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Indonesia Investment Guide

August 2017

AEC+ Business Advisory

World Business Group

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Country & Economic Overview

Key Industries & Opportunities

Doing Business in Indonesia

KASIKORNBANK’s Support

Table of Contents

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Indonesia’s strength lies in its market size

Why Indonesia?

ASEAN’s largest economy

Workforce is youthful and abundant

World’s fastest-growing consumer market

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Table of Contents

Country & Economic Overview




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Country Overview

1990 2011 2014 2025 2009

Timeline and Milestones:

Data Source: International Monetary Fund, News Sources

1995: WTO Membership

2009: Signed Partnership Cooperation Agreement with EU

2011: 15-Year Economic Plan MP3EI established

2025: MP3EI: National Long-Term Development Plan to become a ‘Developed and self-reliant, just and democratic’ nation

Country Name: Republic of Indonesia

Area: 5,070,606 km2 (Land 1,904,569 km2)

Population: 258.7 million (2016 est.)

Government: Presidential Representative Democratic Republic

Currency: Indonesian Rupiah (USD1=13,348 IDR as if 30/6/2017)

GDP (Current Price): USD 932 billion (2016)

GDP per capita: USD 3,604 (2016)

2014: Joko Widodo elected President. Shift towards democracy

2015

2015: Launched Medium Term National Development Plan (RPJMN 2015-2019 )

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Major Cities & Regions

JAKARTA

Java

• Most populated and has most developed infrastructure

• Receives 60% of Indonesia’s FDI

• Key industries: telecom, hotels, electronics, autos, F&B, construction, petrochemical

Sumatra

• Strategic location near Singapore, Malaysia and Malacca Strait

• Rich in natural resources such as forests, minerals, and oil & gas

• Key industries: mining, agriculture, infrastructure, chemical/pharmaceuticals, F&B

5 Main Islands of Indonesia

Kalimantan

• Nation’s top source of coal and natural gas

• Key industries: oil & gas, mining, logistics

Sulawesi

• Its capital, Makassar, is the main gateway to Eastern Indonesia

• Key industries: agriculture, forestry, fishery, mining, energy

Papua

• Home to main fishery industry and rich in minerals

• Has most developed production line for fishery and world’s largest gold mine

• Key industries: fishery, mining, infrastructure

• Jakarta 10 mil • Surabaya 2.8 mil • Bandung 2.6 mil • Bekasi 2.5 mil • Medan 2.5 mil

Indonesia’s 10 Most Populous Cities

• Semarang 2.1 mil • Tangerang 2.0 mil • Depok 1.9 mil • Palembang 1.6 mil • Sth. Tangerang 2.5 mil

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Indonesia’s economy continues to experience strong and steady growth, underpinned by strong economic fundamentals, as well as the government’s commitment to reform its finances and emphasis on building capacity and developing infrastructure.

Economic Overview

Indonesia's GDP Growth and GDP per Capita, 2010-2020 Change in Economic Composition, 2013 - 2016

Data Source: International Monetary Fund, CIA World Factbook, ADB, Statistics Indonesia

46.0%

40.3%

13.7%

2016

USD

• Indonesia has a growing income class and one of the largest populations in the world.

• Its industries are growing and the country is shifting from being consumption-led to industry-led.

• Infrastructure development is also top priority for the state. This will ensure Indonesia has sound foundation for future development.

• However, low commodity prices may have some dampening effect on the economy.

• The Indonesian economy is steadily evolving from being commodity-based to being increasingly manufacturing and service-based.

• Second to manufacturing, wholesale and retail trade is particularly significant due to Indonesia’s growing consuming class.

• The service sector is also growing in a healthy manner, driven by growing demand for financial services of the middle class and growth in the construction sector driven by industrial and infrastructure development.

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Foreign Direct Investment Overview

Top Investors 2016

in over 25,000 projects

Data Source: BPS, Indonesia; BKPM, Indonesia; News

• In terms of accumulated FDI, both Singapore and Japan are traditionally the top investors in Indonesia, with Singapore accounting for over 20% of accumulated FDI and Japan over 10%.

• Meanwhile, China has recently emerged as a top investor.

Total FDI 2016 Top FDI Sectors 2016

Sector Value (USD mil) % of FDI

Electronics, machinery 3,897 13.5%

Chemical, pharmaceutical 2,890 10.0%

Paper, printing 2,787 9.6%

• While 2015’s top FDI recipients were the mining and transportation sectors, FDI in 2016 has moved away from resources and infrastructure to focus more on the industrial sector.

• However, the resources sector will continue to be a big attraction for investment due to abundant existing resources.

Significant growth in share of FDI inflow into manufacturing

27%

67%

6%

2016

The focus was back on manufacturing in 2016, a result of the government’s commitment to upgrade Indonesia’s industry towards more value-added production through various investment incentives and lowered restrictions on investment.

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Trade Overview

International Trade, 2012 – 2016

Data Source: UN International Trade Center

ASEAN 23%

Falling commodity prices have had a significant effect on Indonesia’s international trade, of which oil and commodities make up a large percentage. However, trade in promoted industries such as vehicles and parts have seen positive growth.

• Indonesia’s downward-trending international trade, particularly in 2015 and 2016, can be attributed mainly to significant drops in the value of oil and commodities, which make up over 30% of Indonesia’s trade. This has also affected import values, since Indonesia imports a large amount of petroleum oil.

• Since 2015, Indonesia has also been curtailing its coal exports for environmental reasons.

• Conversely, exports of vehicles and parts have trended upward, as investment in the sector has been growing.

Top Trade Partners 2016 Top Trade Products 2016

Top Export Destinations

China 12%

USA 11%

Japan 11%

ASEAN 26%

Top Import Sources

China 23%

Japan 10%

EU 8%

Key Exports

Mineral fuels

Animal & vegetable oil

Machinery & equipment

Pearls, precious stones

Vehicles & parts

Key Imports

Mechanical supplies & parts

Refined fuels

Machinery & equipment

Plastics

Iron & steel

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Indonesia - Thailand Trade Overview

Indonesia’s Exports and Imports with Thailand, 2012-2016

Exports to Thailand 2016

Imports from Thailand 2016 are mostly autos, machineries and industrial goods

are mostly fuels, raw materials and auto parts

Coal 13%

Crude Oil 15%

Vehicles & Parts 9%

Plastics 9%

Data Source: UN International Trade Center

Vehicles & Parts 19%

Sugar 9%

Indonesia has always had a trade deficit with Thailand. However, the size of the deficit has been decreasing over the past few years as Indonesia imports less intermediary goods from Thailand.

