indonesia investment updates on eco- indonesia-japan 60 ... … · basic chemical, chemical, &...

4 December 2018

Indonesia Investment Updates on Eco-Products

IMAM SOEJOEDIDIRECTOR OF INVESTMENT PROMOTION

Indonesia-Japan 60TH Anniversary Workshop for Forest Business

The Investment Coordinating Board of the Republic of Indonesia

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INVESTING IN INDONESIA: WHY NOW?

WHY INDONESIA WHY NOW?▪ Steady economic growth in the past 10 years▪ Investment grade by all major rating firms▪ 5th largest economy in the world by 2030▪ 135 million consuming class by 2030▪ 180 million population in productive age by 2030▪ Significant imporvement in regulatory environment

as reflected in Ease of Doing Business

• Most aggressive infrastructure development in Indonesia’s history

• Extra incentive for investments in industrial, tourism and special economic zones

• Fiscal reform for long term sustainable growth• Law reform to ease business and investment• Concrete policy for eradication of corruption• Citizens’ trust on the Indonesian Government is at all

time high• Strong investors’ confidence to invest further in

Indonesia• Policies reform in ICT Sectors

We are once again confronting challenging times in Indonesia. The world looks full of uncertainty and risk. What does it all mean? It means that today is the time to invest - the best time to invest.

__________________________________________________President Joko Widodo

at Singapore-Indonesia Business Dialogue 2017

Source: WorldBank Report, 2017


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SafeStable Reformist

Rank Country Index Score

1 Singapore 97

2 Norway 93

3 Iceland 93

4 Finland 93

5 Uzbekistan 91

6 Hong Kong 91

7 Switzerland 90

8 Canada 90

9 Indonesia 8910 Denmark 88

Top Ten Safest Countries

Source: Gallup World Polls, 2018

On 27 June 2018, Indonesia has successfully organized 171 regional elections (Pilkada Serentak) in order to choose executive heads in 17 provinces , 115 regencies, and 39 cities. The most talked-about regions is West Java, East Java, & Central Java. The previous simultaneous elections were in 2015 with 269 regions and in 2017 with 101 regions.

..as a result, Indonesia has been considered as a SECURE, STABLE AND REFORMIST country by International Rating Agencies

Indonesia’s GDP Rises from 8th in 2016 to 4th in 2050

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PPP Rank

2016 2030 2050

Country GDP at PPP(2014 US$bn) Country Projected GDP at

PPP (US$bn) Country Projected GDP at PPP (US$bn)

1 China 21,269 China 38,008 China 58,4992 United States 18,562 United States 23,475 India 44,1283 India 8,721 India 19,511 United States 34,1024 Japan 4,932 Japan 5,606 Indonesia 10,5025 Germany 3,979 Indonesia 5,424 Brazil 7.5406 Russia 3,745 Russia 4,736 Russia 7,1317 Brazil 3,135 Germany 4,707 Mexico 6,8638 Indonesia 3,028 Brazil 4,439 Japan 6,7799 UK 2,788 Mexico 3,661 Germany 6,138

10 France 2,737 UK 3,638 UK 5,369

GDP at PPP Rankings (Projection for 2030 and 2050)

World Bank’s Economic Growth ProjectionCountry 2017 2018 2019 2020

China 6.8 6.4 6.3 6.2Cambodia 6.8 6.9 6.7 6.7Philippines 6.7 6.7 6.7 6.5Vietnam 6.7 6.5 6.5 6.5Laos 6.7 6.6 6.9 6.9Myanmar 6.4 6.7 6.9 6.9Malaysia 5.8 5.2 5.0 4.7Indonesia 5.1 5.3 5.3 5.3Thailand 3.5 3.6 3.5 3.4

Indonesia in 2045:▪ Population: 309 million▪ Working age population: 52%▪ Urban population: 75%▪ Middle class population: 80%

▪ Income per capita: USD 29,300▪ Share economy from service: 73%

After around 2018, growth could get back on track both in China and in emerging Asia more generally, in part because China will be pushing its productive capacity into other lower cost places like Vietnam, Indonesia, the Philippines and maybe also Myanmar.

