tj. Lesung

Mandalika

Danau Toba Tanjung Kelayang Tanjung Lesung Kepulauan Seribu Borobudur

Bromo Tengger Semeru Mandalika WakatobiMorotaiLabuan Bajo

4 Tourism Special Economic Zone (SEZ)

6 National Tourism Strategic Area

Indonesia Tourism Development focus on 10 New Bali


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89.3297.07

104.96112.57

120126.89

133.39139.54

2015 2016 2017 2018* 2019* 2020* 2021* 2022*

Source: Statista, 2018

Number of internet users in Indonesia from 2015 to 2022 (in millions)

Total Population

265.4million

Urbanisation:

56%

Internet Users

132.7million

Penetration:

50%

Active Media Sosial Users

130million

Penetration:

49%

Unique Mobile Users

177.9million

Penetration:

67%

Active Mobile Social Users

120million

Penetration:

45%© 2018 by Indonesia Investment Coordinating Board. All rights reserved

DIGITAL IN INDONESIA 2018

Source: wearesocial &hootsuite, 2018

Indonesia is one of the biggest online markets worldwide

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Indonesia’s online e-commerce will grow eightfold over 2017-2022


Impact of online commerce in 2017

Online sales growth in 24 out of 34 provinces is outpacing online sales growth in Jakarta.

At least 30 percent of online commerce spending is new consumption, capturing previously untapped needs.

More than $20 billion in new retail revenue

1.6 billion parcels shipped

65 million citizens consuming via online commerce by 2022, compared with 20 million in 2017

Government and Companies can encourageIndonesia’s Online Commerce through:

Build a reliable logistic infrastructure to cater to the 1.6 billion parcels expected to ship per year.

Help MSMEs go online by creating a one-stop shop for merchant services that will be beneficial to entrepreneurs.

Source: McKinsey & Company, 2018

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US$ 2 B Investment from Softbank & Didi Chuxing

US$ 1.2 B Tencent is the largest investor

US$ 1.1 B Alibaba is the largest investor

US$ 0.5 B JD.com is one of the largest investors

US$ 0.1 B Acquired by Grab

US$ 22 MIndonesian 4th unicorn, after Gojek, Tokopedia

and Traveloka

US$ 3.2 MIndonesian 1st start up registered in the stock

market

- Acquired by Blibli.com (Djarum Group)

In 2017, Indonesian Startups received US$ 4.93 Billion of Investment


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Grab Go-Jek Sea Lazada TokopediaRazer Traveloka Bukalapak

$ 10 B $ 5 B $ 4.9 B $ 3.2 B $ 2 B $ 2 B $ 1.3 B $ 1 B

8 Unicorn in Southeast Asia, Half of Southeast Asia Unicorn are coming from Indonesia

Source: Katadata.co.id, Sept 2018 22


Fintech Companies Growth

25

165

235

2011-2012 2015-2016 2017

34%

3%10%

39%

4%

lending

Equity Capital Raising

Investment Management

Payment

Insurtech

12.515.02

18.65

22.78

27.43

32.32

37.15 37.97

2015 2016 2017 2018 2019 2020 2021 2022

Fintech Transaction Volume

Fintech Companies Business (2017)

Fintech will potentially keep growing in Indonesia

Source: Indonesian Fintech Association, 2017Source: Indonesian Fintech Association, 2017

In billion US$

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Tel: (+6221) 525 2008 Fax : (+6221) 525 4945Contact Center : 0807 100 2576E-mail : [email protected]

Indonesia Investment Coordinating Board

Badan Koordinasi Penanaman Modal

(BKPM)

Indonesia Investment Promotion Centre (IIPC)

Abu Dhabi, UEA London, UK New York, USA Seoul, South Korea

Singapore City, Singapore

Sydney,Australia Taipei,Taiwan Tokyo, japanwww.bkpm.go.idinvestindonesia.go.id

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