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Enhancing investment's Access to Indonesian Market Pharmaceutical - Cosmetic Sector Meeting Indonesia Investment Coordinating Board- 2014

Jakarta, 19 November 2014

The Investment Coordinating Board of the Republic of Indonesia

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Why Invest in Indonesia? APEC 2014 Survey on Business investment

According to the PwC 2014, 57% business leader will increase their investment in Indonesia over the next 12 months.

(635 CEOs)


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Investment Realization in Pharmaceutical and Cosmetics Industry (2010-Q3/2014)

2010 2011 2012 2013 Q3 - 2014 2010 2011 2012 2013 Q3 - 2014

Pharmaceutical Cosmetics

DDI 0.0 24.5 35.6 64.8 9.2 0.3 14.8 21.7 21.1 4.4

FDI 13.1 44.3 56.8 124.9 99.6 4.9 75.4 2.7 19.1 22.2

0.0

50.0

100.0

150.0

200.0PHARMACEUTICAL

13.1

In m

illio

n U

S$

68.8

92.5

189.7

108.9

5.2

90.2

24.4 40.2

26.6

During the last 5 years: Pharmaceutical • (FDI Growing) • Total: US$ 472.9 million

(45.8%) on the pipeline US$ 560 million (54.2%)

Cosmetics • (FDI Growing) • Total US$ 186.4 million

(23%) on the pipeline US$ 622.5 million (73%)

Source: BKPM, 2014

COSMETICS

Pharmaceutical

Investment destination 95% in West Java and

East Java

Cosmetics

Investment destination 65% in West Java and

East Java


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Major Foreign Direct Investment Profiles for Pharmaceutical and Cosmetic Industry

Notes: The three largest pharmaceutical investment is from Japan, Germany and USA. EU Investment: US$ 45.6 million (13.4% of FDI)

No Country Number of

Projects

Realization 2010 – Q3 2014 (in US$ million)

Destination

1 Japan 19 126.4 East Java and West Java

2 Germany 7 30.1 West Java and Jakarta

3 USA 4 23.5 East Java and Jakarta

4 Hong Kong 7 16.1 West Java, Central Java

5 Spain 1 10.5 Central Java

6 Singapore 9 8.1 Central Java and West Java

7 Netherland 1 5.0 West Java

8 South Korea 9 3.4 West Java, Banten, and East Java

Pharmaceutical

Cosmetics

No Country Number of

Projects

Realization 2010 – Q3 2014 (in US$ million)

Destination

1 Netherland 7 28.9 East Java, Jakarta, and Yogyakarta

2 Japan 17 22.2 West Java and East Java

3 Germany 4 6.7 West Java and East Java

4 British Virgin Island 2 4.9 Banten

5 United Kingdom 4 4.8 Banten

6 South Korea 15 3.9 Jakarta, Banten, West Java, East Java, Central Java

7 Singapore 8 2.3 North Sumatera, Banten, West Java

8 Nepal 1 1.4 Riau

Source: BKPM, 2014

Notes: The Two largest cosmetic investment is from Netherland and Japan. EU Investment: US$ 40.4 million (32.5% of FDI)


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Why Indonesia Needs Investment in Pharmaceutical and Cosmetic Sector

High Importation on Pharmaceutical and Cosmetic products During the last five years, the trade balance is

always in deficit (on average of USD 174.6 million per year)

In 2013, import value was reached USD 1.1 billion

Raw material: 95% supplied by Import from China (60%), India (20%), Europe, and United States

Trade Balance of Pharmaceutical and Cosmetic Product 2010 – August 2014 (USD mio)

Increasing on Indonesia healthcare expenditure in coming years Indonesia healthcare expenditure is increasing with 13.9% per year, and it will be ever increasing with the existence of government programs such as Indonesia’s Healthcare Card program, and National Healthcare Insurance, etc

.

