invest in

Invest in Remarkable Indonesia

Indonesias Investment Policies and Economic Updates
INDONESIA INVESTMENT COORDINATING BOARD
BKPM November 2013
2013 by Indonesian Investment Coordinating Board. All rights reserved

Contents

Why Indonesia?

Indonesia Investment Performance

How to Invest in Indonesia

The Investment Coordinating Board of the Republic of Indonesia

Why Indonesia?
An Opportunity You Cant Afford to Resist

Why Indonesia

Country Snapshot: The Biggest Archipelago

GDP Size (nominal) GDP percapita

(nominal)

USD 916 Bi USD 3,562.6 6.23 %

Land Area Sea Area Total Area Coastal Line

1,904,443 sq km 3,116,163 sq km 5,020,606 sq km 81,000 km

GDP Growth, 2012

Population Main Towns

245.6 Million people (4th biggest population) Population

(000)

GDP Share GDP/Capita

(%) (USD 000)

Jakarta (Capital) Surabaya Bandung Semarang Medan Samarinda Makassar

9,608 2,765 2,394 1,556 2,097 727 1,339

Jakarta (Capital) East Java West Java Central Java North Sumatera East Kalimantan South Sulawesi

16.4 14.8 14.6 8.5 5.2 6,1 2.3

9.9 2.3 1.9 1.5 2.3 10 1.6

The rising population share of Indonesias middle class, those who spend USD2 - USD20 per day (% of population):

Languange Indonesian (Bahasa Indonesia) As well as some 7500 other regional languanges and dialects.
Source: various

2003

2010

37.7%
The Investment Coordinating Board of the Republic of Indonesia

56.5%
Source: World Bank
4

Why Indonesia

Strategic Location: Gateaway to ASEAN Market

The Investment Coordinating Board of the Republic of Indonesia

Why Indonesia

Resources: Home for Many Natural Resources

Indonesia has an abundance of renewable (agricultural products) and un-renewable (mining and minerals) natural resources
The Investment Coordinating Board of the Republic of Indonesia

Why Indonesia

Population Structure: Competitive Advantage in Terms of Worker and Consumer

4th most populous country in the world (2010)

Higher buying power and quality of human resources

Dependency index will reach the lowest point in 20202030

Sources: Masterplan Acceleration and Expansion of Indonesia Economic Development 2011-2025
The Investment Coordinating Board of the Republic of Indonesia

Why Indonesia

Growing Middle Class: Higher Demands for Better Services and Products

Number of population in middle income

(per capita expenditure per day $2-20)
Sources: Bank Indonesia & BPS-Statistics Indonesia, 2012 (projection)

Proportion of the population based on per capita expenditure per day

5.5%
Note: Per capita expenditure per day is adjusted to the 2005 purchasing power parity terms. Source: SUSENAS and World Bank staff calculations.

18.0% = 40 million people = more than the total

population of Malaysia and Singapore combined.

The Investment Coordinating Board of the Republic of Indonesia

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GDP growth rates (%)

10 5 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 -5 -10 Source: CEIC -15 2011

Why Indonesia

Sound Economy
Maintaining the Pace of Growth
180 160 140

Indonesia is fiscally and monetarily

120 100 80 60 40 20 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
9

more sound
Compared to some European countries

Real GDP per capita (1996=100)

Indonesia

Korea

Malaysia

Thailand

Philippines

The Investment Coordinating Board of the Republic of Indonesia

Why Indonesia

Sound Economy: Insist for Stability

60% 50% 40% 30%

Public Debt and Budget Deficit (% of GDP)

23%

BI Rate vs Inflation (%)

20% 10% 0%
2004 2005 2006 2007 2008 2009 2010 2011 2012

The Investment Coordinating Board of the Republic of Indonesia

10

Why Indonesia

Better Economic Growth than IMFs Projection in 2012

Indonesias 2012 growth hits 6.2%

The Financial Times, 5 February 2013

China
7.8 %

Indonesia 6.2 %

India 5.5 %

Nominal GDP Growth Projection

China India

Indonesia
Saudi Arabia Argentina Russia Turkey Mexico Korea Brazil
0.0 2.0 4.0 6.0 8.0 10.0

The IMF projects Indonesia will be at

2017 2013 2012

the top 3 fastest economic growths among G20 countries.

