Indonesia Investment Outlook and Policy Development

1. INDONESIA INVESTMENT COORDINATING BOARD (BKPM)
© 2014 by Indonesian Investment Coordinating Board. All rights reserved
invest in
INDONESIA INVESTMENT OUTLOOK
AND POLICY DEVELOPMENT
Jakarta, 2 September 2014

2. I N D N E S I A
The Investment Coordinating Board of the Republic of Indonesia
2
World’s Most
Populous Country 4th
248million
Population (in 2013)
17,508islands
Biggest Archipelagic Nation
16th
World’s Largest Economy
1trillion
USD GDP (PPP) 4,876
Member State
G20
USD GDP
per capita (PPP)
“Investment
Grade”(Moody’s, Fitch and R&I)

3. 5.8%
The Investment Coordinating Board of the Republic of Indonesia
3
Indonesia’s GDP
In the last 10 years
at 2000 Constant Market Prices
by Expenditure 2004-2013
(IDR Trillion)
GDP Growth
in 2013
2nd fastest
Growing Economy
Among G-20 Countries
(After China, in 2013)
3,000
2,500
2,000
1,500
1,000
500
-
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
“Indonesia’s Growth
Beats Estimates…”
Indonesia’s GDP growth in 2013 beats all
estimates in a Bloomberg News survey of
25 economists, where the median was
5.34 percent.
(Bloomberg, 2014)

4. USD 21.7 billion
21.7
The Investment Coordinating Board of the Republic of Indonesia
4
Investment Realization in Indonesia
Based on Capital Expenditure (USD Billion)
Excl. oil, gas, and financial sectors
Assumption:
Q1-Q2 rate USD 1 = IDR 9,300
Q3-Q4 rate USD 1 = IDR 9,600
Source: BKPM, 2014
23.4
27.9
34.8
42.2
Sustainable
Investment Growth
total investment realization
in Jan - June 2014 (IDR 222.8 trillion),
48.8 % achievement of the 2014 target,
IDR 456.6 trillion.
15.6% increase
from Jan - June 2013 (IDR 192.8 trillion)
13.5 % increase
from Jan – June 2013
67.3% share
of total investment realization
20.2 % increase
from Jan - June 2013
32.7% share
of total investment realization
FDI
Jan –June
2014
DDI
Jan - June
2014
6.8 8.4 10.2
13.6
7.5
16.6
19.5
24.6
28.6
14.2
2010 2011 2012 2013 Jan-June
2014

5. FDI Realization in Indonesia by Origin Country
Top-10 Countries Based on Capital Expenditure (USD million) in Jan –June 2014
Excl. oil, gas, and financial sectors
Rank Country 2010 2011 2012 2013
1 Singapore 5,565 5,123 4,856 4,671 3,393
2 Japan 713 1,516 2,457 4,713 1,541
3 Malaysia 472 618 530 711 717
4 US 931 1,488 1,238 2,436 663
5 South Korea 329 1,219 1,950 2,205 654
6 UK 276 419 934 1,076 646
7 Netherlands 608 1,354 967 928 604
8 Australia 214 89 743 226 449
9 Mauritius 23 73 1,059 780 430
10 British Virgin Islands 1,616 517 856 786 368
11 China 173 128 140 296 231
Total (97 Countries) 16,215 19,475 24,565 28,616 14,287
The Investment Coordinating Board of the Republic of Indonesia
Jan-June
2014
5 Source: BKPM, 2014.
Singapore, Japan and Malaysia
on the Top-3 Biggest Investors in January –June 2014
6000
5000
4000
3000
2000
1000
0
2010 2011 2012 2013 Jan - June
2014
Singapore Japan
Malaysia US
South Korea China
FDI Realization by Origin Country
in Jan – June 2014
24%
11%
5%
4% 5%
51%

6. 6000
5000
4000
3000
2000
1000
The Investment Coordinating Board of the Republic of Indonesia
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FDI Realization in Indonesia by Sector
Top-10 Sectors Based on Capital Expenditure
(USD million)
Excl. oil, gas, and financial sectors
Rank Sector 2010 2011 2012 2013
Jan-June
2014
1 Mining 2,201 3,619 4,255 4,816 2,739
2 Food Industry 1,026 1,105 1,783 2,118 2,064
3 Transport., Storage & Telecom. 5,072 3,799 2,808 1,450 1,649
4 Food Crops & Plantation 751 1,222 1,602 1,605 1,141
5 Transport Equipment Industry 394 770 1,840 3,732 1,027
6 Chemical & Pharmaceutical Ind. 793 1,467 2,770 3,142 979
7 Metal, Machinery & Electronic Ind. 590 1,773 2,453 3,327 859
8 Paper & Printing Industry 46 258 1,307 1,169 535
9 Non Metalic Mineral Industry 28 137 146 874 522
10 Electricity, Gas & Water Supply 1,429 1,865 1,515 2,222 429
Total (All Sectors) 16,215 19,475 24,565 28,616 14,287
Source: BKPM, 2014.
47% of FDI flowed to
secondary sectors in
Semester I 2014,
while mining still got the biggest share
Component of FDI Realization
Based on Group of Sectors
61%
21%
40% 28% 22% 25%
35% 48% 55% 47%
19% 25% 24% 23% 28%
2010 2011 2012 2013 Jan-June
2014
Primary Sectors Secondary Sectors
Tertiary Sectors
0
2010 2011 2012 2013 Jan-June
2014

