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The Indonesian government has done a lot to enhance the quality of the business

environment for the private sector, particularly in the last three years.

- Rodrigo Chaves, World Bank Indonesia Country Director

Investing in Indonesia : Why now?

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https://news.bcpriok.info/wp-content/uploads/2017/03/cropped-bg4.jpg Property of MCIT, Republic of Indonesia. For Discussion Only
WHY INDONESIA WHY NOW?

Steady economic growth in the past 10 years Most aggressive infrastructure development in

Investment grade by all major rating firms Indonesias history

5th largest economy in the world by 2030 Extra incentive for investments in industrial, tourism

135 million consuming class by 2030 and special economic zones

180 million population in productive age by 2030 Fiscal reform for long term sustainable growth

Significant improvement in regulatory Law reform to ease business and investment

environment as reflected in Ease of Doing Concrete policy for eradication of corruption

Business Citizens trust on the Indonesian Government is at all


time high
Strong investors confidence to invest further in
Indonesia
Policies reform in ICT sectors
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WHY INDONESIA?
STEADILY IMPROVING ECONOMIC PERFORMANCE

EVEN DURING GLOBAL ECONOMIC SLOWDOWN, INDONESIA STILL 2017 ALSO MARKS THE TIME INDONESIA REGAINED INVESTMENT
RECORD REPUTABLE GROWTH THAN MOST COUTRIES GRADE ACROSS ALL MAJOR RATING AGENCY

Source: Bank Indonesia 2017, BKPM 2017


Source: Indonesia Investment2017, Bank Indonesia 2017 www.kominfo.go.id @kemkominfo
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WHY INDONESIA?
INDONESIA IN POSITION TO BREAK THE TOP 5 LARGEST ECONOMY
GDP FORECAST IN MARKET EXCHANGE RATE (USD in Billion) GDP FORECAST IN PURCHASING POWER PARITY (USD in Billion)

No 2016 2030 No 2016 2030


1 United States 18,562 China 26,499 1 China 21,269 China 38,008
2 China 11,392 United States 23,475 2 United States 18,562 United States 23,475
3 Japan 4,730 India 7,841 3 India 8,721 India 19,511
4 Germany 3,495 Japan 5,468 4 Japan 4,932 Japan 5,606

5 United Kingdom 2,650 Germany 4,347 5 Germany 3,979 Indonesia 5,424

6 France 2,488 United Kingdom 3,530 6 Russia 3,745 Russia 4,736

7 India 2,251 France 3,186 7 Brazil 3,135 Germany 4,707

8 Italy 1,852 Brazil 2,969 8 Indonesia 3,028 Brazil 4,439

9 Brazil 1,770 Indonesia 2,449 9 United Kingdom 2,788 Mexico 3,661

10 Canada 1,532 Italy 2,278 10 France 2,737 United Kingdom 3,638

16 Indonesia 941

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Source How will the global economic order change by 2050, PwC 2017 4
WHY INDONESIA?
GROWING PRODUCTIVE POPULATION AND CONSUMING CLASS

ESTIMATED 180M POPULATION IN PRODUCTIVE AGE, 90 MILLION INDONESIANS COULD JOIN


AT THE PEAK OF DEMOGRAPHIC DIVIDEND THE CONSUMING CLASS BY 2030

Source: Taking Advantage of the Demographic Dividend in Indonesia, UNFPA 2015


Indonesia An Inevitable Choice of Economic Transformation, Waltham Economy of Asia Review, 20114
www.kominfo.go.id @kemkominfo
Unleashing Indonesia Potential, McKinsey Global Institute 2012
Antara News, 2016 5
Property of MCIT, Republic of Indonesia. Not for redistribution.


We are once again confronting challenging times in Indonesia.
The world looks full of uncertainty and risk.
What does it all mean?
It means that today is the time to invest - the best time to
invest.

