Indonesia at a Crossroads

Prepared for:
Date:
Indonesia at a Crossroads
Copyright © Tractus Asia Ltd. 2015
13 November 2015
The Road to the AEC & Mekong Region
2015 and Beyond

2
Diverse Markets with Increasingly
Sophisticated Economies
ASEAN 2014 GDP: US$2.57 trillion
GDP Growth average: 5.5%
Population: 618 million+
Total 2013 FDI: US$131.57 billion

33
Indonesia – a String of Pearls

44
ASEAN’s elephant in the room
Population: 250+ million
GDP growth 2014: 5%
GDP: US$888 billion
Local
consumption
makes up
60% of GDP
888
Gross Domestic Products 2014
374
308
327
64
Myanmar
186
Vietnam Thailand Indonesia
17
Cambodia
285
Philippines Singapore Malaysia

55
Abundance of people with fattening wallets
Source:WorldBank
Indonesia
Vietnam
Philippines
Thailand
Myanmar
Malaysia
Cambodia
Singapore
Total Labor Force by Country 2013
(Millions)
3.07
8.61
13.04
31.43
39.65
42.25
53.74
120.29
Tertiary Enrolment Rate (%)
Myanmar
Cambodia
China
Vietnam
Indonesia
Philippines
13.8%
15.8%
24.3%
24.4%
27.2%
30.9%
Malaysia
36.0%
Thailand
52.6%
Source:WorldBank
7% 26% 42% 25%
2014 Household Incomes
(IDR per Year)
>36 million 36-60 million 60-120 million >120 million Source: BPS

66
But slowed by underdeveloped infrastructure

77
Indonesia building to decongest and expand
0 1 2 3 4 5 6 7
Singapore
China
Thailand
Indonesia
Vietnam
Cambodia
Myanmar
Quality of Infrastructure
Airports
Ports
Roads

88
Economy fueled by services and industry
Services
• Trade, hotel & restaurants
• Transport & communication
• Business services
Industry
• Construction
• Mining
• Automotive
Agriculture
• Palm Oil
• Cocoa
• Rubber
43.3
(% of GDP)
13.7
(% of GDP)
42.9
(% of GDP)

99
With growing participation in the global economic
community
Agreement Year
ASEAN Free Trade Area 1992
ASEAN-China Free Trade Area 2003
ASEAN-New Zealand-Australia Free Trade Area 2004
ASEAN-Japan Free Trade Area 2008
ASEAN-South Korea Free Trade Area 2008
Indonesia-Japan Economic Partnership
Agreement (IF-EPA) 2008
Indonesia-Pakistan Free Trade Agreement 2013
Trans Pacific Partnership TBD
Regional Comprehensive Economic Partnership TBD

1010
Significant importer of capital goods and components while a
heavy exporter of base commodities
Source: TradeMap
25%
14%
10%
5%4%
4%
4%
2%
2%
2%
28%
Top Imports 2014: Total US$178.1
Billion
Fuels, oils, etc
Machinery
Electronic equipment
Iron & steel
Plastics
Organic chemicals
Vehicles
Iron or steel products
Cereals
Residues, wastes,
animal fodder
Other products
29%
12%
6%
4%3%
3%3%
2%
2%
2%
34%
Top Exports 2014: Total US$176
Billion
Fuels, oils, etc.
Fats
Electronic equipment
Rubber products
Machinery
Vehicles
Precious stones,
metals, etc.
Misc. chemical
products
Footwear
Wood products
Others

1111
Southeast Asia investment – competing for FDI
0
10000
20000
30000
40000
50000
60000
70000
MillionsUSD
FDI Into Southeast Asia
2009
2010
2011
2012
2013
Source: UNCTAD

1212
Investors bullish on Indonesia
Investment Realization 2010 – Q3 2015 (trillions IDR)
Source: BKPM
FX: 1 USD = 13,500

1313
With investment edging towards added value
Source: BKPM
14%
13%
10%
8%
7%
7%
7%
7%
5%
22%
Mining
Transport, Storage &
Communication
Metal, Machinery & Electronic
Industry
Electricity, Gas & Water Supply
Motor Vehicles & Other
Transport Equip. Industry
Real Estate, Ind. Estate &
Business Activities
Chemical and Pharmaceutical
Industry
Food Crops & Plantation
Food Industry
Other
FDI Realization by Sector 2015 (through Q3)

1414
From a diversity of nations
Source: BKPM
14%
16%
12%
2%
4%4%3%
45%
FDI Realization by Country 2015 (through Q3)
Malaysia
Singapore
Japan
China
Netherlands
USA
British Virgin Islands
Other

15
15
TAX
HOLIDAY
TAX
ALLOWANCE
IMPORT
DUTY
FACILITY
(Government Regulation No.18/2015) (MoF Regulation No.176/PMK.011/2009)
(MoF Regulation No MK
159/PMK.010/2015)
143 business
segments eligible for tax
allowance
30% of investment value
reducedfromcorporatenet
incomeover6years
Requirements Apply
5-15years taxexemption
Potential for 20years
exemption for “strategic”
industries
10-100% reduction in
tax in 9 pioneer industries
IDR
1trillionminimum
investmentplan (US$ 100
million)
0% import duty on
machines, equipment, and
raw materials for
production
1.Tourism and culture
2.Public health services
3.Mining
4.Construction
5.Telecommunication
6. Port
ApplicableIndustries
include:
Governmentlookingto attractfurtherinvestment
Source: BKPM

