Republic of Indonesia Synergy for Progressive Reforms October 2016 0
About Investor Relations Unit of the Republic of Indonesia Investor Relations Unit (IRU) of the Republic of Indonesia has been established as a joint effort between Coordinating Ministry of Economic Affairs, Ministry of Finance and Bank Indonesia since 2005. The main objective of IRU is to actively communicate Indonesian economic policy and to address concerns of investors, especially financial market investors. As an important part of its communication measures, IRU maintains a website under Bank Indonesia website which is administered by International Department of Bank Indonesia. However, day-to-day activities of IRU are supported by all relevant government agencies, among others: Bank Indonesia, Ministry of Finance, Coordinating Ministry for Economic Affairs, Investment Coordinating Board, Ministry of Trade, Ministry of State Owned Enterprises, Ministry of Energy and Mineral Resources and Financial Services Authority. IRU also convenes an investor conference call on a quarterly basis, answers questions through email, telephone and may arrange direct visit of banks/financial institutions to Bank Indonesia and other relevant government offices. Published by Investor Relations Unit – Republic of Indonesia Contact: Wiwit Widyastuti K. (International Department - Bank Indonesia, Phone: +6221 2981 8279) Dalyono (Fiscal Policy Office – Ministry of Finance) Farid Arif Wibowo (Directorate General of Budget Financing and Risk Management- Ministry of Finance) E-mail: contactIRU-DL@bi.go.id 1
Overview Institutional And Governance Effectiveness: 1 Accelerated Reforms Agenda with Institutional Improvement Economic Factor: 2 Strong and Stable Growth Prospects Remain Intact External Factor: 3 Improved External Resiliency Fiscal Performance and Flexibility: 4 More Fiscal Stimulus with Prudent Fiscal Management Monetary and Financial Factor: 5 Credible Monetary Policy Track Record and Favourable Financial Sector 2
Institutional and Government Effectiveness: 1 Accelerated Reforms Agenda with Institutional Improvement
Positive Global Perception Ease of Doing Business 1 Corruption Perception Index 2 * Both India and Brazil shared the same score (38) in 2015 55 2008 2009 2010 2011 2012 2013 2014 2015 2016 50 50 Higher rank is better 45 45 69 70 38* 40 90 91 36 35 99 35 30 110 25 123 Higher score is better 130 130 20 2010 2011 2012 2013 2014 2015 150 Indonesia India Brazil Philippines Turkey Indonesia India Brazil Philippines Turkey Global Competitiveness Index 3 World Governance Indicators 1 55 Higher rank is better 2009 2010 2011 2012 2013 2014 2015 2016 52 30 Higher rank is better 46 39 45 41 40 45 38 35 55 60 57 25 25 75 * Both ‘Rule of Law’ and ‘Regulatory Quality’ shared the same score (40) in 2015 15 81 2010 2011 2012 2013 2014 2015 90 Voice and Accountability Political Stability/Absence of Violence Indonesia India Brazil Phillipines Turkey Government Effectiveness Regulatory Quality Rule of Law Control of Corruption 1. Source: World Bank; 2. Source: Transparency International; 3. Source: World Economic Forum 4
Indonesia Remains the Investment Destination of Choice Rising Direct Investments 1 Indonesia Enjoys Large Investments Relative to Peers within the Region 2 IDR tn 34,65 2016E Total Investment / GDP (%) 35 31,66 FDI DDI TOTAL 160 155.3 30 26,15 55.6 24,42 120 23,74 25 17,96 20 80 15 99.7 40 10 0 5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 0 2013 2014 2015 2016 Brazil India* Indonesia Malaysia Philippines Thailand The Economist: Indonesia among the top 3 destination for attracting JBIC: Amongst ASEAN countries, Indonesia is the most preferred place for investors in Asia (January 2016) 3 business investment (December 2015) 4 India 40,4 India 69,3 Indonesia 38,8 China 58,2 China 38,8 Indonesia 48,0 Thailand 30,7 Philippines 37,2 Vietnam 27,5 Malaysia 32,7 Mexico 23,6 Myanmar 32,2 USA 16,6 Vietnam 30,1 Philippines 11,5 Thailand 29,0 Brazil 11,1 Japan 28,3 Myanmar 7,9 Australia 27,1 Malaysia 6,2 Singapore 24,8 Russia 5,5 South Korea 23,6 Singapore 4,6 Hong Kong 22,9 Korea 3,9 % of surveyed who consider each country has promising prospects % of surveyed who plan to increase investment in each country Taiwan 18,9 Turkey 3,9 0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0 80,0 0 5 10 15 20 25 30 35 40 45 The Economist – Asia Business Outlook Survey 2016; 1. Source: Indonesia Investment Coordinating Board (BKPM); 3. Source: JBIC – Outlook for Japanese Foreign Direct Investment (27th Annual Survey); 2. Source: IMF World Economic Outlook, Database October 2016, * actual figures; 4. 5