Rebecca Harding, CEO of Delta Economics

Source: How will the global economic order change by 2050, PwC, 2017; WorldBank, 2018


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Tax &Incentive

2

LandAcquisition

3

Regulation

1

PublicInfrastructure

5 Skilled Labor & Foreign Worker

4

Issues:• Uncertain regulation,• Licensing is considered complicated, • Lack of coordination among Ministries and Central-Local Government

Government Efforts:• In the Economic Package 16th launched on September 2017, the Government released a Presidential Regulation No. 91 Year 2017 regarding to Acceleration of Doing Business.

• Single submission system that implying the investors will only have to go one place to obtain all required licenses. The IT and database system will be connected

Issues:• Land acquisition is the biggest challenge for foreign investors The process may take years, and could cause substantial delay and uncertainty.• Speculative rising price of land

Government Efforts:• Issuance of Government Regulation No. 13 year 2017 on RTRW (spatial plans). The Minister of Agrarian could issue a recommendation of space utilization to speed up project permissions.

• The Ministry of Industry to set a price ceiling for industrial land, intended to maintain price stability and enhance the attractiveness of industrial land

Issues:• Limited number of skilled labor• Complicated procedure to obtain Foreign Worker Permit

Government Efforts:• The Government is preparing incentives formulation for industry that supporting vocational and training program• The Government is preparing Government Regulation that process of obtaining Foreign worker Permit will be delegated to BKPM (one roof)• Governmenr Regulation No. 22 of 2018 has released to ease foreign worker.

Issues:• Slow dwelling time on the port• Lack of infrastructure caused by lack of funding

Government Efforts:• Starting on Feb 1, the Government implement “post-border” system, in which the physical checking of some restricted goods will be done outside the customs area of the port, in order to reduce the length of time goods remain in the port

• Indonesian Government offer several alternative financing i.e. PINA (Non State Budget Financing) through various financial instrument (perpetual bonds, securitization, etc.)

Issues:• Complicated tax collection, slow service of tax collection• Fiscal incentive is not attractive to investors

Government Efforts:• Ministry of Finance on 21 Feb launched tax data integration system to improve taxpayer data transparency

• Ministry of Finance will revise tax incentives regulation for more wide range of business sectors. At least 20 business sectors to be added from existing 145 business field in Tax Allowance. The regulation also will give simpler mechanism on applying Tax Allowance/Tax Holiday• Ministry of Finance has issued regulation No. 35/2018 on Tax Holiday

5 Common Challenges faced by Investor on Doing Business in Indonesia

The Investment Coordinating Board of the Republic of Indonesia6

Rank Country 2013 2014 2015 2016 2017 Q3 2018 Total

1 Singapore 4,672.0 5,832.1 5,901.2 9,178.7 8,441.6 6,701.9 40,727.4

2 Japan 4,712.9 2,705.1 2,877.0 5,400.9 4,996.2 3,753.5 24,445.6 3 China 296.9 800.0 628.3 2,665.3 3,361.2 1,827.7 9,579.5

4 Malaysia 711.3 1,776.3 3,077.0 1,115.6 1,213.6 1,181.2 9,074.9

5 South Korea 2,205.5 1,126.6 1,213.5 1,065.8 2,024.6 940.0 8,576.0

6 USA 2,435.8 1,299.5 893.2 1,161.9 1,992.8 1,002.2 8,785.4

7 Hong Kong, PRC 376.2 657.3 937.2 2,248.3 2,116.5 1,636.6 7,972.1

8 Netherland 927.8 1,726.3 1,307.8 1,475.2 1,489.4 778.9 7,705.4

9 British Virgin Islands 785.7 624.0 730.5 1,157.3 844.8 786.9 4,929.2

10 United Kingdom 1,075.8 1,588.0 503.2 307.3 774.8 235.2 4,484.2

Total (Top 10 Countries) 18.199,9 18.135,3 18.068,8 25.776,3 27.255,6 19,274.0 126,709.8

TOTAL (144 countries) 28,617.5 28,529.7 29,275.9 28,964.1 32,239.8 21,921.2 169,548.2