• Thailand shares only 3.7% and 6.4% of Indonesia’s total exports and imports respectively.

• Top imports are intermediary goods used in downstream production such as auto parts, machinery & parts, and chemicals. Sugar has emerged as a new major import item in 2016 due to Indonesia's sugar shortage in 2016.

• Indonesia continues to mainly exports fuel products to Thailand. Shipments of crude oil and coal accounted 27.7% of total exports from Indonesia to Thailand.

Top Trade Products 2016

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Infrastructure Overview

Mode of Domestic Freight Transport, 2013

Road networks have expanded at a healthy pace, but is still not enough to meet surging demand, especially in Java. Road is the primary means of transport for both passenger and freight.

Road Indonesia has the 7th longest navigable waterway in the world. Development is improving. Projects such as the “Sea Toll Road” among many others is being pushed by government.

Water Transport

Rail Rail network mainly stretches across Java and Sumatra islands. The Railway Development Plan is aimed at expanding coverage to all major islands.

Air There are 27 international airports across 6 major islands: Java, Sumatra, Kalimantan, Sulawesi, Papua and Nusa Tenggara. There are also 264 domestic airports.

Telecommunications There is a strong mobile phone market, with mobile phone penetration at 122%. Many people own up to 3 sim cards. As of 2015, there are approximately 308.2 million mobile users. Meanwhile, internet penetration has risen from 36% in 2015 to 40% in 2016.

Road 77%

Rail 15%

Sea & Air 7%

Data Source: BPS, Indonesia; Ministry of Transportation, Indonesia; News Sources

Due to high logistics costs and bottlenecks in economic development from uneven infrastructure readiness across the nation, infrastructure has become one of the major areas of focus for the Indonesian government.

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Java is the most congested island as road construction cannot keep up with car growth

Road Infrastructure

Total road length 2015

508,000 km 56% is asphalt 90% of people travel by road 80% of cargo is transported by road 72% motor vehicle growth since 2007

Development Plan

Develop 6 major islands into 6 Economic Corridors with major road networks to connect economic centers, industrial clusters, ports and rail networks.

Data Source: BPS, Indonesia, BKPM, Indonesia

Role of Each Economic Corridor

Java Driver for national industry and service provision

Sumatra Center for production of natural resources and energy reserves

Kalimantan Center for mining and energy reserves

Sulawesi Center for agriculture, forestry, fishery, oil & gas and mining

Nusa Tenggara

Gateway for tourism and food support

Papua Center for fishery, energy and mining

• Balikpapan-Samarinda • Manda-Bitung • Panimbang-Serang • Trans-Sumatra Toll Road network

Priority Toll Road Development 2016:

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Port Infrastructure

Key Plans in Jokowi’s “Sea Toll Road” Program

PORT GOAL

Kuala Tanjung World’s biggest port once it is completed; international hub of Western Indonesia; to begin operation in 2018

Tanjung Priok (Kalibaru)

Expand capacity (triple) and reduce dwell time from 6 to 4 days; New Priok or Kalibaru set to begin operations in 2023

Batam Regional hub; support regional industry

Bitung International hub of Eastern region

Makassar Regional hub; expand capacity

Sorong Regional hub; reduce logistics costs around Papua

Top 4 Major Ports

60% of all shipping costs

comes from port usage

Data Source: BPS, Indonesia, BKPM, Indonesia

To be regional logistic hub in 2019 with reduced shipping cost, the government inaugurated 11 bonded logistic centers (PLBs) in 2016 and plan to open 50 more in 2017.

handle 19.5 million tons of imports and 4 million tons of exports

International Inter-Island

Tanjung Perak Tanjung Priok

Tanjung Priok Makassar

Belawan Belawan

Makassar Tanjung Perak

Top Ports by Route Type:

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Rail Infrastructure

Currently, only Java and Sumatra have rail networks

Long-Term Plan 2030

Medium-Term Plan 2019

1. High speed trains in Java 2. Airport link rail networks 3. Sea port link rail networks 4. Urban rail networks 5. Trans-island networks

The trans-island networks to be completed by 2019 are shown on the map

► Total railway length:

12,000 km

► Total budget:

USD 60 billion

Total operational

railway length 2016

5,159 km

Data Source: BPS, Indonesia, Ministry of Transport, Indonesia

Freight and Passenger Traffic in 2016

Freight Java 8 million tons

Sumatra 24 million tons

Passenger Java 351 million people

Sumatra 6 million people

As part of the master plan for economic development, the government has outlined ambitious plans for rail networks to be available across all its major islands

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• USD 5.4 billion budget in the next 5 years to build 62 new airports and renovate existing ones

• New runways, terminals and cargo buildings for Soekarno-Hatta and Juanda by 2017

• Largest cargo airport in Banten by 2018

• Railway connections to 13 airports by 2019

Air Infrastructure

Air infrastructure is vital to its economic development since only a group of cities are connected by land

Busiest Airports for International Cargo

Top 3

• 2012 – 2016: Domestic passenger traffic grew 21%, international passenger traffic grew 25%, and international cargo volume grew 2%

• By 2034, Passenger traffic will more than double from 158 million to 340 million

• But Soekarno-Hatta and Juanda airports are already 200-300% over capacity

Key Future Developments

Data Source: Ministry of Transport, Indonesia

Key Trends

Airport Cargo Volume (kg)

Soekarno-Hatta (Jakarta) 326 mil

Ngurah Rai (Bali) 28 mil

Juanda (East Java) 19 mil

Total International Cargo, 2016: 393 mil kg

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Table of Contents

Country & Economy Overview



Kasikorn Bank’s Support

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Retail & E-Commerce Automotive Industrial Agriculture

Construction & Construction Materials

Indonesia’s rising income, increased urbanization and rigorous government development plans such as the MP3EI are creating an environment conducive to business growth and opportunities

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Retail & E-Commerce Industry

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Retail – Overview (1/3)

Data Source: SingPost Analysis, Secondary Research, A.T. kearney, KResearch, Statista, Publication Statistics Indonesia, Business Monitor International

of average monthly household expenditure in 2015 is spent on food and beverage

47%

Upper middle

Lower middle

High

Low

Low income = Less than USD 220 per month Lower middle income = USD 220 to USD 366 per month Upper middle income = USD 367 to USD 732 per month High income = More than USD 732 per month

Upper middle and high income groups could be main targets: • Significant growth rate since 2009 • Almost 70% of Indonesia’s working population fall in this category. • These groups are more open to trying international products and

brands; they are less price sensitive.

