Chemicals Investment Proposition · Key growth segments in fertilizer production Fertilizer production by type as a proportion of total production, Indonesia, 2011-2015 1. Urea is

Badan Koordinasi Penanaman Modal

Chemicals Investment Proposition

29th August 2016

Indonesia Investment Coordinating Board

Why Canadian firms are investing in Indonesia

Indonesia’s GDP will increase by over 150% to $2.2 trillion by 2025

Indonesia has the 4th

largest population in the world (261 million as of August 2016)

Indonesia is very cost effective - the average monthly wage is $161

Indonesia is one of the fastest growing economies in the world in the world (>5% p.a. 2012-16)

Access to the $2.5 trillion ASEAN market with a population of 620 million


What Canadian investors say about Indonesia

invested by Canadian firms

in Indonesia

of Canadian investors in Indonesia are

planning to re-invest in Indonesia

(WAVTEQ, June 2016 survey)

of Canadian investors in Indonesia would recommend other

Canadian companies to invest in Indonesia

(WAVTEQ, June 2016 survey)


Why invest in Indonesia’s manufacturing sector?

Growth in chemicals

7.6%average annual growth of the chemicals sector

Indonesia’s competitive strengths for manufacturing investment World’s fourth largest population of 260 million The chemicals & related sector has averaged 7.61% annual growth from 2011-14 Labour costs nearly half of China and lower than India for skilled positions Better availability of scientists & engineers than China or India Effective corporate tax less than half China and India

Size of workforce

15+ million employment in the

manufacturing sector in 2015

#1 in Asia for industry

41.3%Indonesia’ proportion of GDP in industry is higher than rest of

ASEAN and overtook China in 2015

Track record

$12 billionChemicals related foreign direct investment in Indonesia 2011-15

$

Agricultural chemicals

has been the 3rd

largest sector for chemicals FDI into

Indonesia (2011-15)


Key opportunities for Canadian investment –Agricultural fertilisers and chemicals

Market demand• In 2016, total market demand for food & beverages in Indonesia is expected to reach nearly

US$230 billion and is projected to reach around US$330 billion by 2020. • According to the Economist Intelligence Unit, the value of the food demand is expected to

grow at a compound average growth rate of 10% per annum between 2016 and 2020.

Agricultural area• Indonesia’s total agricultural area is 54 million hectares. The area is still steadily expanding,

with an annual average growth rate of nearly 12% between 2001 and 2011.

The expansion of agricultural land and production is directly increasing the demand for agricultural fertilisers and chemicals.


Growth of fertilizer production in Indonesia

• From 2011 to 2015, production increased by 10.34%, reaching over 11.5 million tonnes of nutrients in 2015.

Fertilizer production, by million tonnes of nutrients, Indonesia, 2011-2015

Source: Indonesian Association of Fertilizer Producers (APPI) http://www.appi.or.id/?statistic

10559

11905

11368 11263

11651

9500

10000

10500

11000

11500

12000

12500

2011 2012 2013 2014 2015

http://www.appi.or.id/?statistic


Key subsectors for chemicals FDI in Indonesia

Source: WAVTEQ, based on fDi Markets

Greenfield FDI in chemicals sector by subsector, (% of projects), 2011-15

Paints, coatings, additives & adhesives

34%

Basic chemicals26%Agricultural

chemicals8%

Pharmaceutical preparations

7%

Hospitals & healthcare offices

10%

Other chemical products & preparation

5%

Other10%

1. Agricultural chemicals has been the 3rd largest sector for chemicals FDI into Indonesia


Key growth segments in fertilizer production

Fertilizer production by type as a proportion of total production, Indonesia, 2011-2015

1. Urea is the major segment, accounting for just under 60% of production in 2015

2. The share of organic has doubled to 6.3% of total production in 2015 vs. 2011

3. The share of NPK has also increased from 21% to 25.8% in 2015

Source: Indonesian Association of Fertilizer Producers (APPI) http://www.appi.or.id/?statistic

NPK25.8%

Organic6.4%

ZK (K2SO4)

0.1%Fosfat/SP-36

2.4%ZA/AS6.0%

Urea59.4%

2015

NPK21.0%

Organic3.2%

ZK (K2SO4)0.0%

Fosfat/SP-36

4.2%ZA/AS7.7%

Urea63.9%

2011

http://www.appi.or.id/?statistic


Track record in attracting FDI

FDI flows into Indonesia in the chemicals sector (2010-15), US$ million

Source: Based on BKPM data

1. Indonesia had attracted $11.7 billion of FDI in the chemicals sector since 2011 with almost $2 billion of FDI in 2015 (Source: BKPM)

1467

2770

3142

2323

1956

00

500

1,000

1,500

2,000

2,500

3,000

3,500

2011 2012 2013 2014 2015


FDI Track Record – case studies

Elevance Renewable Sciences, a US-based chemical company has opened a bio-feedstocks plant in Gresik, Indonesia. The investment is a joint venture project with Wilmar International, an agribusiness group based in Indonesia. The plant initially will operate using palm oil, but also can run on soybean, mustard or other bio-feeds.