Source: BKPM, November 2018

In USD Million

DDI 36% (IDR 1,184.0T)

FDI 64% (IDR 2,064.1T)

In the last 5 years, IDR 3,248.1 T Investment has been Recorded,

with Japan as the 2nd Largest Investing Countries

Transportation Equipment and Other Transportation (37%)

Basic Metal, Metal Goods, Machinery, and Electronic Industry (16%)

Electricity, Gas, and Water (12%)

House, Industrial Estate, and Office(8%)

Basic chemical, chemical, & pharmaceutical(6%)

Others (21%)

24.5billion US dollarsTotal FDI realization

in 2013 – Q3 2018

Rank

2ndAmong total FDIin 2013 – Q3 2018

By sector

Source: BKPM, November 2018 Total Project : 12,404 Projects

Local Workers : 676,898 People

By location

Java (94%)

Sumatra(5%)

Kalimantan (1%)

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

3.8billion USDin Q3 2018

3.9billion USDin 2017 Q3

11%Y-o-Y

FDI realization2013-2017

Japanese Investment Realization in Indonesia Continues to Increase (2013 – Q3 2018)


Some Big Japanese Companies Have Invested in Indonesia


Infrastructure 35 GW power generation 24 Sea ports Multimode

Transportation

Agriculture Food estate Corn Plantation Cattle Salt

Industry

Labor-intensive industry Textile Food &

Beverages Furniture Footwear Lifestyle

Import-substitution

industryChemical &

Pharmaceutical Iron & Steel Component Defend Industry

Export-oriented industry Electronics

CPO & Derivative Products

Wood Products, Pulp & Paper Automotive

Downstream industry of natural

resourcesCacao Sugar Smelter

Maritime Ship Building Cold Storage Marine Technology

Tourism, SEZ & Industrial Park10 Tourism

Priority Destination

10 Tourism SEZ 8 Existing SEZ 7 New SEZ14 Priority Industrial

Parks

Digital Economy e-Commerce Financial Technology

IT Based Creative Economy

INDONESIA’S INVESTMENT PRIORITY SECTORS 2015-2019

Eco-Products as

the NEW BIG DEAL

63% of Indonesian consumer are willing to take Eco-products, despite the

different price [Nielsen, 2017]


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Culinary (41.69%)*;Fashion (18.15%);

Craft (15.70%);TV & radio (7.78%);Publishing (6.29%);

Architecture (2.30%);Apps & game developer (1.77%);

Advertising (0.80%);Music (0.47%);

Photography (0.45%);Performing arts (0.26%);Product design (0.24%);

Fine arts (0.22%);Interior design (0.16%)’

Film (0.16%);Visual comms. Design (0.06%).

Source: Barekraf, 2017; pic: network.bbtv.com, 2017

7.38%of 2016 GDP

*Proportion of each sub sector to total creative economy GDP, 2016.

valued for IDR 852 trillion grow 4.38% yoy

Indonesia New Big Things:Creative Industry, Lifestyle, Digital Economy, and Tourism

IndonesiaInvestment Coordinating Board11

The 10 New ‘BALI’

Tj. Kelayang

Wakatobi

Labuan Bajo

Bromo – Tengger - Semeru

Borobudur

Kep. Seribu

Lake Toba

Tj. Lesung

Mandalika

Morotai

4 Tourism SEZ

6 National Strategic Tourism Zones (KSPN)

Indonesia New Big Things:More Tourism Destinations are Created, including Eco-Tourism


Indonesia New Big Things:Indonesia’s Energy Consumption is Shifting from Oil and Coal to Renewable Resources

23%

30%

25%

22%

2025

4.79%

31%

2011

2050

Some Japanese companies have invested in hydropower plant, such as KEPCO, J-Power, etc.

Korean Companies (GIMCO) has signed

MoU with local companies to invest in

wood pellet industry that will be exported

as Korean power plant fuel.


