investment opportunities on manufacturing industry in ... · federation of hong kong industries -...

Directorate of Investment Planning for Manufacturing Industry

Federation of Hong Kong Industries - Hong Kong, 30 July 2019

Investment Opportunities on Manufacturing Industry in Indonesia

BKPM’s Delegations

2

Mr. Said Ridwan

(Director for Manufacturing Industry Investment Planning)

E: [email protected]; [email protected]

BKPM’s Delegations

Mr. Faisal Rahman

(Section Head for Transportations Industry Investment Planning)


Mr. Irawan Budi Satrio

(Section Head for Chemical and Pharmacy Goods Industry Investment Planning)


Why Indonesia ?

3

Source: various, edited

03

trillion

GDP Only ASEAN

Member in the G20

The largest

economy in ASEAN $1 GDP of more

than $1 trillion

(PPP)

Population of

260 million

“Consuming class’

twice the size of the

population of Australia

Young and dynamic

people 44% of

Indonesians are aged

under 25

Indonesia is a global leader in social media. It has:

More Facebook and

Twitter users than the

population of Australia

The world’s third largest

market for Facebook

The most active city for Twitter

in the world: Jakarta

44% 2x

Indonesia’s economy is forecast to be the world’s 10th largest by 2025 01.

Indonesia is the fourth most populous country in the world 02.

Indonesia has successfully built economic virtuous cycle,

bringing Indonesia to one of the global leading economies

4

Source: MoI, edited

Indonesia in the future… 2030… 2050…

5


McKinsey&Company

… and in 2030

7th-largest economy

in the world

135 million Members of the

consuming class

71% of the population in cities

producing

86% of GDP

113 million Skilled worker

needed

$1.8 trillion Market opportunity in consumer services, agriculture and

fisheries, resource, and education

Emerging markets will dominates the

world’s top 10 economies in 2050 (GDP

at PPPs)

2016 2050

China 1 1 China

US 2 2 India

India 3 3 US

Japan 4 4 Indonesia

Germany 5 5 Brazil

Russia 6 6 Russia

Brazil 7 7 Mexico

Indonesia 8 8 Japan

UK 9 9 Germany

France 10 10 UK

E7 economies G7 economies

Indonesia Global Competitiveness Index

6

Source: Global Competitiveness Report 2018

50

2012 - 2013

38

2013 - 2014

34

2014 - 2015

37

2015 - 2016

41

2016 - 2017

36

2017 - 2018

Global Competitiveness Index (GCI)

47

2017

45

2018

GCI 4.0

In the latest GCI 4.0 survey method, among ASEAN

countries, Indonesia ranks after Singapore (2nd),

Malaysia (25th), and Thailand (38th) in 2018.

Indonesia is one of the developing countries that is well

connected (50th) and has a growing entrepreneurial culture

(24th).

4th

Industry as a driver of economic growth

Source: Ministry of National Development Planning/National Development Planning Agency, edited

20.8% of GDP Strengthening of Industrial

Growth Pillar

(2020)

21.4% of GDP Diversification and Increasing of Value Added

(2025)

22.3% of GDP Strengthening of Advanced

Industrial Base

(2030)

23.4% of GDP Strengthening of Innovation

and Global Role

(2035)

24.6% of GDP Increasing of

Industrial Adaptation

(2040)

26.0% of GDP Increasing of

Industrial Sustainability

(2045)

Industrial modernization is focused on

regional and industrial centre-based of

natural resource processing industries with

supply chain and value chain integration

from upstream to downstream. Industrial

pushed into a part of the global value chain

(GVC).

INDUSTRY PRIORITY:

• Food and beverages;

• Textile and apparel;

• Automotive;

• Electronic;

• Chemical and

Pharmacy.

Indonesia is the 4th Most Prospective Investment Destination

and its sovereign credit rating continues trending higher

8

Source: UNCTAD, 2017

3 4 4 4

5 6

7 7 7

9 11 11

20 36

40 US China India

Indonesia Thailand

Brazil

UK Germany

Mexico Philippines

Spain Vietnam

Singapore Canada

Australia

BBB- / Stable

Baa2 / Stable

BBB / Stable

BBB / Stable

BBB / Stable

JBIC Report : Indonesia as Promising Countries/Regions for

Overseas Business over the Medium-term (next 3 yrs. or so)

9

Note 1: The countries and regions other than those listed above included North America (15 companies, 3.5% of the total), EU/Europe (12 companies, 2.8%

of the total).

Note 2: In case several countries came in the same ranking, they are listed by the order of the previous year’s ranking.

Note 3: See p.64 for pre-FY2016 results.

Investment Climate is one of the critical points that the

government is actively trying to improve

Source: BKPM, edited

The government today is focused on

regulation and bureaucracy reform, as

well as simplifying the permit and

requirements to invest.

"Improvement of every

indicator must become the

priority of ministries and

state institutions, so that

efforts will be more

focused, while concrete

targets must be set.”