0%

2%

4%

6%

8%

10%

12%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2016e 2017f 2018f 2019f 2020f 2021f

Total household spending Growth (right axis)Billion USD

150

300

450

600

750

900

1050

The retail sector directly benefits from the rising income of Indonesian people due to the country’s robust economic growth. Household spending in Indonesia is expected to continually increase in the next 5 years at an annual growth rate of over 10%.

Total household spending is expected to grow continuously due to robust economic growth. However, consumer behavior differ among income groups, so understanding the market characteristics is important for successful market entry.

Share of Indonesian Working Group by Income, 2009 and 2015

Indonesia's Total Household Spending, 2016-2021

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• Instant noodles • Baked goods • Snacks and

confectionery • Dairy products • Packaged foods • Premium

ingredients

• Ready-to-drink coffee and tea

• Iced tea • Soft drinks • Fruit juices • Energy drinks • Isotonic/sports

drinks

• Mobile phones • IT accessories • Toiletries/Skincare • Beauty products • Apparel • Baby products • All-purpose cleaners • Electrical appliances


Popular Products

Data Source: Euromonitor, Publication Statistics Indonesia

The offline market in 2015 still dominates the retail sector in value

4.6 million stores

Number and Growth Rate of Retail Outlets, 2015

Traditional Trade

Convenience Store

Super market

26,700 stores

1,400 stores

15.5% 0.2% 2%

Due to rapid urbanization, Indonesian people demand more “convenient and modern retail products and services that save time” .

Hyper market

300 stores

7.7%

Convenience stores, mom-and-pop shops and gas stations are currently the major retail channels in Indonesia. However, modern retail such as shopping malls and hypermarkets are expanding along with rapid urbanization.

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Data Source: KResearch, BKPM Negative Investment List, gbgindonesia

1st – tier

Main trading hubs • Jakarta • Surabaya

2nd – tier

Major industrial cities with many expatriates and local middle class

• Bogor • Depok • Tangerang • Bekasi • Bandung

Maximum 67 percent foreign ownership for department stores, distribution and warehousing businesses is allowed with conditions.

New Regulation

Complete 2017

Key Players in the Retail Sector

145 stores 114 stores 15 stores 9 stores

Complete 2018

New Harco Plaza

8039 stores 7000 stores

24 stores 63 stores

452 stores

The key trading hub is mainly clustered on Java island, especially in West Java. Moreover, key retail players are competing to expand their target customer bases to compete and gain larger market share.

Department Stores

Shopping Centre

Convenience Stores

Major Retail Market by City

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E-Commerce – Overview

Internet Users in Indonesia

• Share of e-commerce market in retail is expected to reach 8% in a few years from less than 1% this year

• Around 8% of consumers currently shop online and on average spend around USD250 per year

• 27% of transactions are via social media

• Almost 90% of urban Indonesians own a smartphone

Key Trends

Key Products in E-Commerce

Books Electronics Fashion

► Clothes are top products for both men and women.

► women buy more fashion accessories while men buy more phones and electronic gadgets.

Popular Channels

Data Source: SingPost Analysis, Secondary Research, PWC, sp ecommerce

Auto Accessories Cosmetics

Social media/blogshops/IM

30%

C2C websites

30%

B2C websites

40%

As mobile and internet penetration grow, e-commerce is expected to expand significantly as a channel for retail, especially in rural areas where physical stores are lacking.

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Retail & E-Commerce - Opportunities

Opportunities in Retail

► Drivers • Increased income of middle class

and demand for better quality and more diversity

• More urbanized lifestyle • More women entering job market • Rise of modern retail channels

Opportunities in E-Commerce

► Opportunities • Export products to local

distributors • Export products directly to large-

scale retailers

► Potential products • Ready-to-eat food & beverages • Fashion & sportswear Products • Groceries

► Drivers • Increased internet and mobile

penetration • Lack of diversity of products at

physical stores • Lack of availability of physical

stores in more rural areas • Low operating costs

► Opportunities • Export products to established

local or foreign e-commerce platforms and further expand through social media

► Potential products • Apparel & footwear • Toiletries & cosmetics • Home furnishing/home gardening

Brand Loyalty Indonesian consumers are very brand conscious

Local Tastes Regional differences may exist – must study and tailor products to suit local tastes and styles.

Halal 90% of population are Muslim. Halal food processing is also complicated in terms of regulations and procedures. However, the remaining 26 million people are not Muslim and are a huge potential target group.

Infrastructures Poor transport infrastructure and inefficient payment channels could be a key challenge for Indonesia’s retail sector, though the situation is improving.

Challenges

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Automotive Industry

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Automotive - Overview

Car penetration in Indonesia is still relatively low: 87

cars per 1,000 people

Indonesia Automotive Production

Proportion of Sales by Passenger Vehicle Type, 2013 & 2016

1H2017 Key Car Sales by Brand

Key Products From Thailand

1.Toyota

2.Daihatsu

3.Honda

4.Suzuki

5.Mitsubishi

• Parts for Engine

• Diesel Engine

• Bodies & Parts

• Brake system

• Tires

Thailand supplies

33% of

Indonesia’s parts

imports

Data Source: Gaikindo Indonesia, UN International Trade Center

37%

18%

6%

10%

18%

0.0

0.3

0.6

0.9

1.2

1.5

1.8

2008 2012 2016 2020F

Mill

ion

Un

its

Passenger cars (PV) Commercial cars (CV)

0.6

1.1 1.2

1.6

Indonesia's automotive production has expanded thanks to improved economic conditions. With an annual production capacity of over a million, passenger cars dominate the market with approximately 7 percent growth per year.

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Automotive - Opportunities

Opportunities in Parts Manufacturing

► Drivers • Import restrictions on CBUs • Demand for high quality parts • Presence of major car

manufacturers with many product lines

• Still high reliance on parts imports

Opportunities in Auto Services

► Opportunities • Export car parts and accessories

to serve existing manufacturers or after sales support

• Invest in OEM or REM production to support local supply chain

Wholesale trade is not prohibited

► Drivers • Growing trend in car ownership

will push demand for repairs and services

• Growing wealth will drive demand for customizations and improvements

► Opportunities • Invest in:

• Car maintenance garage • Vehicle inspection garage • Car accessory shop

Car maintenance and repairs is open to 49% foreign ownership

Retail Prohibition Retail trade of cars, motorcycles, commercial vehicles and their parts are closed to foreign investment. Foreign manufacturers sell through major local partners.

Import Restrictions CBUs are prohibited for imports. A few exceptions may be granted for types not assembled in Indonesia.

Local Content Requirement Several processes must take place in Indonesia such as painting, welding and assembling. There are also annual import quotas on CKD and IKD parts.