Kalimantan RegionSumatera Region

1 Geothermal MW -

2 Hydro MW 1.056

3 Micro Hydro MW 10

4 Solar MWp -

5 Wind MW 15

6 Biomass/MSW MW 41

7 Marine MW -

8 Bio-Fuel Thou KL 830

1 Geothermal MW 3.305

2 Hydro MW 4.284

3 Micro Hydro MW 983

4 Solar MWp 5

5 Wind MW -

6 Biomass/MSW MW 274

7 Marine MW -


Total MW 8.851

No Power Plants Capacity Total

1 Geothermal MW 2.150

2 Hydro MW 4.562


4 Solar MWp -

5 Wind MW 250

6 Biomass/MSW MW 206

7 Marine MW -


Total MW 7.965

No Power Plants Capacity Total

1 Geothermal MW 400

2 Hydro MW 2.323


4 Solar MWp 52

5 Wind MW 170

6 Biomass/MSW MW 21

7 Marine MW -

8 Bio-Fuel Thou KL 4.423

Total MW 3.186

1 Geothermal MW 75

2 Hydro MW 118

3 Micro Hydro MW 43

4 Solar MWp -

5 Wind MW -

6 Biomass/MSW MW 55

7 Marine MW -


Total MW 290

Java-Bali RegionSulawesi & Nusa Tenggara Region

Maluku & Papua Region

There are 21.6 GW RE potential spreads in 12

regions“ “

Source: RUPTL 2017 – 2026 PT. PLN Persero

Mentawai Off-Grid Biomass Power Plant Project

Investment Opportunity:• Development, implementation, and operation an Off-Grid Bamboo-Based Biomass Power Plant Project with a total capacity of 5 MW• Construction a power plant in each 20 villages located in Siberut and Mentawai Islands

Project Schedule:• Recent status: Feasibility Stage• 2018: contract signing at tariff US cent 16.41/kWh (85% of BPP – US cent 19.30/kWh)

Investment Plan:• Project cost: USD 27.7 Mn• Concession period: 20 years• FIRR/ NPV: 13%/ USD 9 Mn

Contracting Agency:PT Charta Putra IndonesiaCP: Jaya Wahono

Project Site:Siberut and Mentawai Islands, West Sumatera

Source: PPP Book, 2018


15Source: , Ministry of Industry, 2018

Focus on 5 industry sectors :1.Food & beverage2.Textile 3.Automotive4.Electronics5.Chemical

Cyber-Physical, Internet of things,Collaborative manufacturing

Eco-Products in Industry 4.0


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Central Java▪ KI Kendal▪ KI Bukit Semarang Baru▪ KI Wijayakusuma▪ KI Demak ▪ Tanjung Emas Export Processing Zone

East Java▪ Java Integrated Industrial▪ & Port Estate▪ KI Maspion ▪ KI Tuban ▪ Safe N Lock Industrial Estate

South Sulawesi▪ KI Bantaeng▪ KI Makassar

Banten▪ Modern Cikande Industrial Estate▪ KI Wilmar▪ Krakatau Industrial Estate Cilegon▪ Millenium Industrial Estate

West Java▪ Bekasi Fajar Industrial Estate▪ KI Delta Silicon 8▪ Karawang Internasional Industrial City▪ Suryacipta City of Industry▪ GT Tech Park▪ Artha Industrial Hill▪ KI Marunda Center▪ KI Greenland International Industrial Center (GIIC)/Deltamas ▪ KI Jababeka Tahap III

North SumatraKI Medan

Riau Islands ▪ Batamindo Industrial Park ▪ Bintang Industriall Park II ▪ Kabil Integrated Industrial Park ▪ West Point Maritime Industrial Park ▪ Bintan Inti Industrial Estate

DKI Jakarta▪ Kawasan Berikat Nusantara/KBN ▪ KI Jakarta Industrial Estate Pulagadung/JIEP

▪ KI Kota Bukit Indah Ind. City ▪ KI Indotaisei Kota Bukit Indah▪ East Jakarta Industrial Park ▪ Bekasi International Industrial Estate▪ MM 2100 Industrial Town ▪ KI Terpadu Indonesia - China ▪ KI Kujang Cikampek▪ KI Lion ▪ Cibinong Center Industrial Estate▪ KI Rancaekek