(President Joko Widodo)

No. 10 Indicator Ease of Doing

Business

Total

1 Starting A Business

2 Dealing With Construction

Permit

3 Registering Property

4 Getting Electricity

5 Paying Taxes

6 Getting Credit

7 Protecting Minority Investor

8 Trading Across Boders

9 Enforcing Contract

10 Resolving Insolvency

2018 2019

66,47 67,96

77,93 81,22

66,08 66,57

59,01 61,67

83,87 86,38

68,04 68,03

65,00 70,00

63,33 63,33

66,59 67,27

47,23 47,23

67,61 67,89

2018 2019

72 73

144 134

108 112

106 100

38 33

114 112

55 44

44 51

112 116

145 146

38 36

Distance to Frontier

(DTF) Score Rank

- EODB DTF Score: 6 indicators go up, 3 indicators relatively fixed

- EODB Rank : 6 indicators go up, 4 indicators go down

Fix indicators

Indicators go up

Indicators go down

INDONESIA REFORM IN DOING

BUSINESS 2019

Investment Realization in Indonesia Reaches IDR 721.3 Trillion

in 2018 and rise by 4.1%

11

Source: BKPM

Investment Realization (IDR Trillion)

2013 2014 2015 2016 2017 2018

399.2 463.1

545.4 612.8

692.8 721.3

↑16.0%

↑17.8%

↑12.4%

↑13.1%

↑4.1%

DDI FDI

38%

62%

FDI in Indonesia by country 2013 – 2018 (USD Mn) Exclude upstream oil, gas, and financial sectors

12

Source: BKPM

Rank Country 2013 2014 2015 2016 2017 2018 Total %

Share

1 Singapore 4,672 5,832 5,901 9,179 8,442 9,193 43,219 24%

2 Japan 4,713 2,705 2,877 5,401 4,996 4,953 25,645 14%

3 China 297 800 628 2,665 3,361 2,377 10,128 6%

4 Malaysia 711 1,776 3,077 1,116 1,214 1,775 9,669 5%

5 South Korea 2,205 1,127 1,213 1,066 2,025 1,605 9,241 5%

6 USA 2,436 1,300 893 1,162 1,993 1,218 9,001 5%

7 Hong Kong,

PRC 376 657 937 2,248 2,117 2.011 8,347 5%

8 Netherland 928 1,726 1,308 1,475 1,489 943 7,870 4%

9 British Virgin

Islands 786 624 731 1,157 845 1,043 5,186 3%

10 United Kingdom 1,076 1,588 503 307 775 271 4,520 3%

Total (10 Countries) 18,200 18,135 18,069 25,776 27,256 25,389 132,825 75%

Other Countries 10,418 10,394 11,207 3,188 4,984 3,919 44,110 25%

TOTAL (145 countries) 28,618 28,530 29,276 28,964 32,240 29,308 176,935 100%

• Total investment

realization from Hong

Kong in 2013-2018 is

USD 8,347 million,

making Hong Kong as

an important partner

for Indonesia.

• Nevertheless, more

opportunities are

available for Hong

Kong investors to grow

their investment in

Indonesia.

Hong Kong investment rank has been gradually improving

during the previous years in Indonesia

13

Source: BKPM

Rank Country Realization

US$ Million % Share

1 Singapore 8,441 26%

2 Japan 4,996 15%

3 China, P.R. 3,361 10%

4 Hong Kong 2,116 7%

5 South Korea 2,024 6%

6 USA 1,992 6%

7 Netherland 1,489 5%

8 Malaysia 1,213 4%

9 Mauritius 1,056 3%

10 British Virgin Islands 844 3%

Total 127 Countries 32,239 100%

FDI Rank in 2017

Rank Country Realization

US$ Million % Share

1 Singapore 5,901 29%

2 Malaysia 3,077 15%

3 Japan 2,877 14%

4 Netherland 1,308 6%

5 South Korea 1,213 6%

6 Hong Kong 937 5%

7 United States 893 4%

8 British Virgin Islands 731 4%

9 China, P.R. 628 3%

10 United Kingdom 503 2%

Total 95 Countries 20,665 100%

FDI Rank in 2015

Indonesia Investment Policies (1)

14

1st Phase:

Investment Development that is Relatively Easy and Fast Produces

2nd Phase:

Acceleration of Infrastructure and Energy Development

3rd Phase:

Large Scale Industrial Development

4th Phase:

Knowledge-Based Economic Development

Vision to 2025:

“Sustainable Investment to

Achieve The Independent,

Advanced and Prosperous

Indonesia”

Presidential Regulation No 16 of 2012

on Investment General Planning (RUPM)

Investment Climate Improvement

7 Policy Directions of Indonesia Investment

Investment Distribution

Focus on Food, Infrastructure and Energy Development

Green Investment

Empowerment of Micro, Small, Medium Enterprises and Cooperatives (UMKMK)

Providing of Facilities, Ease and/or Incentives for Investment

Investment Promotion

Investment Roadmap (2010-2025)

Phase can take place in parallel and simultaneously

Indonesia Investment Policy Direction


15

Investment climate be increased become one of the best in the world

Strengthening of Labor Intensive, Export Oriented, and Value Added Sector

Increasing of Investment Climate Policy

Accelerating of Investment on Advanced Technology and High Innovation Sector

Sustainable Investment and Investment Protection in Overseas

Source: Ministry of National Development Planning/National Development Planning Agency, edited

