invest in 2014 by indonesian investment coordinating board. all rights reserved 5th international...

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© 2014 by Indonesian Investment Coordinating Board. All rights reserved

5th International Conference & Exhibition on Palm Oil| Jakarta, 26 May 2014

Investment Policy on Sustainable Palm Oil Industry

Hanung Harimba Rachman Director of Planning for Agribusiness Industry and Other Natural Resources

The Investment Coordinating Board of the Republic of Indonesia2

Topic of Discussion


I. Investment Policy: sustainable economic growth


Investment Realization in IndonesiaBased on Capital Expenditure (USD Billion) Excl. oil, gas, and financial sectors

Assumption: Q1-Q2 rate USD 1 = IDR 9,300Q3-Q4 rate USD 1 = IDR 9,600Q1 2014 & Q1 2013 rate USD 1 = IDR 10,000

Sustainable direct investment growthtotal investment realization

in Q12014 (IDR 106.6 trillion),13.5% higher than Q1 2013 of IDR 105.3 trillion equvalent USD 10.7 billion or 23.3% of 2014 target

Source: BKPM, 2014

15

23.4

27.9

34.8

42.2

10.79.4

Year Indonesia GDP Growth

World GDP Growth

2007 6.30% 5.3%

2008 6.00% 2.70%

2009 4.60% -0.40%

2010 6.10% 5.20%

2011 6.50% 3.90%

2012 6.23% 3.20%

2013 5.78% 3.00%

Q1-2014 5.21% 3.70%*

IndonesiaMacroeconomic Overview 2007 - 2013

Source: BPS, IMFNotes: *) 2014 World GDP Growth projection data by IMF


Source: McKinsey Global Institute, September 2012

Indonesia Today… and Indonesia in 2030

Remarkable Indonesia

The World’s 3rd Largest Democratic and

Decentralized Nation

251 million of population in 2013

The World’s Biggest Archipelagic Nation

17,508 islands81,000 km Coastal Line

1.9 million sq km Land Area3.1 million sq km Sea Area

3 time zones

G-20 Member State

USD 1 trillion of GDP (PPP) in 2012

USD 4,540 of GDP per Capita (PPP)

One of Asia Pacific’s most vibrant democracies that has maintained

political stability…(The World Bank, 2013)

The World’s Most

Stable Economy in the Last Five Years. (The Economist, 2012)


Abundant Natural Resources: The Key Indicators

Indonesia is one of the world’s major producer of a broad range of commodities.

Source: Coordinating Ministry For Economic Affairs RI, 2011

In 2013. the export of palm oil reached 21 million ton/year


Source: PricewaterhouseCoopers, 2013

APEC CEOs: Indonesia has capacity to surprise with greater business opportunities

than expected...


Indonesia’s Investment PerformanceIndonesia is the 3rd

Investment Destination in Asia(Source: The Economist, 2013)

15.2

21.4

26.2

27.0

28.1

28.9

34.8

37.7

38.6

43.0

53.5

54.1

73.8

51.2

58.8

55.4

47.6

45.5

46.1

53.9

32.8

33.9

38.5

27.1

32.0

20.6

3.2

1.5

3.1

5.6

0.8

3.1

0.7

3.3

2.4

2.2

0.8

0.7

30.4

18.3

15.4

19.8

25.6

21.9

10.6

26.2

25.2

16.3

18.6

13.9

5.0

Taiwan

Hong Kong

Japan

Australia

Philippines

South Korea

Singapore

Vietnam

Thailand

Malaysia

Indonesia

India

China

Increase their level of investmentStill in the market, but will not invest moreReduce their investmentHave no plans to invest

Total Investment (% GDP)(Source: Bloomberg, 2013)

Source : World bank (2013)


The Most Attractive Investment Destination in ASEAN

Notes: (1) Value next to each bar reflects the percentage of respondents that plan to invest or increase investments while value within the bar shows respondents’ average rating on the investment attractiveness of each country. (2) Each respondent was allowed to select multiple responses. Percentages do not sum up to 100%.

The 2012 ASEAN-BAC Survey on ASEAN Competitiveness collated responses from businesses across all ten ASEAN ountries, comprising a mix of small, medium and large firms. A majority of the businesses had been in operation for more than ten years, had trade/investment linkages within ASEAN and had at least general knowledge of ASEAN policy initiatives.

“Half of 405 businesses surveyed intended to invest in

Indonesia over the next years (2011-2014).”