Key Regulations

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Industrial Agriculture Industry

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Industrial Agriculture - Overview

32% The sector employs of the workforce

and Contributes to of GDP

in 2016

14%

Key Agricultural Products

► Plantation crops and vegetables are much more prominent

► Aquaculture grows very quickly; mainly produces shrimps, tilapia, seaweeds, milkfish, and cat fish.

Palm Oil Aquaculture Rubber Coffee Cocoa

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Indonesia is a major global player

Key Exports 2016

Accounts for 52% of world palm oil exports

2 2rd largest global producer of cocoa

Key Imports 2016

1 China

2 Singapore

3 Japan

4 USA

5 South KoreaTop Partners

1 China

2 Singapore

3 Japan

4 USA

5 South Korea

Key Considerations ► Investment regulations in the agricultural sector is

complicated and require detailed study

► Regulations include: form of investment, maximum investment, license requirements, location

► Varying degrees of foreign ownership limitations in plantations depending on the crop type

► Regulation limits private plantations to 100,000 hectares.

Data Source: UN FAO, BPS, Indonesia, UN International Trade Center, BKPM< Indonesia, Global Business Guide

2 2nd largest global producer of rubber

Top Products

Wheat

Soy Bean

Rice

Canada

Australia

United States

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Key Agricultural Products by Region

Java

Rice Sugar Cane Tea

Sumatra

Palm Oil Rubber Coffee

Kalimantan

Palm Oil

Sulawesi

Cocoa

Papua

Nusa Tenggara

Also produces orange, cassava, maize, chili and banana

Also produces maize, cassava, cabbages, chili

Also produces coconut, maize, cassava, pineapple, orange, potato, chili

Also produces maize, cassava, banana, mango, soybean

Indonesia’s fertile soil, large water resources and favorable climate mean all of its

regions specialize in various key produce

Coconut

Also produces palm oil, cocoa, sweet potato

Also produces coconut, coffee, cocoa, soybean, chili

Coconut

Cassava

Data Source: UN FAO, BPS, Indonesia, UN International Trade Center, BKPM< Indonesia

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Industrial Agriculture - Opportunities

Opportunities in Processing

► Drivers • Lack of capital and machinery for

high-tech processing • Still highly dependent on imports

of downstream goods

Opportunities in Cold Storage

► Opportunities • Process downstream, value-added

products such as: • Seafood processing • Cocoa and coffee products • Processed fruits and

vegetables and nuts • Refined sugar • Cereal products

► Drivers • Cold storage is insufficient in

several sectors, e.g. fishery and aquaculture

• Most fishing ports do not have cold storage facilities, which hampered the sector’s growth.

► Opportunities • First, start with cold storage and

ice supply near fishing ports or aquaculture farm

• Extend to cold storage and cold chain services later to serve retail market.

Distribution and Storage Low availability of proper storage facilities and transportation such as cold storage and refrigerated trucks outside Java result in further loss of fresh produce in the distribution process.

Import and Export Regulations Regulations are complex and require detailed study. A close relationship with distributors and local agents is ideal.

Tariffs, Quotas, Duties Different regulations are set on different types of products. Must study in advance.

Key Considerations

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Construction & Construction

Material Industry

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Construction - Overview

FDI in Construction 2015

• USD 954 million • 358 projects

• Number of projects up 22% despite 80% drop in value

FDI in Real Estate 2016

• USD 2.32 billion • 1,152 projects

• FDI value was down slightly by 4.6%, but number of projects

increased by 34%

Key Trends and Drivers ► Though FDI slowed in both construction and real estate, the number of

projects saw significant growth, signifying growth in smaller projects. Condominium prices in Jakarta grew by only 4% but is expected to reach 10% in 2017.

► However, greater easing of foreign restrictions and promotion of infrastructure and industries is likely to spark a new wave of construction in the coming years.

► Bappenas 2015-2019 infrastructure development plan worth USD 7.2 billion

► MP3EI 2025 long-term development plan for infrastructure and logistics network worth over USD 100 billion

Data Source: BKPM, Indonesia; Colliers, Indonesia

Development in Indonesia is still largely centralized in Jakarta, though it is slowly

expanding to other regions

Real Estate Developments in Jakarta, 2015 - 2018

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Trends

CEMENT

• 75% of demand is for bag cement used in housing; 25% is bulk cement for large projects

• Demand slowed in 2016 due to slowdown in government projects

• 2017 seeing uptick from recovering real estate sector

STEEL

• Domestic production is still limited and Indonesia imports a very large amount of semi-finished or flat-rolled products, mostly from China.

• Its exports of stainless steel has also been on the rise.

CERAMICS

• Mostly in floor and wall tiles • Tableware and sanitary ware

production still limited • Extremely reliant on gas as an

important ‘ingredient’ • Gas accounts for around 30-40% of

production costs.

Construction Material - Overview

Data Source : BPS, Indonesia; DBS Vickers, Indonesia, UN International Trade Center, ASAKI, Secondary Research

Cement Steel Ceramics

Production Capacity 2016

Indonesia has become the largest producer of cement Asia-Pacific

100 mil tons 6.7 mil tons 580 mil sqm

International Trade 2016

Imports of cement as dropped due to subdued demand in 2016, but steel demand remains high.

Due to weakened competitiveness from high production costs, imports rose to keep up with demand.

Value (USD)

Trade Ceramics

Imports 377 mil

Exports 335 mil

Value (USD)

Trade Cement Steel

Imports 40 mil 6.2 bil

Exports 82 mil 1.8 bil

+ 16%

- 2% + 32%

- 80%

** Trade figures for steel includes iron

- 2%

+ 51%

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Construction – Special Regulations

Construction service providers must have a “IUJK” or Construction Service License to provide services as:

• Planners • Contractors • Supervisors

Requirements

1 Choose classification of activity

2 Obtain ISO 9001:2008 and Quality Management Manual

3 Have at least 2 experts with qualifications in your registered IUJK category. They will be issued “SKA” or Certificate of Expertise”

4 Obtain KTA and SBU permits - KTA: proof of membership at construction Association Registry - SBU: certificate of legal entity

The IUJK Is valid for 3 years It can be extended following

procedures similar to the initial application process.

2016 Update

Construction contractors and Consultancy Services / Business Services for Construction that apply high technology and / or high risk and / or with a work value of more than IDR 50 billion are open to foreigners as following:

• 67% for foreign investors and • 70% for ASEAN investors

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Construction & Construction Material - Opportunities

Opportunities in Construction

► Drivers • Growing income from locals and

growth in business will push more demand for housing, office space, industrial space.

