Ministry of National Development Planning/ National Development Planning Agency (BAPPENAS Republic of Indonesia EDCF 30 th Anniversary and KSP Dissemination Conference Indonesia Investment Profile and Infrastructure Investment Policy - Director of Bilateral Foreign Funding - Seoul, 5 September 2017
2 Investment Profile and ClimatePolicy
3 Why should we invest in Indonesia? Indonesia is a big market, which is prospective to invest in... 16 th Largest economy in the world Top 5 Emerging markets with the best middle class potential 4 th Most populous country in the world ±5% Private consumption grows steadily Indonesia s economic growth is relatively high and stable with improving GDP per capita Indonesian Economic Growth (%) 5,01 5,02 4,88 Source: BPS *Outlook 5,20 2014 2015 2016 2017* GDP per capita (USD) 3605 3374 2015 2016 Infrastructure Development is progressive 4 th Indonesia is projected to be the largest Economy in the World in 2050 (World in 2050, PWC)
4 Investment Facts of Indonesia Top 4 Prospective host economy to invest (UNCTAD, 2017) Indonesia obtains investment grade from rating agencies Baa3 / Positive BBB- / Positive BBB- / Stable BBB- / Positive Top 3 Destination for attracting investors in Asia (the Economist) BBB- / Positive Top 3 Japanese investment destination (JBIC ratings) Abundant natural resources Rank* 91 Jump from rank 109 in 2015 for Ease of Doing Business (EoDB, World Bank) *Note: the top three reforms to ease doing business are: (i) starting a business, (ii) getting electricity, and (iii) paying taxes 65% of investment realization in Indonesia are foreign direct investment
EODB Ranking Per Indicator 2016 2017 106 Indicator 91 INDONESIA AS ONE OF TOP REFORMER EODB 2017 1 Starting a Business 167 151 Significant improvements: 2 3 4 5 6 7 8 9 10 Dealing with Construction Permits Registering Property Getting Electricity Paying Taxes Getting Credit Protecting Minority Investors Trading Across Borders Enforcing Contracts Resolving Insolvency 113 123 61 115 70 69 113 171 74 116 118 49 104 62 70 108 166 76 1. Minimum Capital shall be paid in accordance with the agreement of the parties 2. Reduced time and cost to get electrical connection 3. Utilization of GIS system 4. Easy access to credit through registration of modern collateral 5. Online payment of taxes 6. The ease of Export and Import through the improvement of customs services and the filing of documents (PEB and PIB) 7. The existence of a simple lawsuit procedure in a commercial court Need siginificant reformation 5
The amount of investment needed to support growth 6 Investment need 23,4% Compared to 2016 5221.8 5332.7 Priority sectors to support growth Rp Trillion 4254,6 4708.3 4721.8 INDUSTRY 2016 2017 2018 Investment Necessary Share (%) AGRICULTURE Government Investment 8,4 SOE investment 12,7 Private Sector: 78,9 TOURISM - FDI & DDI 15,2 - Others 63,7
Friendly Policies and Regulations on Investment: Economic Policy Packages to Improve Indonesia Competitiveness 7 Stimulus Package I: 9 Sep 2015 Boost the competitiveness of national industry Accelerate Strategic National Pojects Boost Low Income Housing Stimulus Package II: 29 Sep 2015 3 Hours Investment Service Tax Incentives Integrated Logistiscs Facilities Stimulus Package III: 7 Oct 2015 Lower Fuel And Electricity Prices Land Permit Simplification for Investment Activities Broadening of Small Business Credit Recipients Stimulus Package IV: 15 Oct 2015 Ease and Affordability of Small Business Credit Increasing Welfare of Workers Stimulus Package V: 23 Oct 2015 Lower Assets RevaluationTax Eliminating Double Taxation for real estates, property, and infrastructure Stimulus Package VI: 5 Nov 2015 Propel Rural Economies through Development in Special Economic Zones (SEZs) Sustainable and Equitable Water Supply to the community Simplifying Import Licensing for Pharmaceutical Stimulus Package VII: 4 Dec 2015 Acceleration of Land Certification Tax Incentive for Labor Intensive Industry Stimulus Package VIII: 21 Dec 2015 One Map Policy Refinery Construction Incentive for Aircraft Maintanance Companies Stimulus Package IX: 5 Nov 2015 Acceleration of Electricity Infrastructure Development