Financing Complex Projects in Indonesiapa- s 1 Financing Complex Projects in Indonesia Indonesia-Belgium…

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    Financing Complex Projects in Indonesia

    Indonesia-Belgium Maritime Summit

    Jakarta, 16 March 2016

    Rio Praaning Prawira AdiningratManaging Partner PA Europe

    Managing Partner PT PA CSR/PA Asia Jakarta

    Secretary General Industrial Dialogue Group

    Adviser on Port and Infrastructure Development

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    Some PA Signature Projects

    Support to multi-billion greenfield and brownfield investment projects including Port of Sohar/Oman, LNG terminal/Wales, Mining/Indonesia

    Major M&As including AB InBev, DSM, KLM

    Prevention of a ban on fish imports into the EU from Indonesia

    Repairing the EU-Indonesia airline ban

    20 years of regulatory-political-ICV-CSR support to many industrial sectors

    Preparing holistically integrated agri-infra port project in South West Java

    Innovative rDNA, energy, water, food, feed, etc projects throughout EU and China incl Melamine crisis, AMR crisis

    High tech projects in Russian incl Lifting of SSN Kursk

    Where is Economic Growth?

    European Commission Vice-President Katainen:

    90% of Global Economic Growth is Outside the EU

    Hearing at European Parliament, 7 October 2014

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    8 trlUSD

    31,11

    in tn USD*

    Inside theEU

    Outsidethe EU

    *source: Studies by McKinsey and four other sources as quoted in an external working paper of the EIB

    Infrastructure Projects

    Inside and Outside the EU in the Next 10 Years

    The Asian Development Bank has estimated that the East Asia region needs infrastructure investment of $8tn over the next decade

    The Indonesian Sea lanes/port projects include 53 bn USD

    High-Level Roundtable on Global Infrastructure Investment Strategy: Integrated All-Stakeholder Road to Profitability and Peace

    24 February 2016, Belgian Senate, Brussels

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    Extra EU funding/guarantees for Infra Investment in Indonesia?

    Rule based investments in a level playing field are the background for the European Council Decision of March 2014 to strengthen the European companies' internationalisation and competitiveness. in open consultation and cooperation with both our Atlantic and Asian partners. ..The time of inward looking should be over.

    EU Council President Emeritus Herman Van Rompuy, IDG High-Level Roundtable, 24 February 2016

    Indonesia is craving for high-quality European investment. We will change the tendering criteria so that the long-term economic value of European infrastructure investment will weigh more against the low short-term cost of investment by certain other countries. Indonesia and many other countries need European investment, with no geopolitical interest but instead with high In-Country Value and indeed ethics for the receiving country and positive return on investment for European companies.

    HE Dr Rizal Ramli, IDG High-Level Roundtable, 24 February 2016

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    We currently prioritize a free trade agreement with the EU over TPP with the US, we appreciate your support.

    HE Dr Rizal Ramli in discussion with Belgian Finance Minister HE Johan Van Overtveldt, IDG High-Level Roundtable, 24 February 2016

    Lijst PwC met plaats Indonesia in 2050

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    ... But ... European companies cannot go alone to countries like Indonesia....

    ...Therefore we ask them to build up strategic alliances with Indonesian companies, state owned or private, and to apply for tenders together....

    This way they can cut down on the costs, making themselves more competitive, and create more In-Country Value and long-term sustainable development for Indonesia.

    HE Dr Rizal Ramli, IDG High-Level Roundtable, 24 February 2016

    Multistakeholder Approach

    Integrated Partnering/Funding Models

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    Global and Regional Requirements

    Food Safety and Food SecurityClean Water

    Clean AirLow Carbon Economy

    Interconnectivity/Market AccessRoad/Port Connections

    Holistically Integrated All Food Chain ApproachFocused Education and Training

    Enabling Authorities/CSR/Individual Responsibility

    Indonesias offer

    In the middle of Growth

    255,46 million people (National Bureau of Statistics 2015)

    GDP 2,554 billion USD by PPP, 2014 (PWC Feb 2015)

    Annual GDP growth 5,73 percent in the last ten years.