President Joko Widodo


at Singapore-Indonesia Business Dialogue 2017

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WHY NOW?
NEW CENTERS FOR ECONOMIC GROWTH
NEW ECONOMIC ZONES TO SPUR MORE EQUAL AND DIVERSED GROWTH
Special Economic Zones
Industrial Zones
Strategic National Tourism Zones

NEW INFRASTRUCTURES TO SUSTAIN GROWTH

2650 km public roads 24 sea ports 97.2% electrification


1000 km toll road 60 ferry ports 35000 MW power plan
Increase number of vessels
Rapid transit bus in 29 cities 33 Dams
15 airports
MRT in 6 metropolitans and 30 hydroelectric power plants
Increase pioneer flights
17 large cities Irrigation systems for 1 m ha
2159 km city rails
1099 inter-city rails Oil refineries with 2 300.000 barrel
www.kominfo.go.id capacity
@kemkominfo

Source: Coordinating Minister for Economic Affairs, 2017 7 Increase the capacity of existing oil refineries
WHY NOW?
ECONOMIC POLICY PACKAGES FOR BUSINESS AND INVESTORS
STIMULUS TO HELP BUSINESS AND INVESTORS DURING GLOBAL ECONOMIC SLOWDOWN
I 9 Sep 2015 II 29 Sep 2015 III 7 Oct 2015 IV 15 Oct 2015 V 23 Oct 2015 INDONESIA 2015-2019
Deregulation 3 Hours Permit Lowering Fuel and Fair Wages system, Decrease in Tax
Strategic Project
Acceleration
Issuance Program
The abolition of VAT
Electricity Price
Simplification of
simple and can be
projected
Revaluation of
Assets
ECONOMIC
Encouraging for the transport Land Permit for The ease and Eliminating double P O L I C Y PAC K AG E
housing for low- industry Investment activity affordability of taxation of REITs
income Integrated Logistics Expanding Small Small Business
Facility Business Loan Loans
Recipients

VI 5 Nov 2015 VII 4 Dec 2015 VIII 21 Dec 2015 IX 27 Jan 2016 X 11 Feb 2016 XI 29 Mar 2016
Development of SEZ Acceleration of Land One Map Policy Acceleration of Ease of Investment Publishing REITs and
KURBE (export-
Ease of Water Certification Process Refinery Construction for Restrictions
oriented business
Supply Tax Incentives for construction Electrical loans)
Simplifying the labor intensive Incentives for the Infrastructure Indonesia Single Risk
Import Licensing for industry Aviation Industry Meat Price Management - ISRM
Pharmaceutical Stabilization Pharmaceutical
products Deregulation in the Industry Development
Logistics Sector

XII 28 Apr 2016 XIII 24 Aug 2016 XIV 10 Nov 2016 XV 15 Jul 2017 XVI 31 Aug 2017
Simplification of Accelerating Creating a roadmap Cost reduction for Task Force for business
Licensing development of for the nation's e- freight and logistics licensing process,
Procedures, affordable housing, commerce industry: Opportunities for checklist licensing at
Duration and Cost of by reducing, easing and logistic insurance and economic zones and data
Starting a Business integrate, and widening access vessel maintenance sharing for licensing
in Indonesia accelerate the to funding Strengthening Regulator reforms and
licensing process offer tax National Single single submission system
www.kominfo.go.id @kemkominfo
incentives, etc. Window
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WHY NOW?
CONCRETE MEASURES FOR LAW REFORM
LAW REFORM PACKAGES TO IMPROVE BUSINESS AND INVESTMENT CLIMATES

ILLEGAL LEVIES ERADICTION TASK FORCE [SABER PUNGLI]


I 26 Oct 2016

Areas of Law Reform package I : Central Government Task Force and Provincial Units
1. Legislation management Multi-sectors, from logistics, public services to education
2. Reforming law enforcement agencies 17,600 reports in the first 50 days
3. Creating legal culture By July 2017 : 917 sting operations, 1834 suspects processed
and Rp 17 billion confiscated

II 17 Jan 2017
SIMPLIFICATION OF REGULATION
Areas of Law Reform package |I :
1. Simplification of regulations Presidential directive to halve 42,000 existing regulations by 2019
2. Accessibility of legal assistance By end of 2016, 324 regulations were revoked and 75 regulations
3. Early warning system for radicalism and were revised across 20 Ministries and 3,143 regulations in
terrorism Ministry of Home Affairs and at Local Governments level

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Source: Setkab, 2016, Kompas 2017, Detik 2017
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WHY NOW?
HIGH CONFIDENCE ON INDONESIA
TRUST OF INDONESIAN CITIZENS TO THE INVESTORS WILLINGNESS TO INCREASE
GOVERNMENT IS AT ALL TIME HIGH INVESTMENTS PLACED INDONESIA AS 3rd in ASIA

