Doing Business & Investment in Indonesia

Indonesia Weda Bay Industrial Park

• The Weda Bay Nickel project aims to recover
one of the largest nickel deposits in the world.

• Its measured, indicated, and inferred
resources are valued at more than 9.3 million
tons of nickel.

• In addition to facilitate metal refining
activities, the Weda Bay Industrial Area is
expected to be the center of downstream
processing facilities including nickel sulfate to
end products in the form of Li-ion batteries for
electric vehicles.

Increase in Investment of Nickel Downstream Facilities
Contribute to Increase in Export Revenue

Nickel Export Ban During 2014 – 2019 Has Significantly Contributed to Investment in Downstream Resource (> US$ 12 billion) and
Increase of Stainless Steel Export (from USD 1.1 billion in 2014 to USD 5.8 billion in 2018)

Stainless Steel Export 6.8

USD Bn 6 5.8

4 3.3

2 1.1 1.2 1.8
0.9
0.7

-

2012 2013 2014 2015 2016 2017 2018 Jan - Nov

2019

Stainless Steel Export up to November 2019 has reached USD 6.8 Bn, higher even compared to FY 2018 number

at USD 5.8Bn

Source: BPS via CEIC

Thank you







Image: techrevolution.asia

INVESTING IN INDONESIA

Manufacturing of Battery

Indonesia Investment Promotion Center (IIPC) New York
May 2020

Indonesia
Your investment destination

2

Indonesia at a glance

16th largest & growing 4th most populous Young and tech savvy
economy country population

• More than USD1 trillion of GDP • 272 million of population (2020) • 2 of 3 population are in working
and a member of G20 • 64 million of middle affluent class, age and the average age is 28 y.o.

• Stable economic growth of more 1.7x total population of Canada • 176 million, +17% of internet users
than 5% p.a. (2018) (2020)
• Gateway to 650 million of
• 7th largest economy in the world population in Southeast Asia, the • 64% of internet penetration (2020)
in 2030, estimated by McKinsey & world’s 3rd largest market • 160 million, +8% of active social
Company.
media users (2020)
• Politically stable and maturing • USD40 billion of digital economy
democracy
(2019), +28% (CAGR 2015-2025)

3

Located in the heart of global market concentration

Ottawa Indonesia’s global
Washington DC source of various
resources:
2018 SE Asia* Indonesia Jakarta
• #1: Geothermal &
Population (mn) 650 268 (41%) Southeast Asia* palm oil

GDP (Nominal, USD bn) 2,891 1,005 (35%) Half of world’s population • #2: Rubber & tin
are in this area • Top 10: Nickel,
Middle-income class (mn) 190 64 (34%)
coffee, cacao, tea
Workforce (mn) 285 131 (46%)
*) 10 countries in Southeast
Source: OECD, BCG, FT, ASEAN, IMF, 2018. Asia: Brunei, Cambodia, Laos,
Malaysia, Myanmar,
Indonesia, Phillippines,
Singapore, Thailand &
Vietnam

4

Strong GDP growth amid global uncertainty Indonesia’s GDP
growth in 2019
Indonesia’s GDP
+5.02%
compared to other countries

Manufacturing with the
highest growth in 2019

31% 20% Manufacturing Textiles +15.4%
Trade & repairs Paper +8.9%
Indonesia’s GDP Agriculture +8.5%
Construction Chemical & +8.4%
in 2019 by sector 13% Mining Pharma +7.8%
Transport & warehousing
6% 13% Others Furniture 5
7% 11%
Food &
beverages

Source: Indonesian Statistics Agency (BPS), 2020. World Bank, 2018.

Manufacturing: 5 focus sectors for Making Indonesia 4.0

Evaluated from 16 industries against impact, attractiveness, and feasibility of the 4th Industrial Revolution.