7. Jakarta
FDIis still concentrated in Java Island,
incentives are offered to improve investment distribution
3% 5% 5% 3%
5% 4% 6% 5%
4% 8% 5% 10%
The Investment Coordinating Board of the Republic of Indonesia
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FDI Realization in Indonesia by Location
Based on Capital Expenditure (USD million) in 2013
Excl. oil, gas, and financial sectors
Rank Economic Corridor 2009 2010 2011 2012 2013
1 Java 9.371 11.499 12.325 13.660 17.325
2 Sumatra 777 747 2.077 3.729 3.395
3 Kalimantan 284 2.011 1.919 3.209 2.773
4 Maluku & Papua 9 596 1.487 1.333 2.735
5 Sulawesi 142 859 715 1.507 1.498
6 Bali & Nusa Tenggara 234 503 953 1.127 889
Total (All Locations) 10.817 16.215 19.475 24.565 28.616
Source: BKPM, 2014.
87%
71%
63%
56% 61%
7%
5%
11%
15% 12%
3%
12% 10% 13% 10%
2009 2010 2011 2012 2013

8. 3rd
The Investment Coordinating Board of the Republic of Indonesia
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World’s biggest
democracy
(after India and US)
Direct Election
The third direct Presidential Elections
has been held in July 2014.
The highest
democracy Index in ASEAN
Indonesia scored 6.76, higher
than average in Asia (5.56) and
in Latin America (6.36).
(The Economist, 2013)
Unityin Diversity
248 million population
300 ethnic groups
700 languages
various faiths
17,508 islands

9. Decentralization
The Investment Coordinating Board of the Republic of Indonesia
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“Remarkable progress
over the past 15 years -
economically, socially, and
politically...”
(UNDP, 2013) In 2001, transformed from
an authoritarian state to
a regional role model.
34 provinces
500 districts
Provinces and districts
provided with greater
autonomy.
Vision 2025
MP3EI as the master plan (2011-2025)
to transform Indonesia into one of the
world’s top 10 economies.

10. APEC CEOs: Indonesia has capacity to surprise
with greater business opportunities than expected...
The Investment Coordinating Board of the Republic of Indonesia
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Source: PwC
APEC CEO Survey, 2013

11. The most promising country for overseas business
(Japan Bank for International Cooperation Survey 2013)
The Investment Coordinating Board of the Republic of Indonesia
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Rank 2005 2006 2007 2008 2009 2010 2011 2012 2013
1 China China China China China China China China Indonesia
2 India India India India India India India India India
3 Thailand Vietnam Vietnam Vietnam Vietnam Vietnam Thailand Indonesia Thailand
4 Vietnam Thailand Thailand Russia Thailand Thailand Vietnam Thailand China
5 US US Russia Thailand Russia Brazil
Indonesia &
Brazil
Vietnam Vietnam
6 Russia Russia US Brazil Brazil Indonesia - Brazil Brazil
7 Korea Brazil Brazil US US Russia Russia Mexico Mexico
8 Indonesia Korea Indonesia Indonesia Indonesia US US Rusia Myanmar
9 Brazil Indonesia Korea Korea Korea Korea Malaysia US Rusia
10 Taiwan Taiwan Taiwan Taiwan Malaysia
Malaysia &
Taiwan
Taiwan Myanmar US
Source: JBIC, November 2013
Positive Factors
1. Future growth potential of local market
2. Inexpensive source of labor
3. Current size of local market
4. Supply base for assembler
5. Industrial cluster development
Issues of Concern
1. Rising labor costs
2. Underdeveloped infrastructures
3. Execution of legal system unclear (frequent changes)
4. Intents competition with other companies
5. Difficult to secure management-level staff
6. Labor problems

12. Top-4 Most Prospective Host Economies for 2013-2015
The Investment Coordinating Board of the Republic of Indonesia
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Indonesia stable at the top five destinations.
United Nations
Conference on Trade and
Development
(Results from UNCTAD’s World Investment Prospects Survey which polls TNC executives on their investment plans)