Source: BPS, 2014


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Pharmaceuticals and Cosmetic Regulatory: Foreign Ownership

1. PHARMACEUTICAL INDUSTRY

Open For Foreign Direct Investment (FDI)

Manufacture of Medical Equipment: Maximum foreign ownership is 100%

Manufacture of pharmaceutical / drug raw materials and medical products : maximum foreign ownership is 85%

Special licenses/permits from Minister of Health

Manufacturers of pharmaceutical’s narcotics

Wholesale of pharmaceutical’s narcotics

100% domestic capital

Wholesale of pharmaceuticals and pharmaceutical raw materials

Pharmacys/Apotek (Drugstore/Professional Practices of Pharmacies)

Processing of traditional medicines

Manufacture of traditional medicines

2. COSMETIC INDUSTRY

Manufacture of cosmetic : maximum foreign ownership is 100%

Retail of cosmetic : 100% domestic capital

Note: Based on Presidential Decree No. 39 Year 2014 Regarding List Of Business Lines With Its Investment Requirements/Negative Investment List (April 2014)


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TAX ALLOWANCE

REGIONAL GOVERNMENT

INCENTIVES

Investment Fiscal Incentives

1. Reduction of net income for 30% from total amount of investment, charged in 6 year with each 5% per year.

2. Depreciation and amortization accelerated to fixed intangible assets (building and non-building)

3. Income Tax on dividends paid to foreign tax subject to 10% or a lower rate according to double taxation avoidance agreement

4. Compensation for losses of more than 5 years but not more than 10 years.

5. Tariff reduction on Income Tax

The tax allowance will be eligible for 129 business fields, including Pharmaceutical Raw Material, Cosmetic Raw Material And Cosmetic Industry (For 2 Business Fields)

IMPORT DUTY FACILITY

1. Exemption of import duty on machinery, goods and materials for business activities in the field of: Industries that produce goods and/or Industries that produce services (Public Health Services)

Import duty exemption is given as long as:

1. Not yet produced domestically

2. Produced in the country but do not meet the required specifications, or

3. Have been produced within the country but not yet sufficient for industry needs.

Provide incentives :

Reduction or exemption on local tax ;

Reduction or exemption on local retributions;

Providing stimulus funds and/or

Providing capital aid.

Provide ease for investment:

Providing data and information on investment opportunities;

Providing facilities and infrastructure;

Providing land or the location, technical assistance; and/or

Expedite the licensing process.


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Pharmaceutical and Cosmetic’s business fields that are eligible for Tax Allowance incentive

NO BUSINESS FIELD KBLI SCOPE OF PRODUCT CRITERIA

1

PHARMACEUTICAL INDUSTRY, CHEMICAL DRUG PRODUCT AND TRADITIONAL DRUG Pharmaceutical Raw Material (Ingredients) Industry

21011

Statin derivate compound, para amino phenol, sephalosphorin, rifamphisin, chloramphenicol and its derivatives, amoxixiline, amphiciline, vitamin a, vitamin b, vitamin c, pharmaceutical raw materials obtained by biotechnology process, paracetamol, pseudoephedrine, lactose, pholate acid, acetosale, anaesthesine

2 Cosmetic Raw Material and Cosmetic Industry

20232 All product covered which are included in the concerned KBLI

- Investment of > Rp. 50 Billion

- Manpower > 300 Persons

Note: KBLI: Klasifikasi Baku Lapangan usaha Indonesia / Indonesia Standard for Industrial Classification


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Free Trade Zone: 4 area, 7.382.000 ha


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One Stop Services (OSS)/ Pelayanan Terpadu Satu Pintu (PTSP)

Electronic Information

Services System and Investment

Licensing (SPIPISE)

33 out of 34 provinces has established One Stop Services (OSS) (97%)

358 out of 413 Regency has established One Stop Services (OSS) (87%)

97 out of 98 City has established One Stop Services (OSS) (99%)

4 out of 4 FTZ has established One Stop Services (OSS) (100%)

1 out of 8 KEK has established One Stop Services (OSS) (12.5%)

Note: Step by step, Government will improve the online system capacity and capability. Right now, you may access online services for having the investment principle licenses. By the end of this year, you may access for business license. And our ambitious program is all licenses and permits both issued by Central and Local Governments in relations to investments, will be serve through an online system. Our new President urge / challenge us to finalize it within six months.