International Monetary Fund; World Economic Outlook Database, April 2012.

The Investment Coordinating Board of the Republic of Indonesia

11

Why Indonesia

Indonesia Today

McKinsey Global Institute: The Archipelago Economy: Unleashing Indonesia's Economic Potential September 2012

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12

Why Indonesia

Indonesia Today and Indonesia in 2030

McKinsey Global Institute September 2012

The Investment Coordinating Board of the Republic of Indonesia

13

Why Indonesia

Investment Climate: The World Embraces Indonesias Economic Performance

Indonesia's foreign debt rating

Indonesias current position Investment grade

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14

Why Indonesia

Abundant Opportunities: Large Market to Served

Consumer Spend in 2011 and 2030

The burgeoning consuming class will give rise to new markets. The new wave of consuming class in Indonesia is a huge business opportunity. With an additional 90 million consumers in Indonesia, consumer spend in urban areas would increase at 7.7% a year to become a USD 1.1 trillion business opportunity by 2030.
The Investment Coordinating Board of the Republic of Indonesia

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Why Indonesia

Priority Sectors : Opportunities to be Taken

1. Sectors that gives added value in the framework of downstreaming program or advanced product processing of mining, agriculture, fishery, and forestry
e.g.: Smelter industry; CPO, cocoa, and fishery advance processing

Development of Priority Industry 2010 - 2014

Indonesia Ministry of Industry

NO

Industry Labor-intensive Industry Small-Medium Industry Capital-goods Industry

Sector Textile, Footwear, Leather, Furniture Fashion, Craft, Precious Stone, Ceramics, Essential Oil, etc. Machinery, Shipyard Food and Beverages, CPO, Cocoa, Rubber, Steel & Upstream Aluminum, Seaweed Automotive, electronics dan Telematics Sugar Industry, Fertilizer Industry, Petrochemical Industry, Oil and Gased Based Industriy
16

2.

Sectors of industry which type of production is imported as capital goods and raw material to support other industry (the substitution of import of capital goods and raw material)
e.g.: Steel and iron; automotive components; basic chemical; and machinery

2 3. Sectors of industry which type of production is imported as public consumption in Indonesia (the substitution of import of consumption goods)
e.g.: Food and beverages industry; home appliances; Oil Refinery (BBM, lubricant).

4.

Sectors of industry which show increasement in domestic consumption trend

e.g.: Cement industry;building materials

Human-capitalbased Industry

5.

Export-oriented sectors which use relatively small imported capital goods and raw materials
e.g.: Industri tekstil, Hilirisasi Industri pengolahan kelapa/kelapa sawit (minyak nabati), Industri pengolahan karet, produk kayu, budidaya udang, industri kakao, kopi, rumput laut, industri makanan, dll

High Growth Industry

6.

Infrastructure sectors which development driven by the Government through the pattern of PPP
e.g.: renewable energy; highway development; airport and seaport; water supply; waste processing; railway development

Special Priority Industry

7.

Tourism Sector and Creative Industry

The Investment Coordinating Board of the Republic of Indonesia

Souce: BKPM

Investment Performance
The Role of Investment in Indonesia

Investment Performance

Economic and Investment Growth Target: National Mid-Term

Development Plan (RPJMN) 2010-2014
The Government has set investment as main contributor of economic growth which targeted 6.3 6.8% each year for 5 years (2010-2014)
Projection 2010 Economic Growth (%) 5,5-5,6 7,2-7,3 1.894,1 220,0 (11,6%) 1.674,1 (88,4%) 2011 6,0-6,3 7,9-10,9 2012 6,4-6,9 8,4-11,5 2013 6,7-7,4 10,2-12,0 2014 7,0-7,7 11,7-12,1

Investment Growth (%)

Investment Required
(IDR Trillion)