East KalimantanKI Kariangau

Riau▪ KI Dumai▪ KI Tanjung Buton

West Sumatera▪ KI Padang

Yogyakarta▪ KI Piyungan

Where to invest?47 Industrial Estates with Direct Constructions (KLIK) Facility


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Sei MangkeiPalm Oil & Rubber Industry, Fertilizer, Logistics, Tourism

Tanjung Api-apiPalm Oil, Rubber,

Petrochemical Industries

Tanjung LesungTourism

Maloy BatutaPalm Oil, Coal and Mining

BitungFishery, Coconut Oil & Herbal

Pharmacies Industries, Various Industry,

Logistics

PaluManufacture, Agro (Rubber, Cacao, Seaweed, & Rattan) Nickel & Ore Industry, Logistics

MorotaiTourism, FisheryIndustry, Manufacture & Logistics

Arun LhoksemawePetrochemical, Logistics, Oil &

Gas Food & Paper Manufacture

SorongShipyard, Fishery & TourismKelayang

Tourism

MandalikaTourism

Fiscal incentives in SEZ are regulated underMinister of Finance Regulation No. 104/PMK.010/2016):

Tax Incentive:• Income tax reduction from 20% up to 100% for periods of max 25 years• Free VAT for import on raw materials

Facility:• Property ownership and residence permit for foreigner• The ease of investment licensing, land, immigration and work integrated in SEZ

Where to invest?11 Special Economic Zones


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New Regime: One Single Submission (OSS)#2 One Stage of Processing


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New Regime: One Single Submission (OSS)#3 One Format of Business Licensing


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Investment Incentives: New Tax Holiday PolicyPROVISIONS AFTER

(MoF Regulation No. 35 of 2018)

SubjectNew Investment with minimum value of 500bn Rupiah

Industry GroupsApplied to 17 industry group

Reduction rate

100%(single rate)

Concession Period

Transition time50% reduction for the next 2 years

After Tax Holiday

Tax allowance for business expansion can be provided with T&C applied.

No. Time Period Investment Value1. 5 years IDR 500 billion up to less than IDR 1 trillion

2. 7 years IDR 1 trillionup to less than IDR 5 trillion

3. 10 years IDR 5 trillion up to less than IDR 15 trillion

4. 15 years IDR 15 trillion up to less than IDR 30 trillion5. 20 years Minimum IDR 30 trillion

Tax Payer

One Stop Service at BKPM

Criteria and Requirements check

Document Submission

BKPM Recommendation

Approval byMinister of Finance 5 Working

Days

New Scheme of Tax HolidayBased on Ministry of Finance Regulation No. 35 Year 2018

Note:• New scheme is faster than previous procedure with 45 working days• Must be submitted before commercial phase. Not only for new company.• Tax Holiday application can be submitted simultaneously at investment registration or at least 1 (one) year after the investment registration issued

Equitable and Non discriminatory treatment against country of origin

TAX ALLOWANCEGovernment Regulation No. 9 of 2016

145business fieldsEligible for tax allowance, expanded from 143 segments in the previous regulation with additional segment: clothing industry.

30 % of investment value Reduction of corporate net income tax for 6 years, 5% each year.

For those taxpayers who have :• Principal licenses (IP) and its changes issued by BKPM;• Principal Licenses for Expansion (IP-PL) and its changes issued by BKPM; or• Investment licenses issued by other authorized agency

These three types of license must be issued after 5 May 2015

Taxpayers who have applied for import duty facility or corporate income tax reduction according to Article 29 of Government Regulation No. 94 of 2010 is rejected by Ministry of Finance.

Under certain requirements among others: investment value or export orientation, manpower absorption, local content, and project location (especially outside Java island).

Notes:Certain business fields and location are based on on Attachment I and II of Government Regulation No. 18 of 2015 Jo. No. 9 of 2016

SOP to process TA facility is25 working days

Equitable and Non discriminatory treatment against country of origin

Transportation and Warehouse• Urban transportation• Cargo handling

Power Generation• Geothermal• Renewable 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

NOTE• The Government under Ministry of Finance is now finalizing the new regulation for tax allowances, tax holidays, tax deductions for small and medium enterprises (SMEs), as well as incentives for companies that carried our research and development (R&D) activities.• The government would expand the number of business sectors that would be eligible for the incentives.• There will be simpler procedures to obtain the incentives.