13. 60%
174%
The Investment Coordinating Board of the Republic of Indonesia
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World’s Most
Populous Country 4th
Covering more than
39%
total population
of South East Asia
70%
2015 Population (projected)
in Middle Income with
per capita expenditure
per day USD 2-20
More than
Population in
working age
170 million
Population in
Middle Income with
per capita expenditure
per day USD 2-20
Source: Bank Indonesia and
Indonesia Statistics Agency, 2012
(Projection)
45
81
93
134
1999 2003 2009 2010 2015
Middle class growth
in Indonesia
2012-2020
Source: AC Nielsen, 2013

14. Beyond Indonesia:
In the heart of the world’s economic growth
The Investment Coordinating Board of the Republic of Indonesia
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Asia and World Population
Source: Coordinating Ministry For Economic Affairs RI, 2011
Global Economic Growth
for Each Decades
(Average percent per year)
Source: World Bank, 2011

15. The Investment Coordinating Board of the Republic of Indonesia
15
InvestmentOpportunities
The most promising sectors
Export-oriented
sectors: downstream
industry of palm and
rubber, electrical
equipment, metal,
paper, textile.
Import substitution of
capital goods and
raw materials:
machinery, iron and
steel, automotive and
spare parts, and basic
chemical.
Import substitution of
consumer goods:
food and beverages,
home appliances, and
oil refinery industries.
Downstream
industries of
mining, agriculture,
fisheries and forestry:
smelter, CPO and cocoa
industries, paper,
furniture.
Industrial sectors with
increasing domestic
consumption
trend: cement and
building material
industries.
Infrastructure
sector encouraged
through PPP: energy, air
and sea ports, roads,
water supply, waste
management and
railways.
Tourism and
creative industries.

16. Commitment & Ease of doing business
What have been done
Infrastructure & logistics
The Investment Coordinating Board of the Republic of Indonesia
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Investment climate
Incentives& facilities

17. The Investment Coordinating Board of the Republic of Indonesia
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Investment Climate Development:
The New Negative List (Presidential Regulation Number 39 of 2014)
Background for amendment of the negative list
– ASEAN Economic Community 2015
• Economic integration – single market and production base
• Free movement of goods, services, investment, skilled labour and
free flow of capital
• ASEAN Comprehensive Investment Agreement (ACIA), 2012
– Towards a free and open investment in 2015
– 16 reservation sectors for Indonesia
– National interest: preparation of future national economic
development
• Boost national competitiveness
• Support specific sectors that can still benefit from foreign
investment (healthcare, national logistical system...)

18. The Investment Coordinating Board of the Republic of Indonesia
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The New Negative List
What changes
– Liberalisation of certain sectors
• New sectors
» Ex: treatment and disposal of non-hazardous waste open to 95% foreign
ownership, previously closed under “private cleaning management”
• Ease restrictions on foreign investment
» Ex: Public-Private-Partnerships
• New opportunities for ASEAN investors
» Ex: Specialist and subspecialist hospital services (throughout Indonesia, maximum
of 67% for foreign investors; capital cities of Eastern Indonesia, except Makassar
and Manado, maximum of 70% for ASEAN investors)
– New restrictions in other sectors
• New restrictions on foreign investment
– New sectors open only to domestic investment
» Ex: retail of certain goods and E-commerce and via post
– Reduction of permitted foreign investment
» Ex: from 95% to 30% foreign ownership for horticulture (in accordance with
Horticultural Law)
– Introduction of new limitations
» Ex: Distribution limited to 33% foreign ownership

19. The Investment Coordinating Board of the Republic of Indonesia
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Indonesia Ease of Doing Business Improvement
Ease of Doing Business Improvement has achieved:
8 Area of Improvement in
Ease of Doing Business
consist of…
• Starting a Business
• Getting Electricity
• Paying Taxes and Premium Insurance
• Enforcing Contract
• Resolving Insolvency
• Registering Property
• Dealing with Construction Permits
• Getting Credit
1. Business entity (Limited Liability/PT) establishment by online system.
2. Simplification on the issuance of Permanent Business Trading License (SIUP)
and Company Registration Certificate (TDP).
3. Expedite workers registration.
4. On line registration for Workers Social Security Program.
5. Simplification on procedures, reducing cost and time for electricity connection.
6. Tax report by online.
7. Online system for payment of social insurance provided (BPJS) by e-payment
mechanism.
8. Accelerate the settlement of commercial disputes in enforcing contract.
9. Accelerate the judicial procedure in resolving insolvency.
10. Time reduction for land certificate examination and transfer of land rights.
11.Building construction permit (IMB) by online.
12.Accelerate water connection services (PDAM).
13.Accelerate telephone connection services (PLN).
14.Regulation for Private Credit Bureau (LPIP) establishment.
15.Collateral Registry Administration System by online.