35th Rank of EoDB Investment contribution to GDP

34.1% 2015-2025


36.4% 2015-2025


38.1% 2015-2025

16


1 IINFRASTRUCTURE 35.000 MW

Power Generation

24 Seaports Multimode

Transport

2 AGRICULTURE/FISHERIES Food Estate Corn Cattle Salt

3 INDUSTRIES

Labor-intensive Textile Food and Beverage

Furniture Footwear Lifestyle

Import-substitution

Chemical and Pharmaceutical

Iron and Steel Components Defence and

Security

Export-oriented Electronics CPO and derivative products

Wood, pulp, and paper products

Automotive

Downstream Cocoa Sugar Smelter

Pioneer Base Metal Upstream

Petrochemical Inorganic Basic

Chemical Organic Basic

Chemical Pharmaceuticals

Raw Materials

4 MARITIME Shipbuilding Cold Storage Marine

Technology

5 TOURISM AND ZONES 10 Tourism SEZ 8 Existing SEZ 7 New SEZ

14 Priority Industrial Park

and Other Industrial Park

10 Tourism Priority

Destination

6 DIGITAL ECONOMY E-Commerce Fintech IT based Creative Economy

Indonesia Priority Sectors for Investment

17


General Investment Policies

Equal treatment for both Foreign Direct Investment (FDI) and Domestic Direct Investment (DDI)

FDI must refer to Negative Investment List (DNI)

Minimum investment of IDR 10 billion • Approx. USD 700,000 (USD 1 = IDR 14,000) • Minimum paid-up capital of IDR 2.5 billion or

approx. USD 178,000 (USD 1 = IDR 14,000)

Obtain investment licenses

Must be established in the form of Limited Liability Company (PT)

Allowed to employ expatriate(s)

Guarantee of no expropriation

Guarantee to freely transfer and repatriate • Capital, profit, dividend, interest and

royalty

Must consider Corporate Social Responsibility (CSR), respect local culture and preserve environment

18


Provisions of business fields

Certain business fields that are prohibited as

investment activities

"All business fields or types of business are open to investment activities, except business fields or types of businesses which are declared closed and open with conditions". - Article 12 Paragraph (1) Investment Law Number 25 of 2007

CLOSED

Certain business fields that can be as

investment activities with certain conditions

OPEN with Conditions

Requirements:

• Reserved for micro, small, medium

and cooperative businesses

• Partnership

• Foreign capital ownership

• Specific location

• Special licensing

1

2

Most manufacturing industries in Indonesia are

open 100% for FDI

100% FDI

Textile Industry

100% FDI

Automotive Industry (Manufacture and

Assembly)

100% FDI

Electronics Industry

19


Negative List of Investment Relaxation

Note:

* Total amount of business fields consist of:

• Business fields closed for investment;

• Business fields reserves for partnership and

SME’s and Cooperative;

• Business fields open with requirements.

515*

NUMBER OF BUSINESS FIELDS

(Presidential Regulation No 44/2016)

371*

NEW DRAFT ON NEGATIVE LIST

Business Fields Business Fields

• 20 Business fields closed for investment;

• 116 Business fields reserves for

partnership and SME’s and Cooperative;

• 235 Business fields open with

requirements.

It will create more manufacturing

industries in Indonesia are

open 100% for FDI

Incentives and Easiness for Manufacturing Industry Investment (1)

20

Tax Holiday/Mini Tax Holiday

Tax Allowance

Value Added Tax (VAT)

and Sales Tax on Luxury

Goods

Incentive and Easiness for

Investment by Regional

Government

Import Duty Facility Green Line Facility

Ease of Import for Export

Purposes (KITE)

Special Economic Zones

(SEZ) for Manufacturing

Foreign Worker

Permit Facility

Import Duty Borne by The

Government

Online Single Submission

(OSS) Facility

Super Deductible

Tax

Others Fiscal and Nonfiscal

Incentives


21

5-20 years tax

exemption* With another 50% tax exemption for additional 2 years (transitional period).

(Government Regulation No.9/2016)

57

30 % of investment value

Reduction of corporate net income tax for 6 years, 5% each year.

*Under certain requirements among others: investment value or

export orientation, manpower

absorbtion, local content, and project

location (especially outside Java island).

Tax Holiday Tax Allowance (MoF Regulation No.176/PMK.011/2009 juncto.

No. 188/PMK.010/2015)

- 2 years import duty exemption or

- 4 years for companies using locally-produced machines/equipment (min.30%).

a. Machinery/equipment import duty exemption

b. Raw materials for production

*) Based on value of investment threshold.

(Ministry of Finance Regulation

No.150/PMK.010/2018)

USD 38 million

Minimal investment value (IDR 500 billion).

Mini Tax Holiday (Ministry of Finance Regulation

No.150/PMK.010/2018)

5 years

50% tax reduction

USD7.6 million Minimal investment value (IDR 100 billion)

1 USD = IDR14.200

With another 25% tax exemption for additional 2 years (transitional period).

44

certain business fields of manufacturing eligible for tax allowance

certain business fields and location of manufacturing eligible for tax allowance

Import Duty Facility

• Reduction of net income by 60% of the total investment.

• The most gross income reduction high of 200% of the total cost incurred for work practice activities, apprenticeship, and/or learning.