Aspiration Opportunities

• 30% market of Southeast Asia, largest in the region
• Abundant agricultural resources

• +9% consumption growth (2016-25 CAGR)
• Growing opportunities in functional clothing (sports

wear, functional underwear)

• Shift from 2W to 4W transportation
• Largest market & 2nd largest producer in SE Asia
• Industry shift to electric vehicles (EV)

• Global #5 in total agricultural production volume
• Largest domestic market in SE Asia, opportunities in

import substitution

• Largest domestic market in SE Asia
• Electronics products are key inputs for multiple

sectors under the 4th Industrial Revolution era

Source: Ministry of Industry RI, A.T. Kearney, 2018. 6

Growing automotive production & sales

Car production & sales in Indonesia (unit) Car production capacity
in Indonesia (thousand units)
1,600,000
1,400,000 1,343,714 1,151,291 530
1,200,000 728
1,000,000 2010 2011 2012 2013 2014 2015 2016 2017 2018
320
800,000
600,000
400,000
200,000

-

120 240 320

Production Sales

In 2018, Indonesia produced 1.34 million of cars (up +10.4%, y/y), Daihatsu Suzuki
264,553 of which were exported (up +14.4%, y/y) to Asia, the Middle Toyota Honda
East, Latin America & Africa, include Japan, UAE, Argentina, Peru etc. Mitsubishi Others

In 2017, Indonesia was the 18th largest car producer in the world, In 2018, car production capacity reached
below Thailand (12th) & above Malaysia (26th). 2.26 million units per year. Five largest
producers cover 68% or 1.53 million units.

Source: Gaikindo, 2019. OICA, 2018. 7

Next in automotive manufacture: Electric vehicles

8

Indonesia as a production base for export markets

EFTA Korea Japan Under negotiation
Iceland, • European Union
Liechtenstein, Hong Kong • RCEP (ASEAN +
Norway,
Switzerland China, Japan, India,

China Korea, Australia, NZ)
• Tunisia
India • Morocco

Mozambique Indonesia

ASEAN* Malaysia, Australia Chile
Brunei, Philippines, New Zealand
Cambodia, Singapore,
Indonesia, Thailand,
Laos, Vietnam
Myanmar,

*)Association of Southeast Asian Nations (ASEAN). 9
Source: Ministry of Trade RI & UNCTAD, 2019.

Improving
Investment Climate

10

Progressive achievements in the last few years

The Wold Bank’s 46 China Improved areas
Ease of Doing Business
69 Vietnam 1. Starting a business
#73 (2019) 2. Getting electricity
73 Indonesia 3. Registering property
 4. Getting credit
77 India 5. Protecting minority investors
47 6. Paying taxes
7. Trading across borders

109 Brazil Key improvements

124 Philippines 1. In the last 4 years, Indonesia has
improved 47 position/rank.
2012 2013 2014 2015 2016 2017 2018 2019 2019: #73
2018: #72 2. Reducing the number of procedure
2017: #91 in obtaining license and transforming
2016: #106 into online based licensing services.
2015: #120
3. Reducing overlaping regulation and
implementing integrated risk
management.

11

Investment Grade status from rating agencies

In 2017, for the first time since the Asian financial BBB / Stable
crisis (1997), Indonesia’s sovereign bonds are BBB / Stable
rated investment grade by all major credit Baa2 / Stable
ratings agencies. BBB+ / Stable
BBB+ / Stable
Source: Bank Indonesia, 2020.
12

Open policies for international investments

• Most business fields are open for 100% • Established in the form of limited liability
foreign ownership company (PT)

Business fields (for FDI and DDI) refers to the “negative Other permitted forms include Foreign Representative
investment list”. The revised Presidential Regulation No.44/ Offices (general trading, O&G, construction services),
2016 on investment opened more business fields for FDI. Foundation, and Permanent Establishment (PE)

• Minimum FDI of IDR10 billion • Allowed to employ expatriate(s)

Equal to USD700,000, with minimum paid-up capital of • Guarantee of no expropriation
IDR2.5 billion (USD175,000) for PT (note: USD1 = IDR 14,500)
• Guarantee to freely transfer and repatriate
• FDI and DDI obtain investment licenses
from One-Stop Services (PTSP) Capital/shares, dividend, interest, royalty, and (branch)
profit; subject to With Holding Tax (WHT)
Through Online Single Submission (OSS) system
• Must consider Corporate Social
Responsibility (CSR), respect local culture
and preserve environment