    (World Bank)

    Worlds 4th largest economy by 2050 (PWC, Feb 2015)

    Median age 29,6 years old (CIA Factbook)

    ICT and innovation oriented

    Worlds 4th largest in mobile phone users (CIA)

    Worlds 2nd largest in text messaging

    Worlds 4th largest in Facebook users (2014)

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    Indonesias Ranking for

    Infrastructure Funding

    Infrastructure Quality: 2nd among BRIC and 27th among EU member

    states

    Doing business: 3rd among BRIC and 29th among EU

    FDI Regulatory Restrictiveness: 2nd in BRIC and 1st in EU

    Repatriation of Capital: 2nd among BRIC and 9th among EU

    Belgian Credit Insurance Agency Delcredere rates Indonesia as

    Medium in terms of risk

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    Indonesias Ranking if in EU

    29th living cost among EU

    6th GDP among EU

    1st in lowest median age among EU

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    Indonesias strengths

    Median age = 29,6 years old

    Large Productivity Growth Potential

    Large ICT/Innovation Potential

    Large Geothermal Energy Potential

    Worlds No.1 Palm Oil Producer

    Large Safe Food Production Potential17

    Indonesias Vulnerabilities Lack of infrastructure CONSTRUCT!

    Lack of legal security EDUCATION/TRAINING IN EU BRUSSELS

    Lack of protection of investment NEW INVESTMENT COURT

    Lack of balance between haves and haves not ICV and CSR

    Weak education and training system PRIOR EDUCATION/TRAINING

    Ranking low in Ease of Doing Business Index: 114 (improving) - PARTNERING

    Indonesian Rupiah dropped more than 18% against the dollar in 2015 - CHEAP

    Repair Offers Unique Investment Opportunity

    Jokowi Government is Destined to Make It Work

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    Funding Indonesian Infra: for instance ChinaThe New Maritime Silk Road: One Belt One Road - OBOR

    Six economic corridors

    1) To the north - China, Russia and Mongolia

    2) The Eurasia Bridge

    3) Connecting China with West Asia through Central Asia

    4) The BCIM Economic Corridor (The Greater Mekong Sub-region and BCIM will also link Yunnan with the Silk Road)

    5) The China-Pakistan Economic Corridor

    6) The Maritime Economic Corridor from China to SE Asia and LatAm 19

    Total 1,1 trillion USD to cover future needs through external investment Projected budget of a.o. AIIB: 100 bn USD; Silk Road Fund: 40 bn USD; Silk Road Gold Fund: 16 bn

    USD

    10 bn for India, 45 bn for Pakistan, a whisper of 85 bn for Indonesia

    BUT: Finance offer to OBOR participating foreign countries: pro-Chinese involvement (Chinese dredgers beat EU dredgers in the Swansea Bay Tidal Lagoon tender

    due to privileged UK-China agreement)

    no in-country value (Chinese steel makers beat Belgians for lock gates for the Deurganckdok in Antwerp, Belgium)

    acceptance of (local) corruption (the funds include payments for middlemen)

    Chinese companies and workers prioritised

    Chinas OBOR Financing Model: 1,1 trillion

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    EFunding: For Instance Japan

    200 billion USD

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    Contributing to social unrest: exclusion promoted

    After social media revolution and Arab Spring

    trend towards instability in all forms of

    Governments/societies

    Low income/high unemployment rates neglected

    Training/education deficit neglected

    Human health vulnerabilities neglected

    Negative perceptions neglected

    Negative communications neglected

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    In-Country Value vs. Social Unrest (I)

    Contributing to In-Country Value: inclusion promoted

    Investment preceded by multi-stakeholder research including

    representatives of civic society, science institutions, NGOs, industries,

    relevant international organizations and regional/national authorities

    All-inclusive facts and figures are analysed on local health, employment,

    food/nutrition, housing, education/training problems and integrated in

    ICV/CSR approach

    Multi-stakeholder approach identifies a phased program allowing both a

    companys bottom line and negotiating position and social contract with

    local citizens optimized while realizing an infrastructure project

    Potential for optimal local indirect or direct employment, improved housing,

    city farming, local production catering to industries involved in the

    infrastructure project (production of uniforms, tools, food, other services)

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    In-Country Value vs. Social Unrest (II)

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    Prepositioning ICV/CSR included Project Proposal at Highest

    Levels of relevant Government authority

    Identification Indonesian Partners

    Preparing in situ ICV and CSR incl 3rd party support

    Preparing funding by IFC, ADB, IDB, etc

    Positioning Project at Ministries of Maritime Affairs & Resources,

    Transport, Coordinating Minis