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
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
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
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
3
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)
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
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)
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
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
5
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
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 $6.5 trillion in size.
Source: World Economic Forum (WEF), 2017.Percent of estimated global growth
United States
Japan
France
Germany
Italy
United Kingdom
China
Spain
Countries with GDP of more than USD 1 trillion per year,
and the year they joined
TRILLION DOLLAR CLUB
Canada
Brazil
India
Russia
Mexico
South Korea
Australia
Indonesia
The top-5 economies that will generate that growth (%):
1970
Source: SEASIA
1979
2005
1988
1990
1990
1990
1998
2004
2006
2007
2007
2007
2007
2008
2017
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
Indonesia is the 5th biggest contributor to the world economic growth
7
PPP Rank
2016 2030 2050
CountryGDP at PPP
(2016 US$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
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
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%
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
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$)
Foreign Direct Investment (FDI) Performance during 2013 – 2017
FDI still concentrated in Java Island
Singapore is Indonesia’s largest source of investment
Source: BKPM, 2018
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
Mining is the largest business sectors during 2013 – 2017,
however secondary sectors still dominated the FDI realization in
Indonesia
Sumatera, 15.30%
Kalimantan, 11.90%
Java, 54.70%
Sulawesi, 7.60%
Bali & Nusa Tenggara,
3.70%
Maluku, 1.20%
Papua, 5.70%
21
13
13
12
11
11
67
Mining
Chemical &Pharmaceutical Industry
Electricity, Gas & Water
Metal Industry
Automotive Industry &Transportation Equipment
Food Industry
Others
(in billion US$)
10
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
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
11
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
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
12
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
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
16 Economic Policy Packages to attract more investment have been issued since 2015
13
Government develops Online Single Submission (OSS) as integrated online system with data sharing
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
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
14
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
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
15
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
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
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
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
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
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
18
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
19
Indonesia’s online e-commerce will grow eightfold over 2017-2022
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
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 $20 billion in new retail revenue
1.6 billion parcels shipped
65 million citizens consuming via online commerce by 2022, compared with 20 million in 2017
Government and Companies can encourageIndonesia’s Online Commerce through:
Build a reliable logistic infrastructure to cater to the 1.6 billion parcels expected to ship per year.
Help MSMEs go online by creating a one-stop shop for merchant services that will be beneficial to entrepreneurs.
Source: McKinsey & Company, 2018
20
US$ 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
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
21
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
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
© 2018 by Indonesia Investment Coordinating Board. All rights reserved
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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Indonesia Investment Coordinating Board
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(BKPM)
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