New Fiscal Incentive Regulation for Investment is on the Draft

Import Duty Exemption

IMPORT DUTY FACILITY

(MoF Regulation No.110/PMK.011/2005 MoF Regulation No.76/PMK.011/2012, MoF Regulation No.66/PMK.010/2015

and Chairman of BKPM Regulation No. 16/2015)

• Exemption of import duty on imported capital goods (machines) for 2 years during construction period.

• Exemption of import duty on imported goods and material for production for 2 years during initial production (or 4 years for companies using locally-produced machines min.30% from total value of machines for production).

• Equitable and Non discriminatory treatment against country of origin

Acceleration and certainty in custom clearance process

Faster & Certain• Capital goods do not require screening.• Cutting the processing time from 3-5 days to only 30 minutes.

Simple requirements • Projects under construction • Obliged in reporting quarterly investment activities (LKPM) • Recommendation from BKPM

Four customs checking status:• Red line is for new companies.Physical & document checks before transported from ports.• Yellow line Document check before goods transported from ports.• Green line Document check after goods transported from ports.• Main Partner Priority for companies with proven track record. No checking required.

New Facility: Status upgrade From RED to GREEN line for new companies under construction

GREEN LINE ACCELERATION FACILITY


About the Investment Promotion AgencyIndonesia Investment Coordinating Board (BKPM)

Primary interface between business and the government to boost FDI and DDI through the creation of conducive investment climate.

Who We Are

Our Services

• ADVISOR

• CONSULTANT

• PARTNER

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Badan Koordinasi Penanaman Modal

(BKPM)Indonesia Investment Coordinating Board

Jln. Jend. Gatot Subroto No. 44Jakarta 12190 - Indonesia

t . +62 21 525 2008

f . +62 21 525 4945

e . [email protected]

www.bkpm.go.id

Arigato GozaimasuThank You

Terima Kasih

IIPC Office in TokyoIndonesia Investment Promotion

Center

Fukoku Seimei Building 16F 2-2-2Uchisaiwai-cho Chiyoda-ku Tokyo 100-0011,

Japant. +81 3 3500 3878

f. +81 3 3500 3879

e. [email protected] | [email protected]

Director: Rakhmat Yuliantoe. [email protected]


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Business fields related to NTFP Sectors

*) Klasifikasi Baku Lapangan Usaha Indonesia/ Indonesian Standard Industrial Classification

No Business Fields KBLI/ ISIC Ownership Tax Holiday Tax Allowance Import Duty

1Forest Business: Rattan, oleopine resin, bamboo, shorea javanica, agarwood, shellac, sago, latex, honeybee

0213 With condition: Partnership

v

2 Crops and Plantation: Peppercorn, clove, essential oil, medicinal, other spice 0128 95% v

3

Primary Forest Product Processing Industry: Rubber latex, rattan, shorea javanica, agarwood, shellac, sago, honeybee

02301, 02302, 02304, 02305, 02306, 02307,

02309100% v

4 Furniture Industry: Bamboo, rattan, and other NTFP materials 31002, 31009 100% v v


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Business fields related to ESNT SectorsNo Business Fields KBLI/ ISIC Ownership Tax Holiday Tax Allowance Import Duty

1 Natural Tourism Object Business Outside Conservation Areas 91034 67% v

2Natural Tourism Object Business: Natural tourist park, highway forest park, hunting park

91032, 91033, 91037 100% v

3 Nature tourism business: natural baths 93221 100% v

4Nature tourism business: Natural adventure tourism, cave tourism, and hunting block business,

93222, 93223. 93229 49% v

5

Nature tourism business in the form of provision of ecotourism facilities, activities and services within forest areas including water tourism

93241, 93242, 93243, 93249 49% v

*) Klasifikasi Baku Lapangan Usaha Indonesia/ Indonesian Standard Industrial Classification


New Tax Holiday Policy:17 Pioneer Industries


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Licensing Simplification (1/3)


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