Meat Price Stabilization Meat Improvement of Logistics Sector Stimulus Package X: 11 Feb 2016 Easing of Investment Restrictions Stimulus Package XI: 29 Mar 2016 Export-oriented People s Business Credit (KURBE) Real Estate Investment Trust (REITs) Risk Management for Expediting Flows of Goods in Ports (Indonesia Single Risk Management/ISRM Further Development of the Pharmaceutical and Medical Equipments Industries Stimulus Package XII: 28 April 2016 Simplification of Licensing, Procedures, Duration, and Cost of Starting Business in Indonesia Stimulus Package XIII: 24 August 2016 Housing for Low Income Communities Issuing Government Regulation (PP) to simplify the number and timing of licensing needed to build a house for low income communities Stimulus Package IV: 11 Nov 2016 E-commerce Road Map Facilitating e-commerce start-up in doing business Related directly to investment
Friendly Policies and Regulations on Investment: One stop services for investment licensing process 8 22 Ministries/ Agencies KLIK: Direct Constructions All sectors: 167 permits delegated to BKPM Permits for industry, electricity, oil and gas, tourism are all in one place One-Stop Service (PTSP) 3 hours services 61% Regional PTSP implement e- licensing 91% Regional PTSP formed Source : BKPM
Friendly Policies and Regulations on Investment: Priority Investment Service 9 Priority Investment Service Direct Construction (KLIK) Investors can directly start their project construction before obtaining construction permits. This service is supported by both Central and Regional Governments. KLIK also as the first step to synergize between central and local licensing. No Requirements No minimum investments or workers is required. Available for selected industrial parks. Construction permits can be obtained in parallel with construction process. Source: BKPM Obtain investment licence at One-stop Integrated Service (PTSP) at national or regional level. Survey a land within selected industrial parks. Acquire the land for your industry. Start the construction of your project. No other permits are required. Apply for building construction permit & environmental permit, in parallel with construction process.
Friendly Policies and Regulations on Investment: Government incentives for investment TAX HOLIDAY TAX ALLOWANCE IMPORT DUTY FACILITY MoF Regulation No.159/PMK.010/2015 5-15 years tax exemption With potential 20years exemption for Projects that are considered as strategic projects for Indonesia economy. Up to 100% reduction on tax 9 eligible pioneer industries : 1. Basic metal industries; 2. Oil refinery industries and/or basic organic chemicals; 3. Machinery industries; 4. Industries of renewable resources; 5. Communication devices industries. 6. Agricultural processing 7. Marine transportation 8. Manufacturing industry in SEZ 9. Economic infrastructures IDR 1 trilion minimum investment plan (USD 100 million) Government Regulation No.9/2016 30 % of investment value Reducton of corporate net income tax for 6 years, 5% each year. 145 business segments eligible for tax allowance, expanded from 129 segments in the previous regulation. Under certain requirements among others investment value or export orientation, menpower absorption,local content, and Project location, particularly outside Java Island. MoF Regulation No.176/PMK.011/2009 Machines, goods, materials for production 2 years import duty exemption or 4 years for companies using locallyproduced machines (min 30%) Industries Which produces goods and/or services, including : 1. Tourism and culture 2. Public transportation 3. Public health services 4. Mining 5. Construction 6. Telecommunication 7. Port 10
Friendly Policies and Regulations on Investment: Amendment Negative Investment List (Presidential Decree 44/ 2016) 100% Open for FDI Distributors that Affiliate in Production 67% Foreigners for distributors who don't affiliate in production 100% Open for FDI Raw Materials for Pharmacy Previously, 85% opened for foreigners 100% Open for FDI E-Commerce Partnership with SMEs Previously, it's closed for foreigners 100% Open for FDI Marketplace With minimal Rp 100 billion (USD 8 million) investment. 49% open for foreigners < Rp 100 billion investment 100% Open for FDI Movie Industry Production, Post Production, Distribution, Projection 67% Open for FDI Infrastructure Transportation& Support Services Including cargo handling, air transportation, lease 100% Open for FDI Tourisms Sport Center, restaurant, bar, cafe Source: BKPM 11