Source: Law No.25/2007, BKPM Regulation No.6/2018 & No.7/2018, Government Regulation No.24/2018 13

Continuous reforms… Jan 2015 Jan 2016
One-Stop 3-hour
July 2018 Service
Online Service
Single
Investment
Submission Policy

Reforms

April 2018 April 2016
Expansion Relaxation
of Invest-
of Tax ment List
Incentives

14

TAX HOLIDAY

(MoF Regulation No.150/PMK.010/2018 & BKPM Regulation No.8/2019)

5-20 years of tax exemption* *) Depends on investment value, started at IDR100bn (US$7.2mn)
+2 years of tax reduction

In-advance confirmation 10. Manuf. of robotic components
from BKPM when companies 11. Manuf. of main components for electrical power gen. engines
register their investment 12. Manuf. of vehicle and main components for vehicle,

18 eligible pioneer sectors: including: Battery industry for two, three, four-wheeled or more
electric motorized vehicles (KBLI: 29300A & 30912A)
1. Upstream base metal industry 13. Manuf. of main components for ships
2. Oil and gas purification and or refinery industry 14. Manuf. of main components for trains
3. Petrochemical industry 15. Manuf. of main components for aircraft
4. Inorganic base chemical industry 16. Agri, plantation or forestry-based industries producing pulp
5. Organic base chemical industry 17. Economic infrastructures
6. Pharmaceutical raw material industry 18. Digital economy
7. Manuf. of irradiation equip., electro medical/therapy
8. Manuf. of electronic & telematics device’s main 15

components, including: Battery industry (KBLI: 27201A)
9. Manuf. of main components for engines

TAX ALLOWANCE

(Government Regulation No.78/2019)

30 % of investment value Eligible business fields include:
reduction of net income tax
for 6 years, 5% each year. • Agriculture: Agriculture, teak forestry, fishery.

166+eligible business fields • Energy and natural resources: Power
Under general requirements: investment value or
export orientation, manpower absorption, local generation, geothermal, waste to energy,
content, and project location. downstream oil and gas, coal and lignite mining,
metal ore mining.
Accelerated depreciation and amortization
• Manufacturing industries: Including battery
on tangible assets or intangible assets.
industry with investment value < IDR100 billion
(investment > IDR100 billion is eligible for tax
holiday).

Income tax on dividend at 10% • Services: Reparation, machinery installation.

or applicable lower tax treaty rate. • Others: Urban transport, warehousing, clean

Extension of loss carry forward period water purification, computer programming, real
estate.
from 5 years up to 10 years.

16

SUPER TAX DEDUCTION

(Government Regulation No.45/2019)

New major tax deductions aimed at boosting investment, research and development as well as
the participation of businesses in improving Indonesia’s human resources, issued on June 25, 2019.

Reduction of Reduction of Reduction of
gross income net income tax gross income

subject to income tax up to 60% subject to income tax up to

200% of total investment 300%
(new business or expansion)
of the cost of of the cost of
in fixed assets for
educational activities R&D activities
labor-intensive industries
(on-field work practices 17
& internships)

IMPORT DUTY FACILITY ADDITIONAL INCENTIVES
IN FREE TRADE ZONES

(MoF Regulation No.176/PMK.011/2009) (Government Regulation No.1/2000)

Machines, goods, Exemption
materials for production
1. Import duties,
2 years import duty exemption or 2. Value added tax (VAT),
4 years for companies using locally- 3. Sales tax on luxury goods,
4. Excise.
produced machines (min.30%).
FTZs Batam, Bintan and Karimun are located
Industries in Malacca Strait, a global main shipping route
with >60,000 ships per year.
Which produces goods
and/or services, including: The FTZs include seaports, airports, industrial
zones and one-stop service for investment.
1.Tourism and culture
2.Public transportation
3.Public health services
4.Mining
5.Construction
6.Telecommunication
7.Port

Map of Batam, Bintan 18
and Karimun with

Singapore and Malaysia.

Additional state budget to manage Covid-19 impacts

⚫ Healthcare (IDR75 tn) 27% ⚫ Social Protection

• Medical equipment: PPE, rapid test 19% (IDR110 tn)
& Reagen test.
• Family Hope Program (PKH) &
• Healthcare facilities. staple food program for 30 poor
• Incentives for medical workers: families.