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Investment Structure and Corporate Forms for Foreign Direct Investment (FDI)

INVESTMENT STRUCTURE

1. JVs - Joint Ventures (For Pharmaceutical Industry max 85%)

2. Wholly Owned Subsidiaries (For Cosmetic Industry and medical equipment industry)

Must be established in the form of a limited liability company.

CORPORATE FORMS

Limited Liability – PT a legal entity that constitutes an alliance of capital established pursuant to a contract in order to carry on business activities with an authorized capital all of which is divided into shares and fulfills the requirements stipulated in the Indonesian company law and its implementing regulations

Representative Office An office managed by one or more citizens of foreign nationals or Indonesian citizens appointed by a foreign

company or group of foreign companies abroad as their representative in Indonesia

Representative office is not eligible for doing business in Indonesia

Public Listed Company – PT Tbk a company that makes a public offering of shares in accordance with the provisions of legislative regulations in the field of capital markets


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Investment Procedures In BKPM

INVESTORS

PRINCIPLE LICENSE

• New • Expansion • Merger • Acquisition

How To Apply For Principle License:

1. Check Indonesia Standard for Industrial Classification (KBLI) and company ownership structure limitation (Negative Investment List / NIL)

2. Check technical requirement/sectoral conditions

3. Check total investment minimum value

Minimum investment : at least Rp. 10 billion or approximate value in US$ 1.000.000

Minimum paid-up/issued capital : Rp. 2.5 billion or approximate value in US$ 250.000

Nominal minimum equity per participant in the company : Rp. 10 million or approximate value in US$ 1.000/participant

Calculation of the percentage of equity (shares) is based on shares nominal value and not share volumes (number)

4. For services sector: Investor has to explain his business plans or activities

Operational Licenses Regional Licenses Fiscal Incentives

BUSINESS LICENSE

COMMERCIAL PRODUCTION/OPERATION STAGE Note: Domestic Capital Investment (PMDN) : Minimum value of domestic investment that

must be processed using SPIPISE - starting from Rp. 500,000,000


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Required Permits/License for Investment Implementation

Preparation Construction Operation Production/ Commercial

Principal License from BKPM

Articles of Association of Legal Entity from Ministry of law and Human Rights

Tax Payer Number (NPWP/PKPP) from Directorate General of Taxation

Permit/Licenses from BKPM Import Identification Number Import duty facilities for

machinery Tax allowance, if applicable Tax Holiday, if applicable

Permits/Licenses from Technical Ministry Technical recomendations Expatriate Working permits Health and Working Insurances

Permits/Licenses from Local Government Location permit Building permit Land titles Nuisance Permit Environmental Permit

Business License from BKPM

Import Duty facilites for raw materials from BKPM

Expatriate Working permit from Ministry of Manpower

Operation Permits from Technical Ministry

Products registration

Certificate of Indonesia National Standards

Permit for Distribution/marketing for Drugs and Foods from BPOM

Permits for Compliance on Safety for Transportation Mode

THANK YOU

Invest in...

© 2014 by Indonesian Investment Coordinating Board. All rights reserved

INDONESIA INVESTMENT PROMOTION CENTER (IIPC)

CONTACT US BADAN KOORDINASI PENANAMAN MODAL (BKPM) Jl. Jend. Gatot Subroto No. 44, Jakarta 12190 P.O. Box 3186, Indonesia P : +62 21 5292 1334 F : +62 21 5264 211 E : [email protected]

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