Rp Trilion Improving Investment Realization (2017 Q2) 12 700,0 600,0 500,0 400,0 300,0 200,0 100,0 0,0 2010 2011 2012 2013 2014 2015 2016 2017 Total 208,5 251,3 313,2 398,6 463,1 545,4 612,8 336,7 DDI 60,6 76,0 92,2 128,2 156,1 179,4 216,2 129,8 FDI 148,0 175,3 221,0 270,4 307,0 366,0 396,6 206,9 Indonesia s Investment in 2005-2017 1st semester fluctuates with positive trend. In 2017 1st semester, total investment increase by 12.9% compared to 2016 1st semester. FDI still dominates the investment in Indonesia. Note: 2017 is until Q2 Source: BKPM
13 Infrastructure Investment Policy
14 Strategy on Infrastructure Development 2015-2019 Fulfillment of Basic Needs 100% Drinking Water access Connectivity Maritime Highway + Infrastructure to support Leading Sectors Intermodal Leading Sector Urban Transport Development of Road,Rail Based Mass Transport System & Intermodal 100% sanitation access Regional Development/ Growth Center Marine Highway Regional Development/ Growth Center Agricultural Improve the capacity and quality of the urban road network Urban Transport Development Concept 96.6% electrification ratio Avoid Shift Improve Livable housing access Border & underdeveloped regions accessibility Transportatio n Safety & Security Developed Area Intermodal Port Area Intermodal Broadband Development: e-government, e-health, e-education, e-logistic, e-commerce, Under- Developed Area Energy Development: 35 GW Target 1.200 kwh/kap. in 2019 ( current facts: Vietnam 1.300 kwh/kap, Malaysia 4.400 kwh/kap.) Manufacturing Service and Tourism Network to Support Efficiency Journey Increased share of Public Transport Develop sustainable urban transport Increased utilization Technology Transportation Institutional integration Transportation Institutional integration
Connectivity Infrastructures: to Support Integrated Regional Development MALAHAYATI BELAWAN/ KUALA TANJUNG BATAM JAMBI PONTIANAK SAMPIT KARIANGAU BALIKPAPAN BANJARMASIN PALARAN SAMARINDA PANTOLOAN KENDARI BITUNG TERNATE AMBON JAYAPURA SORONG TELUK BAYUR PALEMBANG PANJANG TANJUNG PRIOK MAKASAR TANJUNG EMAS /SEMARANG TANJUNG PERAK TENAU KUPANG HUB PORT FEEDER PORT MARINE HIGHWAY HUB ROUTE MARINE HIGHWAY FEEDER ROUTE RAILWAY DEVELOPMENT TOLL ROAD DEVELOPMENT 15
Regional Priorities Development Areas IP SEI MANGKE IP BITUNG SEZ MOROTAI IP MANDOR SEZ MBTK NSTR DANAU TOBA IP KETAPANG IP MOROWALI SEZ SORONG SEZ TJ. KELAYANG IP BINTUNI IP TRANGGAMUS IP BATU LICIN IP BANTAENG NSTR: National Strategic Tourism Region NSTR BOROBUDUR NSTR MANDALIKA SEZ: Special Economic Zone HUB PORT MARINE HIGHWAY HUB ROUTE IP: Industrial Park FEEDER PORT MARINE HIGHWAY FEEDER ROUTE RAILWAY DEVELOPMENT TOLL ROAD DEVELOPMENT 16
Financing Infrastructure Development (2015-2019) Increasing the significant role of SOE & Private Sector Investment Value (The Sources) Public Investment: Provision of Public Facilities Total Value of Investment Required in Infrastructure * 2015-2019: USD 359.2 Bn (IDR 4,796.2 Tn) Government Budget: USD 148.2 Bn (41,3%) SOE : USD 79.8 Bn (22,2%) Private Participation: USD 131.1 Bn (36,5%) Category Definition Example Source of Funding low Social Investment Investment that does not possess direct investment feedback to the object. Social Security Education Security Health Security Government funding (APBN & APBD) Availability Payment School Health Correctional facility IRR Weighted Average Cost of Capital (WACC) Special Commercial Investment PPP Investment with yields under eligibility standars so it needs partly investment reduction from the Government s social investment. Private funding User Fee Toll Roads Seaports Airports Government funding + commercial funding Investment with yields meeting investment eligibility standars but seen as less attractive or risky as government intervention is needed. Toll road Ports Commercial funding promoted by the government Investment with attractive yields as role of government is reduced for regulating and promoting. Electricity Airports Gas pipe Commercial funding high General Commercial Investment Source: BAPPENAS Internal Analysis *) 1 : Calculation based on infrastructure investment (required) to be a middle income country by 2025. Source: Bappenas- JICA, 2014: Background Study for RPJMN 2015-2019, Analyst team of Kementerian PPN/Bappenas RPJMN: National Mid-term Development Planning Non-State Budget Investment Financing ( PINA ) For Projects with IRR > 13 % 17