2.111,1 2.144,5 2.348,8 2.465,0 2.619,9 - 2.788,4 2.939,2 - 3.168,0 272,9 - 274,5 (12,8-12,9%) 329,9 336,6 (13,7-14%) 417,8 433,1 (15,5-15,9%) 525,6 552,5 (17,4-17,9%)

Government
(IDR Trillion and % of total investment required)

Private
(IDR Trillion and % of total investment required)

1.838,2 1.870,0 2.019,0 2.128,4 2.202,1 - 2.355,3 2.413,6 - 2.615,5 (87,1-87,2%) (86-86,3%) (84,1-84,5%) (82,1-82,6)

Source: RPJMN 2010-2014 (prepared from Macro Economic Structure - Kerangka Ekonomi Makro 2010-2014)

Notes: Total investment required: IDR 12.460 Trillion Govenment contribution: IDR 1.816,7 Trillion (14,6%) Private contribution: IDR 10.643,3 Trillion (85,4%) Private investment consists of large-scale FDI/DDI, investment in oil and gas, and mining sector, financial service investment, and SME and cooperative investment The Investment Coordinating Board of the Republic of Indonesia
Source: BKPM
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Investment Performance

Overall Investment Target: BKPM Strategic Plan 2010-2014

Investment Target (in IDR Trillion)
600 400 200 0 2010 2011 2012 2013 2014
FDI DDI

Total Investment Target for 2010-2014: USD 181.0 billion (in IDR Trillion) FDI DDI Total Target Achievement 2010 147.9 60.6 208.5 208.5 2011 172.8 67.2 240.0 251.3 2012 204.1 79.4 283.5 313.2 2013 272.6 117.7 390.3 N/A 2014 329.0 177.9 506.9 N/A Total 1,126.4 502.8 1,629.2 (USD 181.0 Billion) 773.0 (USD 85.9 Billion)

Assumption: USD 1 = IDR 9.000

The Investment Coordinating Board of the Republic of Indonesia

Source: BKPM

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Investment Performance

Overall Investment Realization

DDI FDI (USD Billion)
23.4 14.2 8.3 6 2.3 3.9 2.3 4.2 10.3 14.9 17.1 15.0 16.6 10.8 6.8 8.4 10.2 Others: USD 13 Bn 52.9% 24.6 19.5 34.8

27.9

Investment Realization by Origin Country 2012

Singapore: USD 4.9 Bn (19.8%)

2006

2007

2008

2009

2010

2011

2012

Japan: USD 2.5 Bn (10%) South Korea: USD 1.9Bn (7.9%) Mauritius: USD 1.1 Bn (4.3%) United States: USD 1.2 Bn (5.1%)

Total investment realization in 2012 was IDR 313.2 trillion (USD 34.8 billion) or 10.5% above the 2012s target (IDR 283.5 trillion), 24.6% increase from 2011 (IDR 251,3

trillion)

Source: BKPM

The Investment Coordinating Board of the Republic of Indonesia

Source: BKPM

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Statistic of Italy Direct Investment Realization Based On Capital Investment Activity Q2 2013
35 31 30

25 25 23.4 22.9 20 20 17 15 ITALIA / Italy

10 6.0 5 2.2 0 Project Investment 2010 Project Investment 2011 Project Investment 2012 Project Investment Project 6

9.0

Investment

Q1 2013

Q2 2013

The Investment Coordinating Board of the Republic of Indonesia

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Investment Performance

Overall Investment Realization : Jan-June 2013, Based on Sector

Domestic Direct Investment (IDR Billion) Foreign Direct Investment (US$ Million)

Others, 13,334.14 , 22%

Mining, 11,204.76 , 18%

Others, 3,712 , 26% Mining, 2,618 , 18%

Non Metallic Mineral Industry, 3,435.42 , 6%

Metal, Machinery & Electronic Industry Electricity, Gas 4,573.28 & Water 7% Supply, 4,746.41 , 8%

Transport, Storage & Communicatio n, 9,521.20 , 16%

Paper and Printing Industry, 760 , 5%

Motor Vehicles & Other Transport Equip. Industry, 1,872 , 13% Chemical and Pharmaceutical Industry, 1,773 , 13%