Sorini Agro Asia Corporindo, a chemicals company and a subsidiary of US-based Cargill, an agribusiness, plans to invest Rp600bn to establish a new starch sweetener plant in Cikande, Indonesia. The 100,000 tonnes per year facility is expected to launch operations in September 2015.


Competitive strengths for chemicals– Size of market

0

500

1000

1500

2000

2500

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Indonesia

Philippines

Thailand

Malaysia

Vietnam

Singapore

Indonesia’s GDP 2025 forecast:• Increase >150% to $2.2 trillion• Larger than India’s in 2015• Nearly same size as Canada’s ($2.6 tn)• GDP/capita: $3370 (2015) to $7840

GDP 2011-2025, US$ billion (EIU forecasts)


Competitive strengths for chemicals– Size of population

6

31

69

92

101

255

7

36

70

103

128

308

0 50 100 150 200 250 300 350

Singapore

Malaysia

Thailand

Vietnam

Philippines

Indonesia

Population projection (mid-2030, Millions) Population (2015, Millions)

Source: fDi Benchmark (IMF and Population Reference Bureau World Population Data Sheet)

Population by country, 2015-2030

Indonesia’s population is the 4th largest in the world and will increase to over

300 million people


Competitive strengths for chemicals- Skilled workforce

Source: fDi Benchmark (Global Competitiveness Report, World Economic Forum, Switzerland, 2015-16 )

Availability of Scientists and Engineers – out of 7 (2015)

3.9

4.0

4.2

4.3

4.5

4.6

3.4 3.6 3.8 4 4.2 4.4 4.6

Vietnam

Philippines

India

Thailand

China

Indonesia


Competitive strengths for chemicals– Available workforce

Unemployment rate, 2015-2020

3.6%

6.0%

4.1%

3.2%

2.4%

2.0%

0.8%

5.9%

8.4%

6.0%

4.0%

2.9%

2.9%

1.9%

0.8%

6.3%

0% 1% 2% 3% 4% 5% 6% 7% 8% 9%

India

Philippines

China

Malaysia

Vietnam

Singapore

Thailand

Indonesia

Forecast Unemployment Rate in 2020 (%) Unemployment Rate in 2015 (%)

Source: fDi Benchmark (Economist Intelligence Unit March 2016 & International Monetary Fund 2016)

Indonesia has the least tight labour market in ASEAN


Competitive strengths for chemicals– Low taxes

Total Tax Rate (% profit) in 2015

61%

68%

43%

40%

39%

28%

30%

0% 10% 20% 30% 40% 50% 60% 70% 80%

India

China

Philippines

Malaysia

Vietnam

Thailand

Indonesia

Source: fDi Benchmark (World Bank Doing Business 2016)

Indonesia has low effective tax rates


Competitive strengths for chemicals– Lowest wages in ASEAN

Average monthly wages, USD, 2011-2020

Source: EIU

0.00

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

2011 2012 2013 2014 2015 2016 2017 2018 2019

Indonesia

Malaysia

Philippines

Thailand

Vietnam


Competitive strengths for chemicals– Low labour costs for engineering positions

Labour costs by country for an engineer, USD, 2015

Source: fDi Benchmark

57537

24030

15893

15840

15552

13801

12000

11029

0 10000 20000 30000 40000 50000 60000 70000

Singapore

China

India

Malaysia

Thailand

Indonesia

Philippines

Vietnam

Indonesia has highly competitive labour

costs


Competitive strengths for chemicals– Innovation

Total of Patent applications, non-residents (foreign investors) (2014)

3255

3960

6267

6924

9009

7321

0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000

Philippines

Vietnam

Malaysia

Thailand

Singapore

Indonesia

Source: fDi Benchmark (World Bank World Development Indicators)


Competitive strengths for chemicals– Low cost of living

Cost of Living Index, 2015*

Source: fDi Benchmark *Rating 0-10 (0=lowest cost of living; 10=highest cost of living) (2014)

5.7

3.28

2.22

2.14

1.86

1.82

1.4

1.79

0 1 2 3 4 5 6

Singapore

China

Malaysia

Thailand

Philippines

Vietnam

India

Indonesia

The Investment Coordinating Board of the Republic of Indonesia

20

Badan Koordinasi Penanaman Modal (BKPM)


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

t . +62 21 525 2008

f . +62 21 525 4945

e . [email protected]

Contact Centre :0807 – 100 – 2576 (BKPM)

www.bkpm.go.id

Thank You

Terima Kasih

Documents

Chemicals Investment Proposition · Key growth segments in fertilizer production Fertilizer production by type as a proportion of total production, Indonesia, 2011-2015 1. Urea is