National Strategic Development Plan (Nawa Cita) The 3 Dimensions on Economic Development Priority Sector Human Development Equitable Development Development Food Security Education Inter- Income Group Energy & Electrical Security Health Maritime & Marine Inter-Region: Housing (1) Rural Area, Tourism & Industry (2) Periphery, (3) Outside Java, Water Security, Basic Character Infrastructure & Connectivity (4) Eastern Area. Necessary Condition Legal Certainty & Politic & Democracy Governance Security & Order Law Enforcement 6
Improving Investment Climate: Introduce the 3-hour investment licensing service to complement the One Stop Service (OSS) Requirement for utilizing 3-hour Investment Lisencing Service: 1. Minimum investment of IDR 100 billion (USD 8 million) and/or employing 1,000 local workers. No requirements for investment in infrastructure sector 2. Application must be submitted directly by at least one candidate of the proposed company stakeholder BKPM • Arrive at OSS at BKPM directly from the airport Obtain eight documents & letter of land Wait at the lounge while documents are • Consult with Director of Investment Service availability within three hours to start the processed by BKPM, in-house notary, • Submit the required documents & data ministries, & other government institutions business 9 documents obtained 2 documents needed Certainty to Certainty to start a business Investor identitiy as the prospective shareholders Import capital goods • Investment license • APIP / Import identification • ID Card • Certificate of incorporation • NIK / Customs registration • And/or Deed of Establishment (Indonesian company) or Article • NPWP / Tax Registration Number of Association (Foreign company) • TDP / Company Registration Flowchart of business activities workflow Accurate land Certainty to work information • Containing workflow from raw material production to the • Letter of land availability • RPTKA / Employment plan finished products • IMTA / Working permit Until October 2016, 130 companies have utilized the “ 3 hours services ” Source: Investment Coordinating Board (BKPM) 7
Improving Investment Climate: Introduce the 3-hour investment licensing service to complement the One Stop Service (OSS) Priority Investment Service No Requirements • No minimum investments or workers is Direct Construction (KLIK) required. • Available for 14 selected industrial parks . Investors can directly start their project construction before • Construction permits can be obtained in parallel obtaining construction permits. This service is supported by both Central and Regional Governments which become the with construction process. first step to synergize between central and local licensing • Obtain investment licence at OSS • Start the construction of your project. Survey a land within selected No other permits are required. at national or regional level. industrial parks. • Apply for building construction permit & • Acquire the land for your industry. environmental permit, in parallel with construction process. Until September 2016, 66 projects have utilized the “KLIK services ” Source: Investment Coordinating Board (BKPM) 8
Improving Investment Realization (Q3-2016) 373,560 Rp155.3 T 276,023 Rp140.3 T * Decreasing 10.7% 26.1% Q3-2015 Q3-2016 Q3-2015 Q3-2016 * person Rp55.6 T Rp99.7 T Rp47.8 T Rp92.5 T 7.8% 16.3% Q3-2015 Q3-2016 Q3-2015 Q3-2016 Source: Investment Coordinating Board (BKPM), compared to Q3-2015 period 9
FDI Realization by Sectors (Q3-2016) Electricity, Gas and Water Supply US$663.85 mn 37.7% Chemical and Food Industry Pharmaceutical Industry US$632.24 mn US$569.75 mn 50.3% 3.2% Food Crops Investment US$694.39 mn Realization 24.4% Transport Equip and Other Transport Industry Metal, Machinery and US$688.41 mn Electronic Industry US$1,231.41 mn 30.8% 70.1% Mining US$764.06 mn 15.8% Source: Investment Coordinating Board (BKPM), compared to Q3-2015 period 10
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