1616
While trying to increase the tax base
25%Corporate income tax
15%Dividends, interests, royalties
20% Withholding on remittance
5%-
30% Personal income tax
10% Value Added Tax
20%Withholding tax from
bank deposits
0
2
4
6
8
10
12
14
16
18
Tax Collection Rate (%)

1717
20%
12.50%
10% 9.50% 8%
6.20% 6% 5.60% 5% 4.80%
0%
5%
10%
15%
20%
25%
2011 2012 2013 2014 2015F
National Modern Retail
Revenue Growth
Modern Retail Growth Revenue GDP Growth
120.2
119.8
120.6
120.1
116.5
120.2
120.2
116.9
107.4
112.8
111.3
109.9
112.6
97.5
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Consumer Confidence Index
(100 in 2010)
Economy faces a number of near-term challenges
0
5000
10000
15000
20000
20-year History of IDR to USD
Source: Bank of Indonesia
Source: Bank of IndonesiaSource: Indonesia Retailer Association

1818
And is gradually reforming
Note: Data not available for Brunei. Ranking is out of 174
Source: Transparency International
Note: Ranking is out of 189
Source: World Bank
1
18
49
84
90
103
109
127
134
167
0 20 40 60 80 100 120 140 160 180
Singapore
Malaysia
Thailand
Brunei
Vietnam
Philippines
Indonesia
Cambodia
Laos
Myanmar
Ease of Doing Business Ranking 2016
7
50
85
85
107
119
145
156
156
0 20 40 60 80 100 120 140 160
Singapore
Malaysia
Thailand
Philippines
Indonesia
Vietnam
Laos
Cambodia
Myanmar
Global Corruption Perception Index

1919
Numerous challenges deter investment

2020
The archipelago walks the line of openness and
protectionism

2121
Jokowi hoping to stimulate the economy
First Package
September 9
• Deregulation
and
bureaucratic
reform
• Accelerating
strategic
projects
• Increasing
property
sector
investment
Second Package
September 29
• Simplificatio
n of
investment
license
• Progress on
fiscal
incentive
• Tax cut for
exporters’
deposit
Third Package
October 7
• Lower cost
of fuel, gas,
and
electricity
• Expansion of
micro loan
recipients
• Simplifying
land
clearance
Fourth Package
October 15
• New formula
for UMP
wages
• Further
expansion of
micro loan
recipients
• Measures to
prevent
layoffs
Fifth Package
October 21
• Tax
reduction for
asset
reevaluation
• Double tax
removal for
infrastructure
and real
estate
investment
trust

2222
To build the road forward

Thank you
Shanghai
Hong Kong
Pondicherry
Jakarta
Yangon
Singapore
Bangkok
Ho Chi Minh City

2424
Daniel Bellefleur – Indonesia Country Representative
Daniel Bellefleur
Daniel is the
Indonesia
Country
Representative
and Consultant
for Tractus Asia,
overseeing both
domestic and
ASEAN based
projects
Contact:
Daniel.bellefleur@tr
actus-asia.com
+62.21.29492272
Mr. Bellefleur joined Tractus in 2012 to establish the Tractus Indonesia corporate entity, roll out business development
activities, consult on Indonesia based initiatives and cooperate on regional projects.
As the Chief Country Representative to Indonesia, Mr. Bellefleur is responsible for all in-country operations. Aside from
implementing local and regional projects and building the Tractus network in-country, Daniel manages local staff to
support client needs in the archipelago. With the expanding economy and emerging middle class, Tractus expects
ample opportunities for foreign investors in Indonesia. Below are a number of projects Daniel has worked on:
Ecofys – Supply chain analysis of used cooking oil in Indonesia
Emerging Markets Consulting – Market research on Indonesian preparedness for the ASEAN Economic Community
2015
Minerals Technologies – Facilitating the company’s human resources in-country
Gentherm – Analyzed Indonesia sites for potential manufacturing investment
US Chamber of Commerce and AmCham Hong Kong – Supported two trade missions to Myanmar
Two international law firms – Southeast Asian site selection analysis for BPO operations
AKW – Analysis of Indonesian market for mineral processing technology and customer outreach
Nova-Tech Engineering – Indonesia contracting, tax, and import export regulatory analysis and customer liaison
Fredskorpset – Project manager for Asia expansion
AmCham Indonesia – Vice-chair AmCham ASEAN Committee
Prior to joining Tractus, Mr. Bellefleur worked at the American Chamber of Commerce Indonesia as a Policy Advisor
conducting analyses with local advisors at the Indonesian Chamber of Commerce (KADIN) and the Indonesian
Employers Association (APINDO). The team researched and delivered comprehensive papers to USAID on subjects
such as renewable energy, entrepreneurship, and local manpower laws. Daniel has a Master’s Degree in International
Affairs from the University of Wisconsin, Madison with a focus on Southeast Asian Economics. Daniel also has
significant experience in Thailand where he researched numerous topics at the U.S. Consulate and worked as a Peace
Corps community development advisor in Northern Thailand.

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