20. The Investment Coordinating Board of the Republic of Indonesia
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25 high priorityinfrastructure projects
Ready for Ground Breaking Between 2015 and 2017 ( = Potential for PPP)
No. Sumatra USD Mio.
1 Toll Road: Medan–Binjai (15.8 km) 210
2 Toll Road: Palembang–Indralaya (22 km) 180
3 Toll Road: Pekanbaru–Kandis–Dumai (135 km) 1,530
4 Toll Road: Bakauheni–Terbanggi Besar (150 km) 2,372
5 Toll Road: Tebing Tinggi–Kisaran–Rantau Prapat (178 km) 1,396
6 Toll Road: Panimbang–Serang (83 km) 1,191
7 Toll Road: Lubuk Pakam–Tebing Tinggi (43.5 km) 708
8 Seaport: Hub Kuala Tanjung 2,795
9 Seaport: Tanjung Sauh, Batam N/A
Total Sumatra (9 projects) 10,382
No. Java USD Mio.
1 Access Road: Purwakarta Industrial Area (7.8 km) 71
2 Water Supply: Umbulan 211
3 Port and Access Road: Cilamaya (30 km) 4,176
4 Airport and Access Road: Karawang 3,747
5 Railway: Madiun–Surabaya (165 km, Double Track) 430
6 Coal-Fired Power Plant: Indramayu 4 (1x1000 MW) 2,116
Total Java (6 projects) 10,750
No. Kalimantan USD Mio.
1 Toll Road: Balikpapan-Samarinda (99.02 km) 1,261
2 Railway: Purukcahu–Bangkuang–Mangkatip (290 km) 2,277
3 Coal-Fired Power Plant: Asamasam 5-6 (2x100 MW) 331
Total Kalimantan (3 projects) 3,869
No. Bali-Nusa Tenggara USD Mio.
1 Water Supply: South Bali 282.2
Total Bali-NT (1 project) 282
No. Sulawesi USD Mio.
1 Road: Palu–Parigi (37.4 km) 104
2 Toll Road: Manado–Bitung (46 km) 353
3 International Hub: Bitung 3,208
4 Railway: Makassar–Pare-Pare (136.3 km) 621
5 Hydro Electric Power Plant: Karama (4x112.5 MW) 1,376
Total Sulawesi (5 projects) 5,662
No. Maluku-Papua USD Mio.
1 Road: Enarotali–Tiom (240 km) 174
Total Maluku-Papua (1 project) 174
Source: Coordinating Ministry
for Economic Affairs, 2013

21. 50% for a further 2 years
Reduction of income tax
after the expiration of the
tax holiday and can be
extended by MoF.
The Investment Coordinating Board of the Republic of Indonesia
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TAX TAX HOLIDAY
ALLOWANCE
IMPORT DUTY
FACILITY
(Government Regulation No.52/2011) (MoF Regulation No.130/PMK.011/2011) (MoF Regulation No.176/PMK.011/2009)
30% of investment value
Reduction of corporate
net income tax for 6 years,
5% each year.
129business segments
Eligible for tax
allowance, expanded
from 38 segments in
the previous regulation.
Under certain requirements
among others: minimum amount of
investment value and workforce,
and certain project location
(especially outside Java island).
5-10years
Tax relief facility, starting
from the commencement
of commercial production.
Pioneer industry
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.
IDR1trillion
Minimum investment plan.
Machines, goods,
materials for production
2 years import duty
exemption or 4 years for
companies using locally-produced
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

22. ONE-STOP SHOP
FOR INVESTMENT
We provide “one-stop shop”
(PTSP) licensing provision and our
services for investors include…
 Establishing an Investor Relation Unit for
information, facilitation and inqueries handling from
existing and potential investors.
 Rolling-out the Electronic Information Services
and Investment Licensing (SPIPISE) in 105
regions throughout Indonesia.
 Helping contain various obstacles and giving
consultation.
 Facilitating foreign workers permit.
 Providing online investment tracking system.
 Providing online application process for the
principal license. Other steps needed would be
moved online later in 2014.

23. Thank You
Terima Kasih
Badan Koordinasi
Penanaman Modal
(BKPM)
Indonesia Investment
Coordinating Board
Jln. Jend. Gatot Subroto No. 44
Jakarta 12190 - Indonesia
t . +62 21 525 2008
f . +62 21 525 4945
e . info@bkpm.go.id
www.bkpm.go.id
Indonesia Investment Promotion Centre (IIPC)