Food Industry, 8,936.47 , 15%

Paper and Printing Industry, 4,873.83 , 8%

Transport, Storage & Communication 812 6% Food Industry, 948 , 7%

Metal, Machinery & Electronic Industry, 1,726 , 12%

The Investment Coordinating Board of the Republic of Indonesia

Source: BKPM

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Investment Performance

Overall Investment Realization : Jan-June 2013, Based on Location

Domestic Direct Investment (Rp. Trillion) Foreign Direct Investment (US$ Million)

West Java, 2,993.1 , 21% Others, 3,306.1 , 23% Others, 15.2 , 25% East Java, 19.5 , 32% East Kalimantan, 623.5 , 4% West Java, 2.5 , 4% Banten, 3.0 , 5% East Kalimantan, 8.1 , 14% Papua, 1,347.3 , 10% East Java, 1,417.6 , 10% Jakarta Capital Territory, 1,438.1 Riau, 721.5 , 5% Banten, 2,373.3 , 17%

Jakarta Capital Territory, 3.2 , 5% North Sumatera, 3.4 , 6%

South Kalimantan, 5.1 , 9%

The Investment Coordinating Board of the Republic of Indonesia

Source: BKPM

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Singapore Investment Realization Jan-Sept 2013, Based on sector (in US$ Million)

258 Project ($952,4211 )

195 Project ($921,2425)

Primer

Tersier

Sekunder
470 Project ($1,251,9804)

The Investment Coordinating Board of the Republic of Indonesia

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Singapore Investment Realization Jan-Sept 2013, Based on Location (in US$ Million)
9 Project ($222,497.8) 57 Project ($32,127.8) 29 Project ($66,511.1) 164Project ($676,056.1)

Sumatera
145 Project ($397, 889.7)

Jawa Bali dan Nusa Tenggara Kalimantan

37 Project ($53,688.5)

Sulawesi Maluku Papua

482 Project ($1,676,873)

The Investment Coordinating Board of the Republic of Indonesia

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Investment Performance

Overcome the Challenges: Masterplan

Basically MP3EI is based on these strategic initiatives: 1. Encourage a large scale investment realization in 22 main economic activities 2. Synchronization of national action plan to revitalize the real sector performance 3. The development of center of excellence in 6 (six) economic corridors

Main strategy of MP3EI: 1. Economic potential development through economic corridor 2. Strengthening the national connectivity 3. Strengthening national human resources capability and science and technology

The Investment Coordinating Board of the Republic of Indonesia

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Investment Performance

Overcome the Challenges: Knowing Our Potential

Source: Coord. Ministry of Economic Affairs, 2011

Sumatera Corridor

Kalimantan Corridor

Sulawesi Corridor

Papua Maluku Corridor

Java Corridor

Bali - Nusa Tenggara Corridor

Supporting the National Service and Industry" Central of Production and Manufacture of National Natural and Energy Resources" Central of Production and Manufacture of National Mining and Energy Resources"

Central of Production and Manufacture of National Agriculture, Plantation, Fishery, and Nickel Mining'' Gate of Tourism and Supporting Provider of National Food and Agriculture'' Central of Development of National Food, Fishery, Energy, and Mining

The Investment Coordinating Board of the Republic of Indonesia

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Investment Performance

Overcome the Challenges: Main Economic Activities

Main Economic Activity
Steel Food and Beverages Textile Transportation Equipment Shipping Nickel Cooper Bauxite Palm oil Rubber Food agriculture Tourism ICT Coal Oil and Gas

Sumatera

Java

Kalimantan

Sulawesi

Bali Nusa Tenggara

Papua Maluku Islands

Jabodetabek Area
Sunda Straits National Strategic Area Defence Equipment Animal Husbandry Timber Cocoa Fishery

The Investment Coordinating Board of the Republic of Indonesia

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Investment Performance

Overcome Infrastructure Challenge: The Need of PPP 1

Economic Growth and Investment Need in Infrastructure Sectors
Based on The National Medium Term Development Plan (RPJMN) 20102014, in order to achieve a 7% of economic growth per year in 2014, the value of Indonesian total investment in 2010 - 2014 must reach IDR 12,462.6 trillion (approximately US$ 1.33 trillion)