Source: Government at a Glance 2017, OECD Source: Asia Business Outlook Survey 2017, Thewww.kominfo.go.id
Economist Corporate Network 2017
@kemkominfo
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WHY NOW?
COMPETITIVENESS AND REGULATORY ENVIRONMENT
GLOBAL COMPETITIVENESS RANK

(Rank) 2014 2015 2016 2017


Singapore 2 2- 2- 3
Malaysia 20 18 25 23
Thailand 31 32 34 32
Indonesia 34 37 41 36
Viet Nam 68 56 60 55

EASE OF DOING BUSINESS

(Rank) 2014 2015 2016 2017


Singapore 1 3 2 2-
Malaysia 17 22 23 24 2019
Thailand
Indonesia
46
120
46 -
106
46-
91
26
72
40
Viet Nam 93 91 82 68
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Source: World Economic Forum 2017, World Bank 2017 11
WHY NOW?
ICT POLICIES UPDATE

DEVICES NETWORKS APPLICATIONS

Business Classification: Digital


Domestic component Platform
Affirmative policy to ensure
requirements Safe Harbor
universal access of
Certification process for mobile, Revision of GR 82/2012: Data
telecommunication
handheld and tablet computers localization
Over the Top Service
Next Indonesia Unicorn

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WHY NOW?
PRESIDENTIAL DECREE NO.74/2017: INDONESIA DIGITAL ECONOMY ROADMAP
31 INITIATIVES TO BE COMPLETED IN 1-YEAR-TIME

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Source: Kominfo 2017 13


Thank You

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SUPPLEMENT 1
PALAPA RING

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Source: Kominfo 2017


SUPPLEMENT 2
INCENTIVES AT SPECIAL ECONOMIC ZONES
1. Income Tax (PPh) b. Outside of main activity (Tax allowance)
a. Main activity: 30% reduction of net income for 6 years
> Rp 1 T investment : 20-100% reduction of PPh for 10-25 years Earlier depreciation and amortization
Rp 500 B- 1 T investment: 20-100% reduction of PPh for 10-15 years 10% PPh dividend paid to foreign tax payer (WPLN)
<Rp 500 M investment: 20-100% reduction of PPh for 5-15 years for special activity Compensation for losses 5-10 years

2. Value Added Tax and Sales Tax on Luxury Goods (PPN and PPnBM)
Import: not imposed
Transaction between entities in Special Economic Zone: not imposed
Transaction between entities in different Special Economic Zone: not imposed

3. Custom and Duties


Import: free custom and postponed import duties
From Special Economic Zone to domestic market: import duties follows the prefential tariff based on domestic components

4. Property ownership (Special Economic Zone for Tourism


Free of PPnBM and PPn for luxurious goods
Foreigners/foreign business entities can own property built on land based on agreement with rights holder of the land

5. Main Activity in Tourism


Qualify for Local Tax reduction www.kominfo.go.id @kemkominfo
16 Source: Coordinating Ministry for Economic Affairs 2017
Qualify for Local Retribution reduction
SUPPLEMENT 3
INVESTMENT GRADE BY MAJOR RATING FIRMS

THE INVESTMENT GRADES WERE HARD EARNED THROUGH


CREDIT RATING AS JULY 2017
SERIOUS REFORM BY THE GOVERNMENT

This is a well-deserved upgrade thanks to its prioritization of


fiscal sustainability at the expense of growth in 2016,

- Trinh Nguyen, Natixis SA Hong Kong

More upgrades are possible, with Fitch and Moodys


potentially moving Indonesia up the scale further into
investment grade. All these may be a cause for a raucous
celebration, but also quiet reflection. Tough reforms got
Indonesia to this point.

- Wellian Wiranto, Oversea-Chinese Banking Corp.

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17 Source: Bank Indonesia, 2017, Bloomberg 2017
SUPPLEMENT 4
INVESTORS CONFIDENCE

CONSISTENT INCREASE IN INVESTMENTS IN THE PAST GROWTH OF GDP CONTRIBUTION IS OBSERVED ACROSS
THREE YEARS ALL TOP SECTORS (in USD b, YoY growth 2016)

4.3%
3.3%
3.9%
5.2%
1.1%
7.7%
8.9%
3.2%
8.9%
3.8%

Source: BKPM, 2017 www.kominfo.go.id @kemkominfo


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Source: Kominfo 2017 19


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