• Government keen to promote infrastructure development across the country.

Opportunities in Construction Materials

► Opportunities • Subcontract to large developers

of residential, commercial or industrial property

• Provide consulting to local developers for:

• Design & architecture • Engineering

► Drivers • Locals cannot meet demand in steel

and have low competitiveness in ceramics production

• Heavy reliance on expensive imports of raw materials

• Middle class demanding more higher quality, decorative materials

► Opportunities • Export key inputs or final goods • Invest in local production of

downstream products using advanced technology

• Supply advanced machinery and equipment

Labor Skill Indonesia has a large, abundant labor force but still has a relatively low supply of skilled construction workers and engineers. Training may be required.

Infrastructure and Logistics Logistics costs contributes greatly to production costs. Indonesia is known to have quite high logistics costs especially outside of Java where distribution infrastructure is less developed.

Regional Development Since the construction material industry is regionally confined, growth prospects are dependent on where projects are located.

Key Considerations

36





Table of Contents

37

Setting Up a Business – 2 Methods

There are 2 main ways foreign businesses can operate in Indonesia

1 Limited Liability (PT) 2 Representative Office

A PT PMA is the most common form of foreign investment

Any limited liability company in Indonesia is termed PT. Companies with foreign equity are called PMA. According to Indonesian law, any company with any percentage of foreign ownership is considered a “foreign entity”.

I. Conditions

1. Principle Investment License 2. Deed and Articles of Association 3. Company Registration Certificate 4. Other licenses depending on

business type

The One Stop Service Center provides an integrated way of processing all licenses

REQUIREMENTS:

II. Licenses & Documents

• Must not be business prohibited on the Negative Investment List. Businesses on the Negative Investment List (Notification 44/2016) may be allowed under certain conditions. If not listed, it is assumed 100% open to foreign investment.

• Must be owned by a minimum of 2 parties (each can be individual or corporate).

Data Source : BKPM, Indonesia

A Representative Office may be useful for a business to study the market before entering, but it cannot engage in profit-generating activities, sign contracts, issue invoices or receive payment.

REQUIREMENTS:

1. Articles of Association 2. Letter of appointment from foreign

company 3. Letter of Statement of business activity

restriction 4. Passports of executives

There are 3 types. Some may require extra documents

I. Licenses & Documents

*More details in the Representative Office page

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Setting Up a Limited Liability Company

Submit investment application and obtain Principle Investment License (IP)

Establish entity as Limited Liability (PT PMA)

Obtain tax registration number and VAT

Company Establishment Process

BKPM

Ministry of Law and Human Rights

Tax Office

Relevant Institution

Obtain Producer Importer Identification Number (API-P) for manufacturing companies if needed

Apply for facilities such as machinery import duty exemption or tax incentives if needed

Obtain domicile certificate, building permit Submit Manpower Employment Plan (RPTK) Obtain any sector-specific permits if required

Pre-Operation Process

BKPM

BKPM, Ministry of Finance

Local government Ministry of Manpower BKPM, sectoral

ministries


Obtain Business License (IU) Obtain General Importer Identification Number (API-U) Obtain raw material import duty facility if needed Obtain any sector-specific periodic permits if required

Operation Process

BKPM BKPM BKPM BKPM, sectoral

ministries


1

2

3

IP and IU

Principle Investment License There are 4 Types. A new license must be obtained when: • Starting new business • Change in capital structure

from local to foreign-owned • Expanding production or

service range • Changing investment plan • Merging companies

Business License There are 4 Types. A new license must be obtained when: • Starting operation • Expanding business • Changing business activity • Starting operation after

merging companies

39

Investment Regulations

On Capital Investments

Minimum Capital Investment:

25%

Minimum capital investment is

IDR 10 billion

25% must be paid-up capital

Debt-to-Equity Ratio: Debt : Equity

4 : 1

Minimum share held by individual:

IDR 10 million

On Business Expansion

A new Principle License for Expansion is required every time a company:

1. Adds new business fields and/or 2. Increase production capacity at the same or new

location

On Investment in Public Companies Owning more than 50% share in a public company

“Direct investment” =

On Venture Capital Companies A venture capital company may NOT own shares in:

• Large scale domestic firms (Net assets > IDR 10 bil) • Any PMAs.

40

Setting Up a Representative Office

There are 3 types of Representative Offices a business can set up depending on their business activities and needs.

KPPA Foreign Company Representative Office

KP3A Foreign Company Trade Representative Office

Functionality and Scope

• Manage parent company’s corporate interests

• Prepare establishment of business in Indonesia

• Support business development

• Do marketing activity and support local importers

• Conduct market research • Close trade contracts on behalf of

parent company

• Monitor construction service of parent company

• Article of Association • Data and financial statements of

parent company • Letter of recommendation from

Indonesian Embassy in country of origin

• Construction service permit • Copy of equalization certificate

legalized by national institution • Letter of appointment of Executive

Representative

Documents Required

• Articles of Association • Letter of Appointment of

Representative Executive • Copy of passport of director of

parent company and Representative Executive

• Letter of Statement to not engage in restricted business activities

• Letter of appointment of Executive Representative

• Copy of passport and CV • Letter of statement to not engage in

trading or other restricted activities • Letter of reference from Indonesian

Embassy in country of origin • Letter of domicile

Other Conditions

• KPPA must be located in an office building

• Permit valid for 3 years + two 1-year extensions, after which extension may be granted for other activities

• Prohibited to carry out trading, selling or submitting tenders, settling claims etc.

• Must be incorporated in an office building

• Can be obtained by foreign company with large scale qualification

• Can provide service in any location • Permit valid for 3 years with

extension

BJUK Foreign Company Construction Representative Office

41

New Facilitations to Ease Setting Up Process

To boost investment and improve the ease of doing business, the government has launched new services

3-Hour Registration

Available for businesses that have a minimum investment value of IDR 100 billion or employing 1,000 local workers.

Documents Obtained through 3-Hour service: • Principle Investment license (IP) • Certificate of incorporation • Tax registration • Company registration

• Employment plan • Work permit • Import Identification (API) • Customs registration • Letter of land availability

Direct Construction (KLIK)

Businesses with very large investments can process their registration and obtain documents to start their businesses within 3 hours.

Investors can directly start their project construction while applying for their construction permit in parallel

Available for businesses that invest in selected industrial parks. There are no investment or worker requirements.