Total Rp 12,462.6 T

Infrastructure Investment Need (Rp Trillion)

Rp Trillion
Gap 323.67
Others Rp 10,538.9 T

Private

Government Infrastructure Rp. 1,923.7 T

Investment Need

Infrastructure Investment Need

The Investment Coordinating Board of the Republic of Indonesia

Estimated Financing Capacity

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Investment Performance

Overcome Infrastructure Challenge: Needed of Fund

IDR Trillion

FIVE YEARS DEVELOPMENT PLAN 2010-2014

Gap 323.67

Private

Govt

INVESTMENT NEED: 7% growth target requires: Rp 1,923.7 Trillion (about US$ 204.6 billion) of investments during 20102014. ESTIMATED FINANCING CAPACITY: Central Government budget can only cover 29.1% of total investment need. Big opportunity for private investment through PPP (Rp 668.34 Trillion/US$71,1 billion or 34.7%).
Source: Bappenas

Infrastructure Investment Need

Estimated Financing Capacity

The Investment Coordinating Board of the Republic of Indonesia

Source: BAPPENAS, 2011 Exchange rate: US$1 = Rp 9,400

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Investment Performance

Overcome Infrastructure Challenge: PPP Book Ready for Offer, Priority, and Potential Project
Ready for Offer
Sector/ Sub-sector Air Transportation Land Transportation Marine Transportation Railways Toll Road Water Resources Water Supply Solid Waste and Sanitation Power Oil and Gas Total Project Cost (US$ Million) 36.00 628.00 Sector/ Sub-sector Air Transportation Land Transportation Marine Transportation Railways Toll Road Water Resources Water Supply Solid Waste and Sanitation Power Oil and Gas 764.00 Total 26 38,190.70

Priority Project

Potential Project

Quantity 1 1 -

Quantity 1 13 5

Project Cost (US$ Million) 214.00 32,519.53 590.67

Sector/ Sub-sector Air Transportation Land Transportation Marine Transportation Railways Toll Road Water Resources Water Supply Solid Waste and Sanitation Power Oil and Gas Total

Quantity 3 3 3 3 13

Project Cost (US$ Million) 1,140.00 136.00 2,839.12

4,783.00 1,388.15 203.00 1,762.00 12,251.27

1
3

100.00
-

3
4

150.00
4,716.50

2
2 29

Total (all PPP projects)

58 Projects

US$ 51,205.97 million

Ready for Offer : Bidding Document has been completed, PPP procurement team has been established and ready to operate, procurement team has been established, procurement schedule has been defined, government support has been approved (if required) Priority Project : Included in PPP Potential Project Plan, feasible (from legal, technical and financial aspect), risk identification and allocation has been identified, PPP mode has been defined, Govt support has been identified. Potential Project : Conformity with the national/regional mid term development plan and the infrastructure sectors strategic plan, conformity of the projects location , Thethe Investment Coordinating Board of the Republic of Indonesia linkage between the infrastructure sectors and regional areas, cost recovery potential, preliminary study.
31

Source : PPP Book, Bappenas (2012)

Investment Performance

Overcome Infrastructure Challenge: Projects Ready to be Tendered in 2012-2014

No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Projects Tanah Ampo Cruise Terminal (showcase)* Medan-Kualanamu-Tebing Tinggi Toll Road (showcase)** Soekarno Hatta Airport Manggarai Railway (showcase) Solid Waste Treatment Final Disposal and Management for Metropolitan Bandung Southern Bali Water Treatment Facility Southern Banten Airport Batam Solid Waste Management West Semarang Water Supply South Sumatera 9 Mine Mouth Coal Fired Steam Power Plant (2x600 MW) South Sumatera 10 Mine Mouth Coal Fired Steam Power Plant (1x600 MW) Serpong Balaraja Toll Road** Pondok Gede Water Supply, Bekasi Karama Hydro Power Plant GCA Ministry of Transportation Ministry of Public Works/BPJT Ministry of Transportation Government of West Java Government of Bali Government of Banten Government of Batam Government of Semarang PT. PLN PT. PLN BPJT Government of Bekasi PT. PLN Investment Cost (US$ million) 11.6 376.7 2,000 42.1 43.5 287 75 200 50 80 1,560 780.8 551 20 1,398.9

14. 15. 16. 17.