• The highest gross income reduction of 300% of the total costs incurred for research activities and certain developments in Indonesia.

Super Deductible Tax (Government Regulation No.45/2019)

Green Line Facility

• Capital goods do not require screening.

• Cutting the processing time from 3-5 days to only 30 minutes.


22

Incentives and Ease for Investment by Regional Government

(Government Regulation No. 24 of 2019)

• Provide incentives

can be:

• Reduction, relief, or

exemption on local

tax;

• Reduction, relief, or

exemption on local

retributions;

• Providing of capital

aid to micro, small,

and/or cooperative

businesses in the

regions;

• Assistance for

research and

development for

micro, small and/or

cooperative

businesses in the

regions;

• Assistance for micro,

small and/or

cooperative

vocational training

facilities in the region;

and/or

• Low interest loans.

• Provide ease can be:

• Providing of data and information on

investment opportunities;

• Providing of facilities and

infrastructure;

• Facilitating of land or location supply;

• Providing of technical assistance;

• Simplification and acceleration of

licensing through one-stop integrated

services;

• Ease of access to marketing products;

• Ease of direct construction on

investment;

• Ease of investment in strategic areas

stipulated in legislation that has the

potential for regional development;

• Providing of investment comfort and

security in the regions;

• The ease of the certification and

standardization process refer to

provisions of legislation;

• Ease of access to ready-to-use and

skilled workers;

• Ease of access to raw material

supplies; and / or

• Promotion facilitation base on regional

authority.

Ease of Import Facilities for Export Purposes (KITE)

(Finance Ministry Regulation

No.176/PMK.04/2013)

• KITE facilities are provided to industrial

entities that have been exported or

have the potential to export.

• This facility provides import duty

exemption for materials used for the

production of export goods.

• The goods that eligible to get this

facility are:

• Goods and/or Materials:

• Raw materials, supporting

materials, etc.

• Must be processed for export or

submission.

• Machinery:

• Development, modernization, and

rehabilitation.

• Used to production at least 2

years.

• Sample Goods:

• Used to support the production

process.

• Production results have been

exported/submitted.

Foreign Worker Facilities

• Ease Foreign Worker Permit.

• Ease for Foreign Worker

Employment Plan.

• Foreign workers can use limited

visa and temporary living permit

for working in Indonesia based on

Presidential Regulation No 20 of

2018.


23 Source: various, edited

Fiscal Incentives in Special Economic Zones

Fiscal

Tax Holiday

Tax Allowance

Value Added Tax

Inland FTA

Customs

Import Duty

Entering of Import

Goods:

• Suspension of import

duty;

• Excise Exemption

• Taxes in the Import

Framework (PDRI) are

not collected*

From Custom Areas:

• VAT and Sales Tax on

Luxury Goods are not

collected

Releasing export goods

Export:

• General conditions

apply

To Domestic Market:

• Import Duty = 0 if the

level of domestic

content is greater or

equivalent with 40%

• Repayment of indebted

Value Added Tax

• VAT levies for

submission of taxable

goods

SEZ Manufacture Industry*

*term and condition applied

Indonesia Manufacturing Investment Opportunities (1)

24

: Development Location

West Java

East Java

West

Nusa Tenggara

Central

Java

Jakarta

North Sumatera

Riau

Central Kalimantan Lampung

Banten

: Existing Location


Food and Beverage Industry

Opportunities

Largest domestic market in the

region (30% of ASEAN total). 1

Abundant agricultural resources

(Global #5 in total agriculture

production volume of 2014).

2

Consumer shift to modern packaged

food. 3

Existence of globally competitive players

(e.g. Indofood, Mayora). 4

Good marketing network (outlet/stores). 5

Products • Palm Oil.

• Rice.

• Chicken.

• Sugar.

• Processed Seafood.

• Starch.

• Cocoa.

• Processed Fruits and Veggies.

• Bottled Water.

• Noodle.

• RTD Tea.

• Coffee.

• Baby Food.

• Packaged Pre-Prepared Meals.

• Food Supplement.

• Seaweed.

• Carrageenan


25

West

Java Central

Java

Gorontalo



: Existing Location

Textile and Clothing Industry

Highest consumption growth in

ASEAN (Projected at 9% of 2016-2025

CAGR).

Opportunities

Growing opportunities in functional clothing

(e.g. sports wear, functional underwear).

1

2

Largest domestic market in the region. 3

Products

• Synthetic Fibers.

• High Quality Yarn.

• Specialty and Industrial

Fabrics.

• Technical Multi-Fabric

Textiles.

• Leather Fabrics.

• Apparel with Embedded

Technology.

• Functional Clothing.


26

West Java

Riau Islands

East Java

Jakarta

Banten


: Existing Location


Automotive Industry

Shift from 2W to 4W

transportation.

Opportunities

2nd largest ASEAN

production capacity.

1

2

Largest domestic

market in the region. 3

Industry shift to EV. 4

Products

• Internal Combustion

Engine/ICE Vehicles (especially

MPV, Van, Low Cost Green

Car/LCGC, and Truck).

• Electric Vehicles.

• Main Component for

Automotive (e.g. machinery,

brake, transmission system).

• Technology and Component for

Electric Vehicle.