Steps: 1. Obtain investment license (IP) at One Stop Service at BKPM 2. Survey land in selected industrial parks and acquire land 3. Start construction. No permits required 4. Apply for construction permit and environmental permit in

parallel with construction process

Available locations at industrial parks in: • North Sumatra – 1 location • West, Central and East Java – 12 locations • South Sulawesi – 1 location

42

Construction - Regulations Permitted Activities for Foreign Investors

Data Source: Presidential Regulation Notification 44/2016

Retail Sector

Not Permitted for Foreign Investors

Permitted Only as Joint Venture with Local Entity [Max share]

Permitted with Approval from Relevant Ministry or Conditions

• Retail sale of: automotive, spare parts, jewelry, textile, toys, cosmetics, footwear, electronics, food & beverage

• Retail through mail order • Retail in non-supermarket or outside of

department stores • Supermarkets smaller than 1,200 sqm. or

minimarket smaller than 400 sqm.

• Warehousing [67%] • Distributor without manufacturing [67%] • Department store between 400 – 2,000

sqm. [67%]

Special condition • Liquor wholesale/retail: needs SIUP-MB

liquor license, specific distribution network Ministry of Trade • Department store between 400 – 2,000

sqm. located in a mall and not standalone

Activities not listed are deemed open to foreign investment without condition. Check Notification 44/2016 for more details.

Automotive Sector



• Retail sale of: cars, motorcycles, commercial vehicles, spare parts and accessories

• Maintenance service for motorcycles not connected to sales

• Production of components, spare parts [not specified] • Production of pumps, compressors [not specified] • Automotive maintenance service [49%]

43

Construction - Regulations Permitted Activities for Foreign Investors

Data Source: Presidential Regulation Notification 44/2016

Industrial Agriculture Sector



• Cultivation of: edible oils, palm oil, cotton, tea, tobacco, rubber, small scale stable food crops, marijuana

• Small scale pig and chicken breeding • Fish hatchery • Plantation seeding

Partnership share no specified: • Seafood processing, fish product distribution • Production of: soy sauce, pickled fruits and vegetables, condensed milk, sugar • Warehousing [67%] • Cargo landing [49%] • Freight forwarding [67%]

Construction & Construction Material Sector



• Real estate agent • Construction service with simple technology;

< IDR 50 billion • Consultancy with simple technology; < IDR

10 billion

Partnership share no specified: • Production of: cement products, ceramic products, nails and bolts • Oil & gas product construction • Construction service with advanced technology [67% for general; 70% for ASEAN] • Consultancy service with advanced technology [67% for general; 70% for ASEAN] • 0-2 Star hotels [67%] • Motels [67% for general; 70% for ASEAN] • MICE centers [67% for general; 70% for ASEAN]

44

Negative Investment List - Overview The Negative Investment List is compiled by BKPM, the Indonesia Investment Coordinating Board,

and details which sectors are open or closed to foreign investment and under what conditions.

This list is according to Presidential Regulation No. 44 of 2016:

Closed to Investment Open With Conditions

Open Without Conditions

Examples: • Cultivation of marijuana • Capture of certain fish species • Manufacture of certain chemicals • Manufacture of certain alcoholic

beverages • Provision of public transport • Casinos

Business fields in the following 16 sectors: 1. Agriculture 2. Forestry 3. Maritime and Fishery 4. Energy and Mineral Resources 5. Industrial 6. Defense and Security 7. Public Works 8. Trading 9. Tourism and Creative Economy 10. Transportation 11. Communication and Informatics 12. Financial 13. Banking 14. Manpower and Transmigration 15. Education and Culture 16. Health

Special conditions include detailed regulations on: • Maximum foreign capital • Source of capital • Corporate structure • Location of investment • Extra permission from Ministries • Requirement of special licenses

1 2

3 Business fields not included in (1) or (2) are open to investment without any conditions


45

Negative Investment List – Key Changes Key revisions in the 2016 Negative Investment List include business lines that (1) are now open for 100% foreign ownership, (2) now have higher level of permitted foreign ownership, (3) reserved for partnership with local SMEs, and (4) entirely reserved for local SMEs. Foreign firms now could explore opportunities in more liberalized sectors.

Reserved for partnership with domestic SMEs

Open for 100% foreign ownership

1. Cold storage

2. Restaurant

3. E-commerce (investment over IDR100 billion)

4. Transport infrastructure and services

5. Business and management consultancy / hospital consultancy services

6. Laboratory, medical check-up clinic

7. Raw material for pharmaceutical

8. Distribution affiliated with production

9. Film industry

10. Tourism

1. Meetings, incentives, conferences, and exhibitions (MICE) operations

2. Department stores (with retail space of 400 m2 to 2,000 m2)

3. E-commerce (investment less than IDR100 billion)

4. Construction consultancy services involving: (i) advanced technology, (ii) high risk, and/or (iii) a value of more than IDR10 billion

5. Distribution (non-affiliated with production) increased to 67%

6. Warehousing


Increased Permitted foreign ownership

1. Cane Sugar (white, refined and raw)

2. Retail trading via mail or internet order (for certain goods)

Construction consultancy services and construction implementation services that

• use simple / medium technology,

• are low / medium risk and / or

• have a work value of less than IDR10 billion (consultancy) and up to IDR50 billion (implementation), respectively

Reserved for domestic SMEs

Detailed information please refer to BKPM’s Negative List 44/2016

46

Government Promoted Sectors


BKPM has set the following as priority sectors for 2015-2019.

Infrastructure 35 GW power

generation 24 Sea ports

Agriculture Food estate Corn Plantation Cattle

Industry

Labor-intensive industry Textile Food & Beverages Furniture Toys

Import-substitution industry Chemical &

Pharmaceutical Iron & Steel

Export-oriented industry

Electronics CPO & derivative

products Wood products,

pulp & paper Automotive

Machinery Rubber products Fish & derivative

products Shrimp

Downstream industry of natural resources

Cacao Sugar Smelter

Maritime Ship building Fishery Industry Cold storage

Tourism,SEZ & Industrial Park Strategic tourism

areas MICE 8+11 SEZs

15 New Ind. Parks

47

Import Duty Tax Allowance Tax Holiday

WHO

All investment projects of PMA approved by BKPM as well as Existing FDI companies that are: I) Expanding to production in excess

of 30% of capacity II) Diversifying products

143 Business Segments such as: • Agriculture • Mining, oil and gas • Energy • Industry • Telecom • Healthcare • Transport

Pioneer Industries • Upstream metals • Renewable energy • Shipping • Manufacturing in agriculture, forestry, fishery • Economic infrastructure not part of