18. 19. 20.

Surakarta Municipal Solid Waste Final Disposal and Treatment Facility Kertajati International Airport Jambi Power Coal Fired Stram Power Plant (2x400MW) Pandaan Malang Toll Road
Cileunyi-Sumedang-Dawuan Toll Road Expansion of Tanjung Priok Port (Cilamaya) Pekanbaru-Kandis-Dumai Toll Road
The Investment Coordinating Board of the Republic of Indonesia

Government of Surakarta Ministry of Transportation PT. PLN BPJT

BPJT Ministry of Transportation BPJT

30 842.6 1,350 424

779 1,032.4 1,690
32

* The showcase project had been tendered US$ 1 = Rp 9,400

** Currently within the Pre-Qualification Registration process

Investment Performance

Overcome Infrastructure Challenge: Projects Ready to Offer to Investor in 2013 (1)

Project Selection
No. 1 2 3. 4.

9 Projects Ready to Offer to Investor in 2013

Projects Batam Solid Waste Management West Semarang Water Supply (waiting for final FS) Kertajati International Airport Cileunyi-Sumedang-Dawuan Toll Road Solid Waste Treatment Final Disposal and Management for Metropolitan Bandung South Sumatera 9 Mine Mouth Coal Fired Steam Power Plant (2x600 MW) South Sumatera 10 Mine Mouth Coal Fired Steam Power Plant (1x600 MW) Jambi Coal Fired Steam Power Plant (2x400 MW) Karama Hydro Power Plant (1 x 450 MW) Investment (US$ million) 75 200 50 80 842.6 779 42.1 1,560 780.8 1,350 1,398.9

20 Projects under pipeline of Bappenas, MoF, PT PII

5. 6. 7. 8. 9.

Criteria: 1. FS/Project Feasibility has been finished 2. Commitment and Readiness of Government Contracting Agency
US$ 1 = Rp 9.400
The Investment Coordinating Board of the Republic of Indonesia

33

Investment Performance

Overcome Infrastructure Challenge: Projects Ready to Offer to Investor in 2013 (2)

North Sumatera
Riau Islands

Jambi South Sumatera West Sulawesi BantenWest Java Central Java Bali

Batam Solid Waste Management

West Semarang Water Supply South Sumatera 9 Mine Mouth Coal Fired Steam Power Plant (2x600MW) South Sumatera 10 Mine Mouth Coal Fired Steam Power Plant (1x600MW) Solid Waste Treatment Final Disposal and Management for Metropolitan Bandung Kertajati International Airport Cileunyi Sumedang Dawuan Toll Road

Jambi Coal Fired Power Plant

Karama Hydro Power Plant

The Investment Coordinating Board of the Republic of Indonesia

34

How to Invest in Indonesia

Investment Policies and Facilities

Investment Policy and Facility

INVESTMENT LAW
(UU No.25 Year 2007)

Mandate equal treatment for foreign and domestic investors No minimum capital requirement, freedom to repatriate capital. All business sectors or business types shall be open to investment activities, except for business sectors or business types that are declared to be closed and open with requirements. Simplification of business start up and licensing procedures, including the one-stop shop (PTSP) licensing provision at the Investment Coordinating Board (BKPM). Rolling-out of Electronic Information Services and Investment Licensing (SPIPISE) in 105 PTSP. Launching of the National Single Windows for Investment. Establishing an Investor Relation Unit at BKPM for information facilitation and queries handling from existing and potential investors. Implementing a regional champion program to help select local governments accelerate investments in their respective regions. Launching of investment tracking system. An acceleration of the VAT refund system for exporters Establishment of a complaint management system and a code of conduct for tax officials
The Investment Coordinating Board of the Republic of Indonesia