Central

Java


27

West Java

Banten

East

Java

Jakarta


: Existing Location

Riau Islands


Central

Java

Electronics Industry

Largest domestic market in

the region.

Opportunities

Electronics products are key

inputs for multiple sectors

under the 4IR era.

1

2

Products

• Smartphone Components

(Screen, Charger, and Camera).

• IoT Manufacturing.

• Semiconductor Manufacturing

(Foundry).

• Batteries for Industrial Usage

and Homes.


28

West Java

Banten

East

Java

East

Kalimantan

Central

Java

South Sumatera

West

Papua


: Existing Location


Chemical and Pharmacy Industry

Abundant natural resources.

Opportunities

Large domestic market.

1

2

Products

• Ethylene.

• Propylene.

• Butadiene.

• Synthetic Fiber.

• Synthetic Resin.

• Synthetic Rubber.

• Bioplastic.

• Biofuel.

• Biocomposite.

• Fertilizer.

• Pharmacy and drugs.

Engineering, innovation,

and policy support. 3


29

West

Java

Central

Java East

Java

Yogyakarta



: Existing Location

Machinery Industry

Potential local partner.

Opportunities

Large domestic market.

1

2

Products

• Electrical equipment (electric

motor/generator, solar cell).

• Textile and apparel machinery

(weaving machine, knitting machine.

Increasing of demand. 3

Availability of skilled worker. 4

Increasing of innovation. 5


30

West

Java

Banten

East

Java



: Existing Location

Rubber and Plastic Industry

Availability of large rubber plantation.

Opportunities

Export development.

1

2

Large domestic market. 3

Products

• Tyre.

• Rubber Thread.

• Compound.

• Gloves.

• Hose.

Increasing of ocnsumption. 4


31

West Java

Jakarta

East Java

East Kalimantan

Riau Islands


: Existing Location


Shipbuilding Industry

High consumption growth.

Opportunities

Sea Toll program.

1

2

Large domestic and global market. 3

Products

• Ship.

• Main components for ship.

• Ship repairs activities.

Government procurement. 3


32

West

Java Central

Java East

Java


: Existing Location


Footwear Industry

Mass/seasonal leather production.

Opportunities

Availability of Craftsmanship.

1

2


Products

• Smart Footwear.

• Synthetic Leather.

• Advanced Leather Material.

• Non-conventional Leather

Material.

Research and technology support. 4

Increasing of consumption. 5

High quality production capability base

on demand. 6


33

West Java

Banten East Java

South Kalimantan

Southeast

Sulawesi

North Maluku

Papua

Jakarta


: Existing Location


Basic Metal and Metal Goods

Industry

High consumption growth.

Opportunities

Abundant natural resources.

1

2


Products

• Basic Stainless Steel.

• Alumina.

• Aluminum.

• Nickel Matte.

• Copper Cathodes.

• Precious Metal.

• Rare Earth Metal.

• Various of Metal by Smelter

Product.

Increasing of demand. 4

Availability of marketing network. 5

Integrated industry structure and

association. 6

Central

Sulawesi

34

Eligibility of Pioneer Industry for Tax Holiday (1)

Integrated upstream metal industry (iron steel or non-iron steel) without or with its derivatives

28 Types of Production

1. The steel industry from

non-scrap raw materials,

incl. stainless steel.

2. Integrated steel milling

industry with steel industry,


3. Integrated seamless pipe

industry with steel industry,


4. Integrated welded pipe

industry with steel milling

industry, incl. stainless

steel.

5. Integrated heavy profile

manufacture with steel

industry.

6. Integrated rail manufacture

with steel industry.

7. Metal manufacture that

produces gold ingots.


produces silver ingots.


produces platinum.

10. Alumina industry

(bauxite to alumina).

11. Aluminum ingots

industry (alumina to

aluminum ingots).

12. Nickel from ore industry

with pyrometallurgy.

13. Nickel from ore industry

with hydrometallurgy.

14. Copper cathodes

industry.

15. Integrated aluminum

plate industry from non-

scrap, with aluminum

ingots manufacture.

16. Integrated aluminum rod

industry from non-scrap,

with aluminum ingots

manufacture.


billet industry from non-

scrap, with aluminum

ingots manufacture.

18. Integrated copper plate

industry, with copper

cathodes manufacture.

19. Integrated copper strip



20. Integrated copper sheet




extrusion industry, with

aluminum ingots

manufacture.


tube industry, with

aluminum ingots

manufacture.

23. Integrated seamless

pipe, with aluminum

ingots manufacture.

24. Integrated welded pipe,

with aluminum ingots

manufacture.

25. Integrated copper pipe



26. Rare earth metal

industry.

27. Base metal industry

from black tin non

scrap raw materials.

28. Base metal industry

from zinc non scrap

raw materials.

35


Integrated petroleum, natural gas, or coal-based petrochemical industry without or with its derivatives


1. Ethylene industry.

2. Prophylene industry.

3. Butadiene industry.

4. Benzene industry.

5. Toluene industry.

6. Xylene industry.

7. Methanol industry.

8. Formic acid industry.

9. Dimethyl ether industry.

10. Carbon black industry.

11. Caprolactam industry.

12. Ethylene glycol industry.

13. Integrated polyethylene with

ethylene industry.