Source: ASEAN-BAC, 2012

The ASEAN Business Advisory Council Survey on ASEAN Competitiveness 2012


Japan Bank for International Cooperation Survey 2013

Rank 2005 2006 2007 2008 2009 2010 2011 2012 2013

1 China China China China China China China China Indonesia

2 India India India India India India India India India

3 Thailand Vietnam Vietnam Vietnam Vietnam Vietnam Thailand Indonesia Thailand

4 Vietnam Thailand Thailand Russia Thailand Thailand Vietnam Thailand China

5 US US Russia Thailand Russia Brazil Indonesia & Brazil Vietnam Vietnam

6 Russia Russia US Brazil Brazil Indonesia - Brazil Brazil

7 Korea Brazil Brazil US US Russia Russia Mexico Mexico

8 Indonesia Korea Indonesia Indonesia Indonesia US US Rusia Myanmar

9 Brazil Indonesia Korea Korea Korea Korea Malaysia US Rusia

10 Taiwan Taiwan Taiwan Taiwan Malaysia Malaysia & Taiwan Taiwan Myanmar US

Indonesia: The most promising country for overseas business

(Japan Bank for International Cooperation Survey 2013)

Source: JBIC, November 2013

Positive Factors1. Future growth potential of local market2. Inexpensive source of labor3. Current size of local market4. Supply base for assembler5. Industrial cluster development

Issues of Concern1. Rising labor costs2. underdeveloped infrastructures3. Execution of legal system unclear (frequent changes)4. Intents competition with other companies5. Difficult to secure management-level staff.6. Labor problems

INDONESIA INVESTMENT COORDINATING BOARD

Establishing an Investor Relation Unit at BKPM for information, facilitation and inqueries handling from existing and potential investors.

Rolling-out the Electronic Information Services and Investment Licensing (SPIPISE) in 105 regions throughout Indonesia.

Helping contain various obstacles and giving consultation.

Facilitating foreign workers permit.

Launching the online investment tracking system.

We provide “one-stop shop” (PTSP) licensing provision and our

services for investors include…


17 Action Plans Package to Improve the Ease of Doing Business

Starting a business 5 actions plan involving the Ministry of Manpower and Transmigration, Ministry of Trade, Provincial Government of DKI Jakarta, and Ministry of Law and Human Rights.

Getting electricity 2 actions plan, the issuance of Ministry of Energy and Mineral Resources and State Electricity Company (PLN) regulation regarding mechanism/procedures of electricity connection

Paying taxes and insurance premium 2 actions plan, the issuance of regulation regarding online tax reporting system and simplification of procedures for the payment of social security program consisting of: pension insurance, death insurance, working accident insurance and health insurance

Enforcing contract 2 actions, study on Small Claim Court as a reference for the formulation of the Supreme Court Regulation and prepare academic paper about procedure to resolve small claim cases

Resolving insolvency assess compatibility between regulations and implementation of procedures, time, and cost for resolving insolvency or bankruptcy process

Registering property issuance of regulation on the property registration/land ownership transfer certificate which includes the simplification of procedures, time and cost

Dealing with construction permits 3 actions plan involving Provincial Government of DKI Jakarta, PT PAM Jaya, and PT Telekomunikasi Indonesia

Getting credits issuance of implementing regulation of Bank Indonesia concerning Credit Indformation Management Institution

2

1

3

4

5

6

7

8


Sectors Focused in BKPM’s Plan

Export-oriented sectors: downstream industry of palm and

rubber, electrical equipment, metal,

paper, textile.

Import substitution of capital goods and

raw materials: machinery, iron and

steel, automotive and spare parts, and basic

chemical.

Import substitution of consumer

goods: food and beverages, home

appliances, and oil refinery industries.

Downstream industries of

mining, agriculture, fisheries and forestry:

smelter, CPO and cocoa industries, paper,

furniture.

Industrial sectors with increasing domestic

consumption trend: cement and building material

industries.

Infrastructure sector encouraged

through PPP: energy, air and sea ports, roads, water supply, waste

management and railways.

Tourism and creative

industries.