INVESTMENT FACILITIES

TAX REFORMS

36

Investment Policy and Facility

MoF Regulation No.176/PMK.011/2009 granted import duty facilities to selected industries which produce goods or services. Exemption from import duty on the import of machines for a period of 2 (two) years. Exemption from import duty on the imports of goods and materials for production for a maximum period of 2 (two) years. Exemption from import duty on the imports of goods and materials for production for a period of 4 (four) years, is granted to a company which is using the locally-produced machines at least 30% of the total value of machines for its production. Service industry which is eligible for the facility: 1. Tourism and culture 2. Transportation (for public transportation services) 3. Public health services 4. Mining 5. Construction 6. Telecommunication 7. Port

IMPORT DUTY FACILITIES

Exemption from import duty may be granted to the extent that the machines, goods and materials: are not produced in Indonesia; are produced in Indonesia but the they do not meet the required specifications; are produced in Indonesia but the quantity is not sufficient for the need of the industry, pursuant to the list of machines, goods and materials as determined by the minister who is in charge of industry.
The Investment Coordinating Board of the Republic of Indonesia

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Investment Policy and Facility

Government Regulation No. 12 of 2001 jo No. 31 of 2007 Exemption of value added tax of imported capital goods, machinery, or equipment (except spare parts) which cannot be produced domestically Submit tax-free letter to the Director General of Taxes In December 2011, parliament passed a new land acquisition bill (stipulated as Law No 2/2012) which provides certainties in land pricing and timing of land acquisition process. This will accelerate the construction of desperately needed roads, ports and airports to better connect an archipelago of 17,500 islands spanning some 5,000 kilometers. Government Regulation No.52 year 2011,
TAX ALLOWANCE
30% reduction of corporate net income based on investment value for six years, 5% each year. The imposition of income tax on dividends paid to foreign tax subject amounting to 10%, or a lower rate according to Tax Treaty Agreement.

VAT FACILITIES

LAND ACQUISITION BILL

Tax facilities that could be granted to investors under certain conditions has been issued. By this regulation, the tax allowance will be eligible for 129 business segments, expanded from 38 segments in the previous regulation.
The Investment Coordinating Board of the Republic of Indonesia

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Fiscal Incentives: Tax Allowance (Government Regulation No. 52 year 2011)

Based on Government Regulation No. 1 of 2007 jo. No. 62 of 2008 jo No. 52 of 2011: 1. Reduction of net income for 30% from total amount of investment, charged in 6 year with each 5% per year. 2. Depreciation and amortization accelerated to fixed intangible assets (building and non-building) 3. Income Tax on dividends paid to foreign tax subject to 10% or a lower rate according to double taxation avoidance agreement 4. Compensation for losses of more than 5 years but not more than 10 years. 5. Tariff reduction on Income Tax Based on Second Revision of Government Regulation No. 1 of 2007 Concerning Income Tax Facility For Investment In Certain Business Fields and/or Certain Regions, additional terms for the provision of tax allowance: 1. This facility can be provided after the realization of investment tax payers at least 80% of capital investment plans. 2. tax facilities can also be used by a taxpayer who has received an investment license prior to the enactment of these changes, provided: minimum investment value of 1 trillion rupiah, and not yet commercial production (IUT) Based on revised edition of Government Regulation No. 62/2008 (Government Regulation No 52 of 2011) concerning Tax Allowance for Investment in Certain Businesses and/or Areas, the tax allowance will be eligible for 129 business segments, including infrastructure, agribusiness, cosmetics, and renewable energy. Other newly added sectors are real estate, synthetic fiber, cosmetics material, TV assembly, and civil engineering construction.