14. Integrated ethyl benzene with

ethylene industry.

15. Integrated dichloro etylene

with ethylene industry.

16. Integrated acrylonitrile with

propylene industry.

17. Integrated isopropyl alcohol

with propylene industry.

18. Integrated isopropyl alcohol

with propylene industry.

19. Integrated cyclohexane with

benzene industry.

20. Integrated c-PTA with xylene

industry.

21. Integrated acetic acid with

formide acid industry.

22. Integrated styrene with

ethylbenzene industry.

23. Integrated vinyl chloride

monomer with dichloro

etylene industry.

24. Integrated acetone with

isophropylalcohol industry.

25. Integrated p-PTA with

c-PTA industry.

26. Integrated DMT with c-PTA

industry.

26. Integrated ethyl acetate with

acetic acid industry.

27. Special chemicals industry of

flavour and fragrance.

28. Alkyd resin industry.

29. Polyester resin industry.

30. Aminos resin industry.

31. Polyamide resin industry.

32. Epoxid resin industry.

33. Silicone resin industry.

34. Polyurethane resin industry.

35. Polyethylene resin industry.

36. Polypropylene resin industry.

37. Polystyrene resin industry.

38. Polyvinyl chloride resin

industry.

39. Acetate cellulose resin

industry.

40. Nitrate cellulose resin

industry.

41. Integrated styrene butadiene

rubber with organic base

chemical industry.

42. Integrated polychloroprene

(neoprene) with organic base

chemical industry.

43. Integrated acrylonitrile

butadiene rubber (nitrile rubber)

with organic chemical industry.

44. Integrated ethylene-propylene-

non-conjugated diene rubber


45. Integrated silicone rubber

(polysiloxane) with organic base

chemical industry.

46. Integrated isoprene rubber with

organic base chemical industry.

47. Integrated poly butadiene rubber


48. Manufacture of tow, yarn,

polyamide synthetic filament

strip.


polyacrylate synthetic filament

strip.


polypropylene synthetic

filament strip.

51. Polyamide staple fiber industry.

52. Polyacrylate staple fiber

industry.

36


Integrated natural oil and gas refinery industry without or with its derivatives


1. Natural oil and gas refinery industry.

2. Integrated olefin industry with natural oil

and gas refinery industry.

3. Integrated aromatics industry with natural

oil and gas refinery industry.

4. Integrated normal paraffin industry with

natural oil and gas refinery industry.

5. Integrated synthetic gas industry with

natural oil and gas refinery industry.

Integrated organic base chemical industry sourced from agricultural, plantation, or forestry products without or with its derivatives


1. Betacarotene industry.

2. Tocopherol industry.

3. Tocotrienol industry.

4. Green diesel industry.

5. Green gasoline industry.

6. Green avtur industry.

7. Biolubricant industry.

8. Biosurfactant industry.

9. Bioetanol (fuel grade ethanol) industry.

10. Bioemulsifier industry.

11. Recovered oil industry.

12. Manufacture of tow, yarn, acetate cellulose

synthetic filament strip.

13. Manufacture of tow, yarn, rayon viscose synthetic

filament strip.

14. Synthetic staple fiber industry of rayon viscose.

15. Synthetic staple fiber industry of cellulose acetate.

37


Integrated inorganic base chemical industry without or with its derivatives


1. Integrated non-mercury processed caustic soda

industry.

2. Integrated ash soda industry.

3. Integrated sodium chloride industry.

4. Integrated potassium hydroxide industry.

5. Integrated lithium industry.

6. Integrated sodium industry.

7. Integrated potassium industry.

8. Integrated ammonia industry.

9. Integrated pigment industry.

10. Integrated phosphor industry.

11. Integrated sulfur industry.

12. Integrated nitrogen industry.

13. Integrated halogen industry.

Integrated industry of main raw materials for pharmacy without or with its derivatives


1. Industry of main raw materials for vaccine.

2. Biotechnology based industry of main raw

materials for pharmacy.

3. Blood based industry of main raw materials for

drugs.

4. Integrated pharmacy products industry with

industry of main raw materials for vaccine.

5. Integrated pharmacy products industry with

biotechnology based industry of main raw

materials for pharmacy.

6. Integrated pharmacy products industry with blood

based industry of main raw materials for drugs.

38


Manufacturing industry of irradiation, electromedical, or electrotherapy equipments


1. Manufacturing industry of X-ray tube.

2. Manufacturing industry of CT scan.

3. Manufacturing industry of magnetic

resonance imaging (MRI).

Manufacturing industry of main components for electronic or telematic equipments (such as semiconductor wafer, backlight for Liquid Crystal Display/LCD, electrical driver, or display)


1. Manufacturing industry of

semiconductor wafer.

2. Manufacturing industry of backlight for

display.

3. Manufacturing industry of electrical

driver.

4. Manufacturing industry of display.

5. Manufacturing industry of battery.

39


Manufacturing industry of machinery and main components for machinery


1. Manufacturing industry of electric motor for

machine.

2. Manufacturing industry of internal combustion

motor for machine.

3. Manufacturing industry of metal furnace

machinery for industry (non-electric).

4. Manufacturing industry of metal furnace

machinery for industry (electric).