Doctors & nurses. • Preemployment Card Program for
5.6 million laid-off workers,
⚫ Supports for industries 17% IDR405.1 tn informal workers & micro/small
(US$24.6 bn) business.
(IDR70.1 tn)
37% • Free electricity for 31 million
• Income tax exemption for 6 customers using 450 & 900 kVA.
months for workers in
manufacturing sectors with income ⚫ Economic Recovery
<IDR200 mn/year. Program (IDR150 tn)

• Delay of import tax by 6 months in Credit restructuring & financing for
19 manufacturing sectors. small & medium businesses, among
other businesses.
• Delay of debt payments by 6
months for micro loan credit for
affected businesses.

Source: Coordinating Ministry for Economic Affairs RI, 2020. 19

Indonesia’s tax incentives to respond Covid-19

Reduction of corporate income tax (CIT)

Company Before 2020 2021 2022 onwards

Non-listed 25% 22% 22% 20%
Listed (in IDX) 22% 19% 19% 17%

Other business tax Personal tax Non-tax stimulus

• 30% reduction of CIT instalments; • Employee income tax will be • Reduction of Prohibition and
Restriction for export & import
• Import tax exemptions (non-final borne by the government for activities for certain products;

withholding tax relief); Apr-Sep 2020, & is available for: • Export and import process
acceleration for Reputable
• Advance VAT refunds of up to IDR5 o Companies in 440 business lines Traders;
bn (USD330k) (without automatic tax (predominantly manufacturing);
audit); and/or • Export and import process
acceleration through National
For Apr-Sep 2020 are available for: o Export oriented companies (KITE Logistic Ecosystem.
status); and
o Companies in 102 business lines in
manufacturing sector; and/or o Any employees whose regular
income <IDR200 million
o Export-oriented companies (KITE status). (USD13k) per year.

Source: Coordinating Ministry for Economic Affairs RI compiled by Ernst&Young, 2020. 20

15 SEZs: Open to 100% foreign ownership,
more tax incentives, facilities & ease of permits

SEZs: Special Economic Zones. Source: SEZ National Council, 2020. 21

85+ industrial estates Indonesia
across the archipelago
22
Source: Indonesian Industrial Estates Association (HKI), 2019.

>130 million of more educated workforce

Higher school participation rate, competitive & predictable wages

School participation by age (%) Provincial min. wage 2020: US$112-274 /month*

97.6 Provincial minimum wage growth in Indonesia is determined by a formula that
99.2 was set in Government Regulation No. 78/2015.
88.0
95.5 Minimum Wage New Year = (Minimum Wage Old Year x {Annual National
58.0 Inflation Rate + Annual National GDP Growth Rate})
72.4
14.8
25.2

7-12 13-15 16-18 19-24 Riau East Kalimantan Central Sulawesi
2011 2019 US$186/month US$192/month

Jakarta US$148/month Papua
US$274/month East Java US$226/month

Central Java US$114/month

US$112/month

Source: Indonesian Statistics Agency (BPS), 2020 23
Letter of Minister of Manpower No.B-M/308/HI.01.00/2019. Based on Bank Indonesia exchange rate US$1 = IDR15,600 (April 21, 2020)

Paradigm shift:

Investment licenses in advance with online single submission

Source: Coordinating Ministry for
Economic Affairs, based on
Government Regulation No.24/2018

Three simple phases

1. Notary and AHU Online (online system by Ministry of Law & Human Rights) to establish limited liability company (PT);
2. Online Single Submission (OSS) system to obtain investment licenses (in advance) and facilities;
3. Ministry/Agency/PTSP (One-Stop-Service) to fulfill commitments for investment licenses and facilities.

24

investindonesia

.go.id

Indonesia Investment
Promotion Center in New York

370 Lexington Ave Suite 1903
New York, NY 10017
T: +1 (646) 885 6600

Muchammad Iqbal

Director, [email protected]

Angga Hafiiz

Deputy Director, [email protected]

25

The end-to-end service for investors

Who we are

The Indonesia Investment Coordinating
Board or Badan Koordinasi Penanaman
Modal (BKPM) is the primary interface between
business and government in Indonesia. BKPM
aims to facilitate direct investments and to
create a conducive investment climate.