PPP Joint Office: Coordination among 6 Ministries/Agencies + 1 Corporation 18 1 Publication BKPM, Co.PIC, PT PII (IIGF) 9 Monitoring & Evaluation PT PII (IIGF) 2 Socialization&Publication Bappenas, Ministry of Home Affairs, PT PII (IIGF) PPP Joint Office 8 Debottlenecking & Coordination PSN/PPN: KPPIP Non-PSN/PPN: Deputy 6 CMOE 3 Capacity Building 7 Transaction Assistency LKPP 4 Preliminary Study Facilitation Bappenas 5 OBC Facilitation Bappenas, Coordinating Ministry of Economy, BKPM 6 FBC Facilitation PDPPI (supported by PPP Office)
PPP Joint Office: To Ensure Government Support Delivers to Eligible Projects 19 Coordination PPP Acceleration PPP Joint Office Facilitation Capacity Building PPP Office Republic of Indonesia PT Penjaminan Infrastruktur Indonesia (Persero) / IIGF Capital Place, 7th & 8th Floor Jl. Jendral Gatot Subroto Kav. 18, Jakarta 12710 - Indonesia Government Support on PPP: 1. Viability Gap Funding (VGF); 2. Availability Payment; 3. Government Guarantee; 4. Project Development Fund (PDF) Currently PPP projects will focus on several sectors: Toll Road, Power and Energy, Information and Telecommunication, Waste Management and Sanitation, Transportation, and Social, with total investment Rp 278.8 Trillion (eq. USD 21 Billion)
20 PPP SCHEME IN INDONESIA Indonesia s Government has successfully implemented 6 schemes as benchmarks for future PPP projects 1 2 3 4 5 6 PPP with Government Guarantee Coal fired Power Plant Central Java 2x 1000 MW (investment US$ 3,900.0 million) PPP with Tariff and Viability Gap Fund (VGF) Umbulan Drinking-Water Facility (investment US$ 157.8 million) PPP with Availability Payment (AP) for Investment Return Palapa Ring Optic-Fiber Network (investment US$ 583.4 million) PPP with Government in-kind (Construction Support) Toll Road Solo Kertosono (US$ 578.8 million) Toll Road Cisumdawu (US$ 1,050.0 million) Toll Road Balikpapan Samarinda (US$ 1,120.0 million) Toll Road Manado Bitung (US$ 654.1 million) PPP with Success Fee Mechanism for Preparation Phase Coal fired Power Plant Central Java 2x 1000 MW (investment US$ 3,900.0 million) Unsolicited PPP Project Toll Road Jakarta Cikampek II Elevated (investment US$ 1,050.0 million) Toll Road Krian-Legundi-Bunder-Manyar (investment US$ 691.4 million) Total: US$ 3,402.9 mio Total: US$ 1,741.4 mio
Non-Government Budget Investment Financing ( PINA ) Potential of capital gain at investment recycle stage The First PINA Project in connectivity 15 Toll Road with CAPEX: Rp. 70 Trillion (eq. USD 5.25 Billion) Equity from PT. Taspen Rp. 2 T (eq. USD 150 Million) and PT SMI Rp. 1.5T (eq. 115 Million) Source: Bappenas-PINA Facilitation Center Analysis PINA Facilitation Center at BAPPENAS Office Jl. Taman Suropati No.2, Menteng, Indonesia Tel: +62 21 3903916 21
22 Non-Government Budget Investment Financing ( PINA ) aims to Increase Development Funding Capacity by: o Mobilizing long-term funds potential o Promoting investment recycle for brown field projects o Leveraging development modality capacity with relay financing instruments in each phase of development o PINA Implementation applies international best practice OECD good governance guideline which based on transparency, accountability, responsible, integrity and fair PINA Project Criteria Support on achieving development priority target Economical and social benefit to community Commercially viable Fulfill readiness criteria
23 Welcome to Seoul, 20 21 September 2017
24 - THANK YOU - Director of Bilateral External Funding Ministry of National Development Planning /BAPPENAS Republic of Indonesia kariadi@bappenas.go.id