5. Integrated manufacturing industry of 4-

wheeled tractor main components with 4-

wheeled tractor manufacture by capacity of >

40HP.

6. Manufacturing industry of Multifunctional

Mechanical Tool for Rural (AMMDes).

7. Manufacturing industry of textile machinery.

Manufacturing industry of robotic components for production machinery


1. Manufacturing industry of robotic

components.

40


Manufacturing industry of main components for power plant


1. Manufacturing industry of generator for power

plant.

2. Manufacturing industry of turbine for power

plant.

Manufacturing industry of motor vehicle and main components for motor vehicle


1. Integrated 4-wheeled or more electric vehicle manufacturing with

battery and electric motor.

2. Manufacturing of battery for 4-wheeled or more electric motor

vehicle.

3. Manufacturing of electric motor for 4-wheeled or more electric

motor vehicle.

4. Manufacturing of 100% biodiesel fitted flexy engine for 4-wheeled

or more motor vehicle.

5. Integrated 2 (two) main components minimum for engine of

4-wheeled or more motor vehicle (i.e. piston, cylinder head,

cylinder block, camshaft, crankshaft, and connecting rod)

manufacturing, with 4-wheeled or more motor vehicle industry.

6. Manufacturing of electric power control unit (PCU) for 4-wheeled

or more electric motor vehicle.

7. Manufacturing of battery for 2-wheeled or 3-wheeled electric

motor vehicle;

8. Manufacturing of electric motor for 4-wheeled or 3-wheeled

electric motor vehicle;

9. Manufacturing of electric power control unit (PCU) for

4-wheeled or 3-wheeled electric motor vehicle.

41


Manufacturing industry of main components for ship


1. Manufacturing industry of internal

combustion motor for marine used.

Manufacturing industry of main components for train


1. Manufacturing industry of internal combustion

motor for train.

2. Manufacturing industry of traction motor for train.

3. Manufacturing industry of transmission for train.

4. Manufacturing industry of locomotive for electric,

diesel, and steam train.

5. Manufacturing industry of wagon for self propelled

or electric train.

6. Development, maintenance and repair activities for

signal building construction of train.

7. Development, maintenance and repair activities for

telecommunication of train.

42


Manufacturing industry of main components for aircraft and supporting activities of aerospace industry


Processing industry base on agricultural, plantation, or forestry products for pulp without or with its derivatives


1. Pulp industry, including dissolving pulp, with raw

materials from Industrial Plant Forest (HTI).

2. Integrated valuable paper industry with pulp

industry.

3. Integrated special paper industry with pulp

industry.

1. Manufacturing industry of aircraft engine.

2. Manufacturing industry of aircraft propeller.

3. Manufacturing industry of rotor.

4. Manufacturing industry of aircraft structure

component.

5. Integrated aircraft manufacturing industry with

aircraft main component industry (engine,

propeller, rotor, and structure).

6. Industry of retread tyre for aircraft.

7. Maintenance, repair and overhaul (MRO) activities

for aircraft.

43

Benefits for Investors (1)

Regulation of Business Fields Closed and Business Fields Open with Conditions to Investment (Presidential Regulation No 44 of 2016)

• From 664 to 515 business fields; • 20 business fields closed; • 145 business fields reserved for micro, small, medium businesses,

and partnership; • 350 business fields open with conditions; • More open to investment; • Investment process is easier; • Provide more protection to investors; • Easier for investors to understand; • Reduce logistics costs for investors who produce goods, or who open

factories; • Reducing production costs; • Support for retail business development; • Support for the creative industry; • Quality improvement of labor; • Attract more investors in the tourism sector; • To support 35 GW electricity and renewable energy programs.

Pro Investment Policies Ease of service for central and regional licensing and non-licensing • By Central One-stop Service/Public Service Mall/Regional

One-stop Service

Facilitate the investment problems (debottlenecking) • The Indonesian government is committed to facilitate the

problems faced by investors through coordination between BKPM and related Ministries / Agencies and Local Governments.

Ease of obtaining incentives for investors/companies

Predictable wage system

Acceleration of business implementation Presidential Regulation No 91 of 2017 • Implementation of Online Single Submission (OSS)

Continuous reforms to improve the investment climate • Ease of starting business, dealing with construction permit,

registering property, paying taxes, trading across border, enforcing contract, getting electricity, getting of protection as minority investor, and resolving insolvency.

Dwelling time optimization

Relaxation of entry visa policy

Acceleration of infrastructure and power development

Lower energy costs for industries

Acceleration of land licensing

Affordable housing for the people

Efficiency on national logistic cost

Sectoral policies support

Availability of skilled labor

• Making Indonesia 4.0; • HR capacity enhancement; • Preparing of competent labor.