Investment Opportunities: Quality Investments


Roadmap of Indonesia Investment

Quick wins and low hanging fruitsEncouraging and facilitating ready-to-invest investors

Knowledge-Based EconomyDeveloping economy by innovation and high-technology

Development of Big-Scale IndustryDeveloping big-scale industrials through industry cluster (e.g. Petrochemical, transportation means, and national defense)

Acceleration of Infrastructure DevelopmentDeveloping soft infrastucture (education and health facilities) and hard infrastructure (bridge, port, etc) through Private-Public Partnership Scheme

More than 15 years

Source: BKPM


Policy on Palm Oil Downstream Industries: Quality Investments

Source: The Royal Plantation, 2014


II. Policy on Palm Oil: supporting downstream industry


Investment RealizationInvestment Realization of Oil-Producing Fruit Crops

(US$ ‘000)

Investment Realization of CPO and Cooking Palm Oil(US$ ‘000)

Source: BKPM, 2014


TAX ALLOWANCE

IMPORT DUTY FACILITY

(Government Regulation No.52/2011) (MoF Regulation No.176/PMK.011/2009)

129business segments Eligible for tax allowance, expanded from 38 segments in the previous regulation.

30 % of investment value Reduction of corporate net income tax for 6 years, 5% each year.

Under certain requirements among others: minimum amount of investment value and workforce, and certain project location (especially outside Java island).

2 years import duty exemption or 4 years for companies using locally-produced machines (min.30%).

Machines, goods, materials for production

Which produces goods and/or services, including:

1. Tourism and culture 2. Public transportation 3. Public health services 4. Mining 5. Construction 6. Telecommunication 7. Port

Industries

Investment Incentives


Granted tax holiday

1 PT Unilever Petrokimia received tax holiday facility since end of 2012. It plans to develop the palm oil downstream industry in Sei Mangke, North Sumatera.

2 PT Petrokimia Butadiene plans to develop the factory of butadiene in Cilegon, Banten.

Application on processs 1. Sinar Mas Group

2. Musim Mas Group 3. Wilmar Group 4. Domba Mas 5. Salim Ivomas Pratama 6. Asian Agri Group

Source: Merdeka, 2014


Negative Investment List: Presidential Regulation No.39 of 2014


Negative Investment List: Presidential Regulation No.39 of 2014

Business Fields KBLI Conditions

Palm plantation cultivation for area less than 25 Ha 01262 Reserved for micro, small, medium enterprises and cooperatives

Seeding palm plantation for area less than 25 Ha 01262 Reserved for micro, small, medium enterprises and cooperatives

Palm Oil Industry below certain capacity according to Regulation of Minister of Agriculture Number 26 of 2007 and/or its amendment

10431 Reserved for micro, small, medium enterprises and cooperatives

Seeding palm plantation for area equal or more than 25 Ha

01262 maximum 95 % for foreign capital ownership , and recommendation of the Minister of Agriculture cq. The Director General of Plantation

Palm plantation for an area of 25 Ha or more, up until a certain area according to Regulation of Minister of Agriculture Number 26 of 2007, without a processing unit


Palm oil industry, with similar capacity or exceeding a certain capacity, according to Regulation of Minister of Agriculture Number 26 of 2007 and/or its amendment


Palm plantation and palm oil industry (CPO) for 25 Ha area of land or more, integrated to the processing unit by the same capacity or exceeding a certain capacity according to Regulation of Minister of Agriculture Number 26 of 2007 and/or its amendment

01262and

10432

maximum 95 % for foreign capital ownership , and recommendation of the Minister of Agriculture cq. The Director General of Plantation


To support sustainable downstream palm oil industry

Industrial Area Development • Facilitation and Coordination of Industrial Estate Development in Sei Mangkei (North Sumatra), Kuala Enok-Dumai (Riau), and Maloy (East Kalimantan);

• Establishment of Innovation Center for Palm Oil Downstream Industry in Industrial Estate Sei Mangkei, North Sumatra.

Anti Negative Campaign • Active participation in the Promotion of Investment and Anti Negative Campaign• Implement the Indonesia Sustainable Palm Oil (ISPO) to certified palm oil companies in Indonesia in order to compete in world wide market.

Restructuring CPO Export Duty and derivative products through Finance Minister Regulation (PMK) 75 of 2012 in conjunction with PMK No. 128 in 2011.

Badan Koordinasi Penanaman Modal (BKPM)

Indonesia Investment Coordinating BoardJln. Jend. Gatot Subroto No. 44Jakarta 12190 - Indonesiat . +62 21 5292 1334f . +62 21 5264 211 e . [email protected]

www.bkpm.go.id

Thank You

Terima Kasih

Indonesia Investment Promotion Centre (IIPC)

invest in 2014 by indonesian investment coordinating board. all rights reserved 5th international...

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