Investment Investment Investment BKPM develops strategies to improve an end-
Interest Permit Realization to-end service for investors. Our team will
assist investors from exploring business
opportunities in Indonesia, obtaining
investment licenses and incentives, carrying out
construction stage, to finishing commercial
operation stage.

As a government body who works closely with
business associations and investors, BKPM
continuously encourages Indonesian govern-
ment to keep updating pro investment policies.

26

Investment services at your door

Indonesia Investment Our services • Data and information on • Consultations
Promotion Center (IIPC) • One-on-one meetings
New York investing in Indonesia • Business forums
• Letter of Reference to
IIPCs are the arms of BKPM (HQ in • Contacts in Indonesia:
Jakarta), located in eight major establish Representative
business hubs around the world. governments, business Office in Indonesia
associations, companies,
Under coordination of Indonesian financial institutions…
Embassies and Consulate Generals,
IIPCs provide services for international
investors and “bring” Indonesia closer
to your business.

Established in 2004, IIPC New York’s
services cover all countries in the
Americas: from Canada, the US, to
Chile.

27







Moving Towards Industry 4.0:

The Rise of Indonesian Electric Car

NGURAH SWAJAYA

DIRECTOR GENERAL AMERICA AND EUROPE

Indonesia’s Commitment to Paris
Agreement

Indonesia’s tranformation and
readiness to become a part of World

Supply Chain

Road Map Towards “Making Indonesia 4.0”

Food and Drinks Textile and Automotive Chemical Electronics
Clothing

Electric Vehicle

Indonesia is the second biggest automotive exporter in ASEAN
Target: To be the biggest automotive producer in ASEAN

Integrated Industrial Area

Economic Incentive and
Tax Breaks

Indonesia’s Strategy

Road Map Strategy Automotive 4.0:

Presidential Regulation 55/2019

Giving incentives, providing infrastructures, and protection for the
environment while ensuring the growth of Electric Vehicle industry in

Indonesia

How Indonesia Develops the Infrastructure and
Increases The Quality of Its Human Resources

Indonesia is blessed with abundant natural resources
Investment: US$ 700 million
Expected Revenue: US$ 800 million/year
Due to the abundance of natural resources, Indonesia will be able to supply
ample raw materials for grand scale battery lithium production

Industrial Area Weda Bay, Industrial Area Morowali,
Maluku Central Sulawesi

Nickel Production Capacity 100 ribu tons/year Nickel Production Capacity 120 ribu tons/year

US’ EV Industry Characteristics

Aggressive Investment, both Superior in Technology Big Market
domestic and abroad

Domestic Long-hours battery up to 600 miles, Sales:
cutting-edge software, seamless
Ford ($300b), GM ($900b) connectivity, zero emissions 158k unit (2016) ke 329k unit (2019)

Abroad (China) Proyeksi market share:

Tesla ($5b), Ford ($4,9b), GM ($20b) 2% di 2019 ke 6% di 2025

US’ Needs for Imported Materials Increased

Including for Car Spare Parts from China

2016 2018

China had 3.9% shares in China’s shares grew to 13%
US’ Spare Parts Market ($15b)

$44 million for Lithium Battery
or 11% of US’ market share

What we have: It’s Given that Indonesia
Should be Able to Attract
• Capable Human Resources More US’ Investments
• Huge Market Potential
• Rule of Law
• Economic Incentives
• Abundance of Nickel

MINISTRY OF FOREIGN AFFAIRS OF THE REPUBLIC OF INDONESIA

Thank you

Directorate General of America and Europe

Jl. Taman Pejambon No. 6, Jakarta Pusat 10110
Telp. (021) 3812778 Fax. (021) 3813142
@infoamerop



www.indonesia-chicago.org

Further Questions or Business Inquires:

Economic Affairs at Indonesian Consulate General
Call us: +1.312.920.1880 or E-mail us: [email protected]