44


Investors can enjoy several drivers of competitiveness to build robust

industry sectors

Abundant Working Population

Strong Domestic Demand

Stable Economic Growth

Largest Economy in ASEAN

Resource-Rich Country


45


Demographic Bonus

The next 15 years will be a "golden age" for Indonesia who will enjoy a demographic bonus

1920 1970 2000 2030 2050

Demographic bonus

During the demographic

bonus

After demographic

bonus

Japan

China

Singapore

Thailand

Indonesia

1930

1970

1970

1970

1975

Demographic Bonus Now

0.9% 5.5%

6.7% 9.2%

2.0% 7.3%

3.2% 5.8%

? 5.4%

Average of GDP growth


46

Urban Households Expenditure in 2011 and 2030 (USD billion, 2010 price)

Estimated annual revenue in 2030 (USD billion, 2010-11 price)

Additional consumers by

2030

90million Consumer spend growth in urban areas

7.7% p.a. USD1.1trillion Market opportunity in consumer services by 2030

71% Population in cities,

producing 86% of GDP in 2030

Abundant Opportunity from Growing Consuming Class


47

Middle class growth

in Southeast Asia

2012-2020

110.5% Middle class

growth in Indonesia

2012-2020

174% Middle Class Growth

in ASEAN 2012-2020

The Highest Middle Class Growth

Source: AC Nielsen


48


49

More Downstreaming Smelter Development

Commodity

Total

Reserve

2017

(Ton Ore)

Mining Production

(ton per year) Refinery Facility

Refining

Products

Reserve Life

Based on Ore

Production

per Year Amount (ton) Existing Plan

Copper

2.8 billion

120 million

copper ore 2 smelters

(2.4 million

ton per year)

1 smelter

(2 million ton

per year)

Copper

Cathodes 29 years

3 million copper

concentrate

Anode

Slime

Nickel

3.1 billion 17 million

nickel ore

13 smelters

(31 million

ton per year)

18 smelters

(39 million ton

per year)

NPI

47 years FeNi

Nickel

Matte

Iron

2.3 billion

3.9 million

iron ore and iron

sand 2 smelters

(846,000 ton

per year)

3 smelters

(6.6 million

ton

concentrate

per year)

Sponge

Iron 130 years

3.1 million

iron concentrate Pig Iron

Bauxite

1.6 billion 2 million

washed bauxite

2 smelters

(4.4 million

ton per year)

4 smelters

(15 million ton

per year)

CGA

535 years SGA

Lead

11.5

million

8,000

lead ore

not available

3 smelters

(450,000 ton

concentrate)

Lead

Bullion 108 years

5,000

lead concentrate

Zinc

11.4

million

18,000

zinc ore Zinc

Oxide 105 years

9,000

zinc concentrate

Manganese

87 million

73,000

manganese ore 1 smelter

(4,000 ton

per year)

1 smelter

(26,000 ton)

SiMn,

FeMn 21 years 54,000

manganese

concentrate

6%

62%

10%

12%

6% 4%

Smelter (by Number)

Copper Nickel

Iron Bauxite

Lead and zinc Manganese

4%

69%

7%

19%

1% 0%

Smelter (by Capacity)

Copper Nickel

Iron Bauxite

Lead and zinc Manganese

• Until now, refining products have not been fully

absorbed by the domestic downstream industry.

• Downstreaming smelter development program

can provide raw materials for manufacturing

industry needs in Indonesia and global.

No Commodity Processing Products Refining Products Application

1 Copper Copper concentrate Copper cathodes Cable, bronze, and electronics.

2 Nickel -- Nikel Matte For nickel, and nickel chemical raw.

Ferronikel Steel raw.

Nickel Pig Iron (NPI) Steel raw, stainless steel.

Nickel metal Stainless steel, electroplating, electronics, battery, pigment.

3 Iron Iron concentrate Sponge Iron Raw for pig iron

Pig Iron Raw for iron and steel.

4 Bauxite -- Chemical Grade Alumina

Raw for filler (toothpaste), water purifier, refractory, and abrasive material.

Smelter Grade Alumina Source of making for aluminum.

5 Lead and Zinc

Lead concentrate Bullion Timbal Bullet, ship ballast, nuclear reactor liner, and acid resistant coating

Zinc concentrate Bullion Zn Light steel roof, galvanizing, alloy metal, and bronze.

ZnO Dye.

Source: Ministry of Energy and Mineral Resources, May 2018

Total

Capacity

+101.7

million



New economic developments in Indonesia will drive the growth of the manufacturing industry in Indonesia.

The New Economy: what are they?

Potency of The New Economy Growth in Indonesia

Advise for Investors

51

• Indonesian economy in next years will continue to experience robust, stable, and increasing growth,

supported by recovery momentums gained during previous years.

• Indonesian government committed to continue structural reforms (institutional reform, regulatory

reform, and fiscal reforms) to achieve high and sustainable growth in the era of knowledge driven

economy.

• Indonesian government will continuously and consistently improve its investment climate in order to

create a good and stable environment for business to thrive and prosper.

• Indonesian government strongly encouraged and will facilitates private sectors to take a part in the

development in Indonesia.

• Finding of the right local partners.

• Indonesia offers a promising future for business, Don’t Wait To Long!!!,

Invest In Indonesia As Soon As Possible.

52

Badan Koordinasi Penanaman Modal

(BKPM)

Indonesia Investment Coordinating Board

Jalan Jenderal Gatot Subroto No. 44

Jakarta 12190 - Indonesia

t +62 21 525 2008 | f +62 21 525 4945 | e [email protected]

bkpm.go.id |

investindonesia.go.id

Indonesia Investment Promotion

Centre (IIPC)

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