PPP scheme

FACILITY

Exemption from import duty for 2 years on: • Imports of capital goods such as

machinery, equipment and auxiliary equipment

• Goods and raw materials for final production or services

1. Reduction of taxable income of 30% for 6 years at 5% per year

2. Reduction of withholding tax on dividends paid to non-residents to 10% (from 20%)

3. Extension of tax loss carry-forward to 5-10 years

4. Accelerated depreciation & amortization

Tax exemption of 10% to 100% for 5-15 years from date of commercial production • Can be extended to 20 years if

deemed strategic for economy • Up to 25 years for Special Economic

Zones

CONDITIONS

Goods and materials can only be imported if: • It is not produced locally • it is produced locally, but does not

meet the quality or quantity required

Requirements may also include location of business

• New taxpayers only • Minimum investment IDR 1 trillion • Thin capitalization: debt-to-equity ratio

of 4:1 • Deposit at least 10% of investment in

Indonesian bank

Tax Incentives

Data Source : BKPM, Indonesia; PwC, Indonesia

• Oil and gas • Machinery • Telecom and ICT

48

Non-Tax Incentives

► The government shall not nationalize nor take over the ownership right of any investors, except through the law, in which case compensation shall be paid.

► Any investors shall have the right to

make unlimited transfer or repatriation in foreign currency for various purposes such as:

• Profit remittance/return capital • Payments on imports/loans • Capital gains

Guarantees & Remittances Land Rights Type of land rights Incentives

The Right to Cultivate (HGU) 60 years (35 years+ 25 years) with another possible 35-year extension

The Right to Build (HGB) 50 years (30 years+ 20 years) with another possible 30-year extension

The Right to Use (Hak Pakai) 25 years with another possible 25-year extension

Right to Cultivate & Right to Build

Right to Use

► Only • Local investor • Foreign PMA

► All • Local investor • Foreign PMA • Foreign individual • Foreign rep office


49

Setting up Foreign Trade Company

• Ability to trade and manage business directly • Advantages from having Indonesian partners (local business

connection, old customer base, deep knowledge of customer behaviors, etc.)

• Very high capital requirement (See the Investment Regulations page)

• Lengthy application processes at many related government organizations

Source: BKPM *https://www.indonesia-investments.com/

Foreign Investment Company (PT PMA) Foreign Trade Representative Office (K3PA)

• Often used to introduce and promote products to Indonesian customers or do market research to support parent companies

• Cannot earn revenue

• The initial period of establishment is 3 years and can be extended with approval from Ministry of Trade.

• License given to the K3PA is called SIUP3A

• Foreign investors can establish wholesale and distribution business with maximum ownership at 67%.

• Foreign investors need to find local partners and then contact Indonesia Investment Coordinating Board (BKPM), who is solely responsible for foreign investment in Indonesia. (See the Setting Up a Limited Liability Company page)

Pros of PT PMA

Cons of PT PMA

Pros of K3PA

Cons of K3PA

• Easy to establish • No minimum capital requirement

• Only limited activities allowed i.e. no direct sales activities • Although a K3PA cannot earn revenue, it still needs to report

annual tax on a monthly basis and report all business activities to the Indonesian government

To export products to Indonesia via agents/distributors or e-commerce channels, Thai exporters do not need to apply for any of licenses. However, to better gain market knowledge in long term, Thai businesses could also set up a company in the 2 following forms:

50

Trading via Agents or Distributors

Competent product and market knowledge

Good reference, supporting teams

available

Language skills: Bahasa Indonesia

and English

Strong networks and geographical coverage with sales experience

Businesses that produce pharmaceutical, food, and cosmetic products are required to obtain the Indonesian Food and Drug Authority’s approval.

1. Must have obtained registration identity (STP) from Ministry of Trade 2. Must have obtained importer identification number (API-U) 3. Must have obtained customs Identification Number (NIK) 4. And/or must have obtained any other necessary import licenses 5. Other factors to be considered when choosing agent/distributor include:

• Regular effort needed to monitor agents’ work or distributor accounts

• More than one agent/distributor may be needed, depending on the exported products

• There is a wide range of commission rates which vary according to product complexity, and contract terms.

Cons of Using Agents • Locals have expertise in business operations. • Agents can help to keep track of regulations and policy updates

which constantly changes on short notice. • Locals can help overcome issues regarding knowledge gap and

cultural differences

Pros of Using Agents

The list of restricted imported products changes often. However this can be solved by regularly checking with Directorate General of Foreign Trade, Ministry of Trade.

Qualifications to Consider when Choosing Agents and Distributors Notes

Challenges

Foreign companies cannot directly sell their products in Indonesia but are required to appoint local agents or distributors to act as importers.

51

Trading Via Agents or Distributors

EXPORTERS’ ACTIONS AGENTS/DISTRIBUTORS’ ACTIONS

*As some products need import license and registration from relevant institutions. Exporters may contact Royal Thai Embassy at Jakarta for assistance

Pre-shipment verification or Import Technical Investigation is completed by importers

Green lane -> document verification -> clearance -> goods release

CUSTOMS OFFICE’S ACTION

1

Appoint qualified agents or distributors

Check Indonesian list of HS codes*

Prepare documents for agents or distributors

File the relevant information and documents in PIB (Import declaration form)

Submit the PIB to customs office through EDI system, notify about incoming freight, and make payment

Receive PIB and check for accuracy

Process customs clearance and imported goods will be treated in 3 ways

6

Red lane -> physical inspection -> check documents -> recheck -> clearance -> goods release

Yellow lane -> check documents -> if more information needed, go to red lane -> if no more inspection, go to green lane

General procedures for selling via agents/distributors to Indonesia:

2 3 4

5

7

52

Trading Via E-commerce

Trading through an e-marketplace may be another convenient mode of entry for Thai exporters, as e-marketplaces would generally act as licensed importers, so sellers do not need to find their own importers or apply for their own licenses.