TAX ALLOWANCE

REQUIREMENT

BUSINESS FIELDS

FACILITIES

PP No 1 2007 53 19

PP No 62 2008 67 34

PP No 52 2011 52 77

DEVELOPMENT OF CERTAIN BUSINESS FIELDS AND AREAS THAT RECEIVING FACILITIES

Appendix 1 (Certain Business Field) Appendix 2 (Certain Business Field and Region)

TOTAL

72
The Investment Coordinating Board of the Republic of Indonesia

101

129
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Fiscal Incentives: Tax Holiday (Minister of Finance Regulation No. 130 Year 2011)
There is now a legal umbrella for Tax Holiday in Government Regulation No.94/2010 on Taxable Income Calculation and Payment of Income Tax in Current Year (Tax Holiday that is mentioned in Chapter VIII: Facilities Exemption or Reduction of Income Tax in the Framework of Investment). Tax Holiday incentive mechanism was regulated by Minister of Finance Regulation No. 130/PMK.011/2011. 1. Tax exemption for a period 5 to 10 years after a company or project begins commercial production (100% realization and have the permanent license/IUT). 2. Tax holiday may be granted for a maximum period of 10 (ten) of the Fiscal Year and at least 5 (five) Fiscal Year, commencing from the commencement of commercial production of the Fiscal Year. Following this period, investors could be offered an additional 50% corporate income tax reduction for 2 years after the tax holiday period (12.5 % of income tax for 2 years). 3. Tax holiday is offered for following pioneer industries TAX HOLIDAY

4. The requirements are: minimum investment of Rp 1 trillion; having been legalized at least 12 months before the Regulation on Tax Holiday been issued (Maximum or less than 12 months); and must deposit at least 10% of the proposed investment in an Indonesian Bank.
The Investment Coordinating Board of the Republic of Indonesia

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Non - Fiscal Incentives

Regulations : Presidential instruction No. 1/2010 concerning Acceleration of Implementation National Development Priority Presidential Decree No. 27/2009 concerning Integrated One Stop Services in Investment Sector The aims : To cut bureaucratic procedures; Allow investors to process business license faster; Accelerate and simplify the procedures of investment; and Reduce administration fees Regulations : Chairman of Investment Coordinating Board Decree No. 14/2009 concerning Electronic Investment Licensing and Information Service System (SPIPISE) The aims : Ease of licensing process tracking, Single submission of data & information Single and synchronous processing of data and information Single Decision-making for investment information & licensing process

INTEGRATED ONE STOP SERVICES IN INVESTMENT SECTOR (PTSP)

ELECTRONIC INVESTMENT LICENSING AND INFORMATION SERVICE SYSTEM (SPIPISE)

IMPLEMENTATION OF ONE STOP SERVICE (OSS)

- 33 provinces From 33 Provinces and 497 municipals/cities in Indonesia. - 362 Municipals / Cities have been stablished One Stop Integrated Services for investment (OSS). - OSSI of 33 Provinces and 265 Municipals/Cities (229 Municipals and 36 Cities) have been quilified for National standards. All 33 provinces and 90 Municipals/Cities have been used Online Licensing System (SPIPISE)

The Investment Coordinating Board of the Republic of Indonesia

41

Investment Policy and Facility

On going reforms in investment climate....

No. 1. Agriculture Sectors More Open More Restrictive 2

2.
3. 4. 5.

Forestry
Maritime and Fishery Energy and Mineral Resources Industry

1
1 1 2

6.
7. 8. 9. 10. 11. 12. 13.

Public Works
Trade Culture and Tourism Transportation Communication and Information Manpower and Transmigration Health Security Total

1
1 17* 4* 2 2 8* 40

1 1 2 1 10

Negative Investment List Presidential Regulation No.36 of 2010

The regulation come into force as of May 2010 The Negative Investment List is reviewed every 3 years 40 business sectors are more open for investors

*) Including business field open with condition for ASEAN Investors

The Investment Coordinating Board of the Republic of Indonesia

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International Representatives Office

THANK YOU
Badan Koordinasi Penanaman Modal (BKPM)
Indonesia Investment Coordinating Board
Jalan Jenderal Gatot Subroto No. 44, Jakarta 12190 P.O. Box 3186, Indonesia T : +62 21 5292 1334 F : +62 21 5264 211 E : info@bkpm.go.id
The Investment Coordinating Board of the Republic of Indonesia

invest in

43

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