General procedures for selling via B2C websites to Indonesia

1. Cost saving for exporters 2. Shorter import procedures 3. Large pool of customers 4. Limited responsibility for exporters 5. Able to track all processes via online platform

1. Sellers send their ordered products to B2C cargo center 2. Products are sorted and consolidated 3. 3PL transports goods to port of discharge 4. Goods are sent to Indonesia 5. Customs clearance is done by 3PL and goods are transported to B2C sorting center 6. Goods are packed, ready to be delivered to customers by 3PL

Source: KResearch

B2C Cargo Center

1

Dispatch Consolidate

Port of Discharge

3PL

2 3PL

4 Sellers

Customers

Pick & pack Customs clearance

Transport

3

6

Deliver

Indonesia’s Airport

5 7 B2C

Sorting Center

Transport

Seller’s Responsibility E-marketplace’s Responsibility

Pros

53

Export / Import Regulations

2

Imports

2 Types of Licenses: A firm may hold only ONE

General Import License (API-U): Import finished goods and distribute to third parties

Producer Import License (API-P): Import raw materials for holder’s use only

1

Requirements • Must obtain Customs

Identification Number

• Must declare with Indonesian Directorate General of Customs and Excise

Key Considerations • Some goods have special quotas

• Some goods are prohibited for imports

• Labels in Bahasa Indonesia are mandatory

• If exporting to Indonesia, ensure local importer has the correct license


Exports

Export tax: 20 – 60% On some products

3 Types of Restriction: ► Prohibited:

• Upstream products • Unprocessed mineral ore

► Export only if domestic demand met: • Commodities (flour, palm oil and

certain metals

► Export with condition on having: • Taxpayer identification number (NPWP) • Business licenses such as Trade license

(SIUP), Manufacturing license, PMA license or Exporter identification number (APE).

54

Product Standards Regulations

1. Act No. 20 /2014 Standardization and Conformity Assessment covers standards of manufactured goods, services, systems, processes, and individuals, and designated organizations for assessment

2. Indonesian National Standard (SNI) is the only national standard which is generally voluntary but mandatory for certain products imported into Indonesia. Exporters must apply for it from the National Standardization Agency of Indonesia (BSN).

3. All food and drink products must be registered at the Indonesia National Agency of Food and Drug Control (BPOM) to get registration approval and other relevant certificates depending on the product types.

• Labels must be written in Bahasa Indonesia.

• All meat for consumption (except pork) must have a Halal certification.

• All imported consumer goods must identify importing agent/distributor on labels.

Imports of some goods require specific import license called

1. Special Importer Identification Number (NPIK)

2. Registered Importer Number (ITPT).

Halal certification on food products is highly recommended.

NPIK ITPT

• Ready-made clothing • Electronic products • Footwear • Textiles • Toys

• Food & beverage

• Traditional & herbal medicines

• Footwear • Cosmetic

products

• Rice • Sugar • Corn • Soybeans

List of goods that need NPIK and ITPT

Standards and Certification

Labeling

55

Trade Privileges

Key Memberships Economic Partnerships

Regional Bilateral

ASEAN FTA Sealed

ASEAN + 1 FTA

ASEAN + 6 RCEP

Negotiation ASEAN-HK FTA

Indo-EFTA CEPA

Japan EPA Sealed

Pakistan PTA

India CECA Preparation

Australia CEPA

Negotiation

S. Korea CEPA

Peru CEPA

Chile CEPA

Egypt FTA

Joint Study Group

Tunisia FTA

Nigeria PTA

Turkey CTEP

World Trade Organization

Asia-Pacific Economic Cooperation

ASEAN Economic Community

Cairns Group

G-20 and G-33

• Trade Preferential System of the Organization of the Islamic Conference (41 Islamic countries)

• Preferential Tariff Arrangement - Group of Eight Developing Countries (Bangladesh, Indonesia, Malaysia, Pakistan, Egypt, Iran, Nigeria, and Turkey)

56

Data Source : Ministry of Labor, Indonesia, Primary Research

Major Costs - Labor

Minimum Wages by Region and Key Cities, 2016

Region/City Minimum Wage (USD/month)

Jakarta 237

East Java 232

Papua 187

Sulawesi 183

West Java 171

Sumatra 167

Kalimantan 157

Bali 138

Banten 136

* Regional amount is an average across sub-provinces

Average Wages of Private Sector Workers, 2014

► 60% of workforce is concentrated in Java; 20% in Sumatra

► Wages are lowest in Central Java but is highest in Jakarta itself, where most higher-value businesses are clustered

Employees are paid a 13th-month salary in Indonesia, which will push up total labor cost.

Other things to consider…

USD

57

Electricity Rate

Type of Subscriber: Block and Usage Tariff per m3 (USD)

Household User 0-10 m3 11-20m3 >20m3

Type I 0.08 0.08 0.08

Type II 0.08 0.08 0.12

User Type USD/kwh

Households to Medium Firms 0.11

Large Firms 0.08

Large Industry 0.07

Major Costs - Utility

Data Source : American Chamber of Commerce in Thailand

Type of Subscriber: Block and Usage Tariff per m3 (USD)

Business User 0-10 m3 11-20m3 >20m3

Type III A 0.27 0.35 0.41

Type III B 0.37 0.45 0.56

Type IV A 0.51 0.61 0.73

Type IV B 0.94 0.94 0.94

Type V / Special 1.10 1.10 1.10

** Note on Type of Subscriber

Type III A Small business

Type III B Small business

Type IV A Medium business

Type IV B Large business

Type V / Special Harbor / Port

Water Rate

58

Taxpayer Tax Rate Normal Rate 25%

Limited Company that meets 40% public listing requirement

20%

Company with gross turnover not more than IDR 50 billion

50% reduction of normal rate on proportion of taxable income derived from ratio of IDR 4.8 billion to gross turnover

Corporate Tax

Annual Income Tax Rate Up to IDR 50 million 5%

IDR 50 million - IDR 250 million 15%

IDR 250 million - IDR 500 million 25%

Over IDR 500 million 30%

Personal Income Tax - Resident

Tax System

► DOUBLE TAXATION: Indonesia has signed treaties to avoid double taxation with 59 countries, including 6 from ASEAN: Singapore, Thailand, Malaysia, Vietnam, Philippines and Brunei.

► SOCIAL SECURITY: Employers contribute 4% of employee’s income up to a maximum of IDR 189,000 per month; employees contribute 1%. Maximum contribution is IDR 47,240.

Other Key Features Annual Income Tax Rate All Indonesia-sourced income 20%

Personal Income Tax – Non-Resident

A person is deemed a “tax resident” if he/she:

• Resides in Indonesia

• Has been in Indonesia for over 183 days

• Is in Indonesia during a fiscal year and

intends to reside in Indonesia

Data Source : BKPM, Indonesia; PwC, Indonesia

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Table of Contents

60

AEC+ Business Advisory

Ms Nadeenut Suvanprakorn World Business Intelligence Specialist E-mail : [email protected]

Prepared by:

Mr Pawathorn Tanaichakorn World Business Intelligence Specialist E-mail : [email protected]

About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice.

What we do: • Offer customized and tailor-made advisory services • Publish investment guides and industry reports • Deliver in-depth insights via seminars • Organize business trips to bring first-hand experience

Follow us: Visit our website at:

https://aecplusadvisory.askkbank.com/